Tokenized Real World Assets: Blockchain’s Case for Better Capital Markets
Published on May 7, 2023
Capital markets are one of the most important pillars of the modern economy and, in turn, society itself. By facilitating the free flow of capital, these markets make it possible for innovation and progress to take place, creating new financial opportunities for everyone in the process. Not content with democratizing traditional capital markets over the past decades, blockchain and fintech are now looking to radically change them forever.
Traditional capital markets, while more effective than the systems that preceded them, have long struggled to scale up. This was reflected both in terms of accessibility and their application to other types of assets. While the former has now been partially solved by technology, the latter challenge still persists. Not only did legacy approaches make it difficult to achieve the level of “abstraction” required for the effective flow of real-life assets but also to do so in a way that satisfied all interested parties.
This difficulty means that real-world assets like real estate, commodities, and art haven’t benefited from the same level of liquidity and efficiency as their intangible counterparts. This makes sense when considering the different ways in which these assets are used and the technical complexity of managing them. However, the lack of effective capital markets for real-world assets represents a missed opportunity that was recognized long before blockchain was born.
Here is where the tokenization capabilities of blockchain technology come in. By “converting” real-world assets into digital tokens that can be traded on blockchain-based platforms, blockchain solves the technical challenges of the past. Not only is this approach to tokenization cost-effective and scalable but it also does so in a way that ensures total transparency.
Tokens based on blockchain ensure that the provenance of the asset linked to them can’t be forged. This ensures that audibility, security, and authenticity are no longer a concern for regulators and other players engaging with that market. In addition to every token being identifiable and traceable without the need of trusting any particular authority, blockchain can also increase liquidity in a substantial manner.
In its “Blockchain-enabled digital tokenization is poised to transform commerce” report, KPMG highlighted how “by creating more liquidity by using blockchain tokens, the transfer of value is accelerated.” As pointed out by HSBC’s “The 10x potential of tokenisation” report, the fractionalization introduced by blockchain tokenization “has the potential to give rise to a new demographic of investors, creating increased accessibility and augmenting the universe of investment options available.”
The “Crypto: A Better Capital Market for Real World Assets” panel was moderated by CryptoOracle Founder Lou Kerner sat with Souq Co-Founder & CEO JonPaul Vega and Maple Co-Founder & CEO Sidney Powell. Hosted by this year’s edition of Grit Daily House at Consensus, the panel touched on topics like the unique challenges and opportunities of tokenization, the role regulation has to play, and how their startups are contributing to the building of better capital markets.
To learn more about what this panel of experts had to say about the past, present, and future of NFTs, make sure to watch the video below or on Grit Daily’s official YouTube channel!
Juan Fajardo is a News Desk Editor at Grit Daily. He is a software developer, tech and blockchain enthusiast, and writer, areas in which he has contributed to several projects. A jack of all trades, he was born in Bogota, Colombia but currently lives in Argentina after having traveled extensively. Always with a new interest in mind and a passion for entrepreneurship, Juan is a news desk editor at Grit Daily where it covers everything related to the startup world.
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