Tokenising Real World Assets: A New Era For Web3 Inclusion

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Tokenising Real World Assets: A New Era For Web3 Inclusion

Tokenising Real World Assets: A New Era For Web3 Inclusion

Leading the web3.0 revolution, Blockchain technology and its underlying immutable ledger has much more to offer than you know.

The inclusion of Blockchain in any industry or domain leads to a transformation. This transformation is not generally something out of the box. It is something that has always been imagined but has been impossible to implement because of several constraints and trade-offs.

Let’s apply Blockchain to something different than supply chains, art, currency, or games.

How about your investments?

When you do an investment, ROI sure takes priority but what also matters equally is security, liquidity, reliability, transparency, and access.

Blockchain has revolutionised the space of investment and asset management by integrating these features with the concept of tokenisation.

How it Works?

As mentioned earlier, Blockchain is an immutable ledger. It maintains a record of all transactions where transactions refer to any interaction with the digital network.

The record of a transaction can also be thought of as a data entry into a ledger.

This data can represent any form of information such as the ownership of an asset. If you buy a house in real life, you establish its ownership by getting a verified document stating you as the owner. This same information can be stored as a data entry on the Blockchain ledger rather than a paper.

If the asset goes through any activity in real life such as a transfer of ownership, the same is reflected on the Blockchain.

This is the concept of Blockchain-based tokenization.

In essence, tokenization with Blockchain refers to the record of ownership existing in an immutable ledger where the token represents the asset and carries the same value as the asset. This asset can be anything such as equity, real estate, art, or even SHIPS!

Let’s get a bit technical

Tokens are governed through some pre-written piece of code called a smart contract. The smart contract contains some functions that define various critical aspects such as the flow of ownership, the value appreciation of an asset, the liquidity aspect, and everything else that you can think of.

To buy or own a token, you need a public address and a private address. This is like your bank account number and your password.

To create an account on a Blockchain network, you need to create a wallet. The public key in the wallet is linked to the token on the Blockchain while the private key is used to authenticate any activity to be done on the token.

Tokens can be classified into two categories:

Utility tokens that define the digital economy or use case of a particular ecosystem.

Security tokens that represent an asset digitally.

The most prominent types of security tokens are:

  • Equity tokens — Representing stocks as tokens
  • Debt tokens — Representing real estate mortgages and corporate bonds among others
  • Derivate tokens — Representing another token or an underlying asset.
  • Hybrid convertible tokens — A mix of two other token types
  • Real-life asset-backed tokens — Representing a real physical asset

The rise of asset-backed tokens

Real-world assets have been void of true revolution for decades especially considering the lack of digitalization in this space. Whether it is about more liquidity or global access, real-world assets seem like a low-hanging fruit that no one is picking.

Therefore, addressing the key concerns related to investing in real-world assets becomes imperative to open new doors. By having unabated access to such an investment class, people can experience

  • Better ROI
  • Better Reliability
  • Security and Transparency
  • Easy Access to Liquidity
  • Diversified portfolio

Let us understand the potential of asset-backed tokens through an example

Ship-backed tokenization

Ships are among the largest asset class in the world, and the most coarse segments. Having a huge buy-in, Ships become the last choice for an average investor.

Think of it like going to a bar but not being able to drink that Macallan 18-Year old because they only permit buying the whole bottle. That won’t be fair right? Everyone should have a taste of the best.

Everyone should have the liberty to have at least a fraction.

In a similar sense, investing in ships used to have a lot of roadblocks such as investment value, access, reliability, and more.

Tokenizing ships becomes a natural solution to this problem. Through digitalisation and decentralisation, Blockchain has taken us back to an era where villages used to crowdfund a ship for various reasons.

Now the village is the whole world and the reason is “better returns”.

With the idea of Shipfinex, we are allowing a user to become a fractional owner of a ship by investing a reasonable amount without any geological constraints.

It’s Time To Become A Sailor

In the midst of recession and inflation, better and safer investment opportunities are needed to ensure that our lives are not just about survival but about fulfilling our dreams.

Everyone deserves better returns on their savings and investments regardless of the amount they invest. That is what true decentralisation stands for.