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Asset tokenization refers to a process whereby a digital asset is created which is directly backed by a physical asset such as a car. The main benefits of asset tokenization are as follows:
- Liquidity/Divisibility: Tokenization enables clients to invest in an expensive asset like a supercar, without the need to purchase the vehicle outright. While this is theoretically possible using conventional financial mechanisms, investors typically have to pay a so-called “illiquidity discount” of up to 20-30%. By using tokenization, these costs can be avoided.
- Diversification: Tokenization enables investors to diversify risk by buying tokens in multiple cars. This means that if one car does not perform well, the loss can be offset by profit on other cars.
- Lower Cost: As fewer middlemen are involved, fees are much lower.
- Less bureaucracy: Compared to a conventional investment, there is very little bureaucracy because everything can be controlled and monitored online.
Faster Settlements: The higher liquidity and automated nature of the system mean that transactions are much quicker.
Submitted August 31, 2019 at 01:44PM by Tonymillions84 https://ift.tt/2Px8CkT
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