The manner by which people invest is now greatly affected by tokenisation and cryptocurrency. Those who fail to realise the great potential of blockchain will be left behind as major companies are biting the bait and joining the crypto trend.
A shift in Market Focus
When blockchain technology and cryptoasset start to mature, there will be a shift in focus towards security tokens. Tokenising assets will be used to prove a person’s ownership of real-life assets.
More and more companies are already working towards leveraging this method of financing for raising assets in agriculture, real estate, etc. Whilst there are many overhyped blockchain projects and cryptocurrencies going down the drain, there are still a number of promising upcoming projects that will shake the decentralised crypto economy.
Security Token Offerings
From Initial Coin Offerings (ICOs), the trend is now towards security token offerings (STO). Security token offerings are now being used to raise funds backed by real-world assets. They are the best forms of an entry point. STOs provide a simple means of transferring tokens through the blockchain globally at an instant. Contrary to what most know, asset-backed tokens are not exclusive to blockchain-related activities that often adopt ICOs to raise more funds. STOs are an even better means of carrying out businesses on stock exchanges than the methods presently in use.
Additionally, security token offerings will open the gates to a digital asset economy. Whilst STO is similar to ICO as an effective fundraising tool, it can have a faster turnover, which can be used as a feasible strategy for crowdfunding. Historically, ICOs have successfully helped a number of projects to come into fruition, it has also been used as a tool for scamming investors of their money since it has fewer regulations involved.
In terms of crowdfunding, regulation is key. It is important for all parties involved to be protected via the blockchain. The evolution of blockchain engineering has proven it to be a useful application for many industries.
Tokenisation Disrupting the Financial Industry
One of the major industries affected by tokenisation and cryptocurrency is the financial sector. This emerging token economy allows financial institutions to provide a more efficient and bias-free market by reducing the friction that may result from the creation, buying, and selling of securities. Tokenisation has four main benefits for both sellers and investors:
Tokenisation of assets allows typically illiquid assets such as artworks to have a place in the market. Having a secondary market allows traders to increase their asset’s liquidity. Sellers can take advantage of liquidity premium to increase the value of their assets as well.
Since tokens transactions are carried out using smart contracts, exchange transactions can be done with more efficiency. Since these transactions can be automated, administrative burdens are removed such as the need for intermediaries. This efficiency then translates to cheaper transaction fees.
The use of tokens allows holders to have legal rights to tokenised assets. This process allows for increased transparency since both parties have the necessary information of whom they are dealing with. Both parties have avenues where they can check the legitimacy of the assets.
Tokenisation opens up more opportunities for investors to a whole lot of investment options. Tokenised assets are highly divisible. This means a larger number of investors can take ownership of that asset, which will make the asset cheaper. Investors who previously could not afford to buy these assets now have easy access at a fraction of its original price.
Tokenisation is indeed the future now that the US Securities and Exchange Commission published their regulatory guidelines for token issuers. The Distributed Ledger Technology (DLT) framework includes a number of considerations token issuers must factor in before offering their tokens as securities.
Now that cryptocurrencies have solid grounds, how do you benefit from all this? Begin by investing in the crypto market.
How to Invest in the Crypto and Tokenisation Market?
Entering the Crypto world can be a bit confusing particularly for beginners. Like any traditional investment, investors should not put their money in anything without having first-hand information about it. Often times, newbie investors will make half hazard decisions because they fear of missing out. In Cryptocurrency, understanding the space is important.
To get started, here are a few tips:
Get as much information as you can about the crypto space.
Having even a basic understanding of the market, how it moves and how it affects each other is useful. The crypto space is littered with different kinds of security tokens and tokenised assets. Like stocks, these tokens are volatile. Price changes several times a day. Do not easily freak out when you notice huge fluctuations in value. Getting substantial information about the asset will help you decide on the long-term whether you would like to buy, sell, or hold.
Getting information about the market is the same as having the right information about the company and the teams behind the tokenised asset.
Make sure you know that the company does and how they are planning to achieve their goals. If they are not transparent about it in their white paper, then you might want to step back and consider investing in other cryptocurrencies. It would also be beneficial to get as much information about the tokenised asset. Find out if the tokens are properly distributed amongst investors as this will dictate how the value will increase in time.
Choose the STOs and hope for the best.
Before biting the bait, make sure you have a particular STO in mind and read on all the information you can get about it and then hope that it will increase in value.
Blockchain technology will continue to evolve. Changes will happen and it is for the companies and investors to scrutinize whether it will be best for their business and interests. Its existence is shaking the industry and it will continue to do so and it is up to you if you want to maximise what you can benefit from it.