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Tokenization of Real-World Assets and the provision of Liquidity for STO Market.
Introduction
The concept of tokenization is steadily gaining popularity and mass adoption among investors. The technology behind this idea seeks to offer middle-income earners the opportunity to own a fraction of an asset and as a result, earn a good return on investment.
What is Asset Tokenization?
Asset Tokenization is simply the process where real tradable assets are represented on a blockchain network by issuing a digital security token.
Also, tokenization is an evolution of the digitalization of private markets. A solution that divides the ownership of all assets into digital tokens. This makes it easier to trade certain assets that need to be transferred from the seller to the buyer e.g real estate.
Through tokenization, real-world assets can be represented on a blockchain network by simply breaking it into smaller parts and turning them into digital tokens. This process seeks to democratize investments in physical assets.
To better understand what tokenization of real-world assets is all about, let’s take a look at this simple case scenario.
The Ordeal of a Middle Income Earner
Sharon, an American mother of two who works as an Architect at a real estate company and earns a relatively average income wants the best for her little kids when they grow up; decides to invest her six-year savings of $10,000.
Putting the money in her bank account would lead to inflation, meaning her money would amount to nothing when her children grow up and won’t be able to offer the quality of life she desires for them.
As an Architect, she understands that putting her money into properties like houses/flats would yield interest over time and save her from inflation. But the problem is that $10,000 is not enough to buy a decent house nor to be able to obtain a loan from the bank. She’s in a fix and needs a way out!
The good news is that with tokenization, she can invest her $10,000 for a fraction of an asset and benefit from its potential increase in value.
What tokenization does is quite simple, instead of having one person buying a house for $200,000, we now have 1000 persons take $200 each and share this house. With this technology, low and middle-income earners would earn passive income by owning a fraction of real-world assets such as real estate property, artworks, company shares, collectibles, etc.
Interestingly, anything can be tokenized once it’s on a distributed ledger, thanks to the nature of blockchain technology.
Also, with the use of smart contact, the entire process is made transparent, secure, efficient, fast, and cost-effective. It does not require a centralized entity to mediate between sellers and buyers and running on smart contracts eliminates the possibility of anyone defaulting on contractual obligations.
What’s a Token?
A Token is a representation of a proportional part of the digitized asset.
These tokens act as shares and they are similar to NFTs. The difference is that they are fungible and are tied to the value of the assets. They can be traded between sellers and buyers. With tokens on the blockchain Network, transactions can take place 24/7, with the aid of smart contracts - eliminating the need for middlemen. Blockchain technology is important because it helps to simplify transactions, reduce fraud, and makes it easier to track and monitor asset ownership.
Furthermore, security tokens are financial instruments & represent a share of a company or an asset.
Security Tokens offer fractional ownership which opens up the market to smaller investors and brings additional liquidity because the token can be traded in real-time, anywhere, and with mobile apps.
What’s the correlation between STO and Asset Tokenization?
Once an asset has been tokenized, there is the need to execute an offering (STO) for the digitized assets which are in the form of tokens, so that anyone in the world and at any time can acquire them. With STO investors are invited to purchase security tokens.
For start-ups & entrepreneurs, STOs are an easy & relatively inexpensive way to raise capital for projects, because it offers investors secure, transparent & direct investments in their company.
Any company that wants to raise capital through STOs has to comply with regulations and reveal its prospectus to potential investors for scrutiny, thereby increasing transparency, accountability, and security of investments.
Most often these companies find it difficult to obtain liquidity from STO markets due to strict licensing requirements and high regulations. This is where IX Swap comes in.
IX Swap: key Liquidity Provider for STO Market
IX Swap is the first Defi platform to facilitate the trading of security tokens through licensed custodians and security brokers that would provide actual ownership and entitlement over these real-world assets.
Though IX Swap does not carry out the tokenization of real-world assets, its focus is to unlock the value of TSO through a steady supply of liquidity for tokenized stocks.
IX Swap is a Defi project with a team of well-researched, Knowledgeable, and successful individuals, with vast experience in the crypto markets and blockchain technology.
Their collective resolve is to build a DeFi platform that would provide liquidity to STO/TSO markets and become a bridge between DeFi and CeFi.
Conclusion
With the increasing number of tokenized stocks, companies and start-ups in security tokens are in search of liquidity through Security Token Offering (STO) and IX Swap pools and AMM innovation offers timely solutions.
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