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Asset tokenization is one of the latest blockchain trends to emerge in the fintech sector. This new concept offers a way of tokenizing just about anything, which helps inject liquidity into previously cumbersome assets.
But, what exactly does tokenization entail? And does it hold the future of security token offerings? If you have been following the crypto space for some time, these questions must have crossed your mind whether you are a blockchain aficionado or not. Well, no need to worry, this extract will give you insightful information worth grasping in this era of the digital world.
Asset tokenization refers to the process of converting assets into blockchain tokens, usually security tokens. This process allows assets to be represented digitally, making it easier for them to be manipulated in a blockchain ecosystem.
In some ways, asset tokenization is similar to securitization. But, unlike the latter process that converts assets with low liquidity into security instruments with higher liquidity, tokenization turns real-world assets into digital forms with high liquidity.
The blockchain tokens used in asset tokenization are often security tokens. Developers usually use Security Token Offerings (STO), a form of ICOs, to create these tokens. The security tokens used in tokenization can represent participation in an investment fund, a piece of real estate investment, or company shares. Once digitization of assets is complete, legal and ownership rights are transferred to the token holder. The holders can then trade the security tokens on a secondary market.
Liechtenstein Security Exchange is one of the blockchain projects that is looking to leverage asset tokenization. The exchange has a variety of products, all of which follow Liechtenstein’s Blockchain Act.
One of the products on the LCX platform is the STO Launchpad. Thanks to this platform, developers get to speed up security token offerings and reduce costs while at it. LCX achieves all these through its partnership with external companies to create a token that would meet a security definition.
The STO Launchpad consists of four primary entities that all work together to ensure the successful tokenization of assets. The Proprietary Technology Platform manages the tokenized assets. This entity ensures that both the tokens and the platform comply with the set legal terms.
The Legal Tool Kit defines the legal and tax external partners of the launchpad while, on the other hand, the account management entity manages the investor’s accounts. This division makes it easier for investors to manage and track all their assets using one account.
The last entity is the Product and Service Framework. It defines the products by LCX and how they integrate with the blockchain laws in place in Liechtenstein.
One of the primary goals of the STO Launchpad is to tokenize everything. This entails physical, financial, and digital assets. The launchpad aims to bring more professional investors into the blockchain world by providing better liquidity for real-world assets.
In a recent AMA, LCX has disclosed that they have a full pipeline of tokenization projects valued more than 100 Million USD already with more proposals coming in almost daily. Furthermore LCX has signed 2 tokenization agreements which will be announced in the coming weeks.
In accordance with the new blockchain laws in Liechtenstein LCX acts in their roles as compliant Token Issuer and Token Generator to Tokenize these assets. LCX sees a huge potential to tokenize assets in the entertainment industry, such as gaming or film assets.
STOs have recently been demanding a lot of attention. This new form of raising capital is quite lucrative for raising capital. Having blockchain technology at its core sets STOs apart from traditional forms of raising capital for project funding.
Over the last few years, the hype around STOs has focussed on the benefits they offer in the issuance and lifecycle of digitized assets. Sure, this approach was necessary for the development of STO solutions. But with the infrastructure already in place, it’s about time that we looked into other STO aspects that have been neglected.
One of the most significant benefits of security token offerings is that they offer greater liquidity for real-world assets. Say, for example, entity A would like to invest in real estate but only has a small amount of the money required. If entity B, who is the owner of the real estate property, tokenizes their asset, A would easily invest in a fraction of the topic. In the absence of asset digitization, A would have either had to source funds to invest in the entire property or miss out on the opportunity entirely.
Other benefits presented by STOs stem from having blockchain technology at its core.
STOs have created a shift in the global financial sector. Investors are slowly shifting their focus to investing in token assets, which is well on its way to disabling the use of ICOs by companies as a means to raise funds. We cannot say, for sure, that ICOs and utility tokens have been completely phased out. However, the focus is shifting, resulting in the introduction of companies such as LCX looking to tokenize everything.
Just like blockchain technology, STOs have been dominant in fintech and real estate. However, more industries are now shifting with the new wave. In the future, we can expect other sectors such as healthcare, enterprises, and even sports, to jump on board.
Certain benefits such as fractional property ownership, enhanced liquidity, and smart contracts, STOs provide an innovative way for investors and issuers in the primary market. Therefore, having more companies adopt the use of STOs will help bring in more investors, which will be an excellent boost for the mass adoption of crypto assets.
The Blockchain is ever-evolving, and one of the latest trends in its tech is STOs. Security Token Offerings present several useful features that are key in getting more people to invest in crypto assets.
Since the inception of the first STO in 2017, several companies have been formed to help bridge the gap. One such company is LCX, whose STO Launchpad is looking to tokenize everything, in a bid to draw in more professional investors.
There’s no doubt that STOs are paving a new path for blockchain technology. As more companies adopt this new method, the crypto community can only wait to see what more STOs can offer.