Tokenization: The Global Economy’s Future

What is Tokenization?

Asset tokenization is the process of turning ownership of an asset into a digital token on a blockchain. This token is like a digital certificate of ownership that can be easily traded and tracked.

An asset in this context could be physical (like real estate or art) or digital (like intellectual property or company stocks), linked to a digital token on a blockchain.

This token represents ownership (or a share of ownership) of the underlying asset. Transactions involving the token are recorded on the blockchain, providing a secure and transparent record of ownership.

Benefits of Asset Tokenization:

• Increased Liquidity: 

Assets can be divided into smaller tokens, making them more accessible to a wider range of investors and increasing the trading activity.

• Fractional Ownership: 

This allows people to invest in assets that were previously too expensive for them to buy outright.

• Streamlined Transactions: 

Blockchain facilitates faster and more efficient transfer of ownership and trade settlement compared to traditional methods.

• Enhanced Security:

Blockchain's tamper-proof nature reduces the risk of fraud and errors.

• Wider Market:

Tokenization presents asset holders with a wider pool of potential buyers, locally and internationally. 

8 Sectors Leveraging Tokenization & Blockchain Technology

• Finance:

As of May 2024, the global digital asset market is valued at over $2.3 trillion, with daily trading volumes reaching $30 billion as reported by the Financial Times. While this is a small fraction of the global stock market, it is still significantly larger and more liquid than traditional transaction markets and stock exchanges.  

Secondary securities platforms can integrate blockchain to facilitate secure and efficient trading of tokenized securities representing ownership in securities, investment funds, or other facilities. 

Blockchain platforms like Fireblocks are built for scalability, allowing financial institutions to tokenize a wide range of real-world assets efficiently. Convexity’s Odozi MPC Wallet strengthens tokenization by providing secure key management and transaction signing. 

Without a stable unit of value and ease of access, pricing and trading tokenized assets would be cumbersome and complex. Stablecoins make it easy to price and allow anyone to access the global markets of asset tokenization trading in local currency.  Stablecoin such as the Africa Stablecoin Consortium’s cNGN is pegged to the Nigerian naira and makes this process seamless.

For investors in tokenized securities, tax compliance is a valid concern. Chainkeeping, a platform designed by accounting and digital asset professionals, streamlines financial reporting, tax calculations, and filing for crypto users, accountants, and tax authorities.

• Real Estate: 

Assets like real estate can be difficult to trade because they are illiquid. Finding a buyer takes time because of the high capital investment required. 

By tokenizing real estate assets, investors can trade individual properties with more profitability, in granular sizes and with less need for intermediaries. 

HouseAfrica leverages blockchain technology to issue secure and verifiable digital titles for purchased land. HouseAfrica's Sytemap platform leverages satellite map technology to help buyers choose, verify, and pay for real exchange, delivering digital titles powered on blockchain & NFT.

• Education:

Diplomas, certificates, and transcripts can be issued as tamper-proof tokens on a blockchain. This removes the risk of fraud and forgery, while also allowing for easier verification by employers or educational institutions. Students can also tokenize their academic work.

Educational institutions can leverage Convexity’s BitCert solution to create a secure and transparent record of student data, enrollment information, and course completion on the blockchain. This streamlines administrative processes, reduces the risk of errors, and allows for easier data sharing between institutions if needed.

• Aviation: 

Frequent flyer miles and other loyalty points are essentially illiquid assets. Tokenization allows airlines to create tradable tokens representing these points. Passengers can then buy, sell, or even use them for purposes beyond traditional airline rewards.

Aeropaye replaces traditional flight tickets with secure digital tokens using blockchain technology. When a flight is cancelled or delayed, Aeropaye's system automatically processes a refund within seconds. The refund process is secured by smart contracts on the blockchain, removing the need for manual verification and paperwork.

• Governance:

Governments can use tokens to represent voting rights in a decentralized autonomous organization (DAO). This creates a transparent and verifiable record of votes, reducing the risk of manipulation and fraud. Token holders have a vested interest in the success of the DAO, foreseeably increasing voter participation. Convexity has expertise in building DAOs for private enterprises and government agencies.

A pioneer in e-government, Estonia has leveraged blockchain for secure data storage and identity management. They've even piloted a program for citizens to access government services using blockchain-based digital IDs.

Dubai also has various initiatives underway, like exploring tokenization of government services, using blockchain for trade finance, and developing a regulatory framework for cryptocurrencies.

• Sports:

The sports industry is embracing blockchain technology and NFTs (non-fungible tokens) to bolster fan engagement and create new revenue streams. For example, Chiliz ($CHZ) is a blockchain platform that powers Socios.com, a platform where fans can purchase Fan Tokens. These tokens allow fans to participate in exclusive polls and votes on club decisions, access VIP rewards, and connect with other fans in new ways.

Socios.com has fan tokens for soccer clubs (like Barcelona, Paris Saint-Germaine, Manchester City, etc.), tennis (like the Davis cup), fighting (like PFL and UFC), rugby (like Harlequins, The Sharks, Leicester Tigers, etc.). 

• Telecommunications:

Spectrum licenses, crucial for network operations, can be tokenized to streamline trading and potentially create a more efficient market for spectrum allocation. 

Tokenized assets representing infrastructure projects broaden the investor base and attract capital for building and expanding telecom networks, especially in underserved areas.

Giga, a UNICEF-ITU partnership, aims to connect every school to the internet by creating a global marketplace for "Connectivity Credits" that incentivizes investment in bringing internet access to underserved areas, using blockchain technology and tokenization. 

• Entertainment:

Projects like video-games, films or albums can be crowd-funded using tokenization, giving producers and creatives a wider avenue to source capital from. Tokens can be used to manage access to digital content, preventing piracy and ensuring creators receive fair compensation.

Conclusion

Tokenization is reforming asset management and utility across industries, powered by blockchain technology.

Convexity Technologies is a blockchain solutions and consultancy firm, specialised in asset tokenization and enterprise-grade blockchain infrastructure for industry niches.

Wondering, how blockchain can transform your industry? We have the expertise to show you the way. Contact us at info@withconvexity.com