Tokenization of Assets Will Increase Market Liquidity, Experts Believe

Tokenization has the greatest impact when it is used to bring liquidity to assets that are illiquid or otherwise nontransferable. There are certain areas where tokenization can prove to be of extreme value and social media is one of them. YouTube and Twitter are some of the platforms that can gain extreme benefits from it. Users, publishers, and advertisers can exchange tokens between themselves without the presence of middlemen but tokenization of every real-world asset might not prove to be a great thing because of the transparency required with the use of public ledgers. Talking to BlockPublisher, the CEO of Graychain Limited, a financial services company based in Hong Kong, Paul Murphy said:

Tokenization makes sense because it facilitates any transaction related to an asset. Unfortunately, if the ledger is public, a lot of people will not want their assets tokenized.

Tokenization is forming a local network pertaining to an asset. And in that local network, a representative of value provides some utility to the users. It also enables fractional ownership of an asset but use of public ledger for asset tokenization is a major concern.

Public ledger is a record of all the activity of a network which is visible to everyone who is a part of that network. Public ledgers ensure that a transparent fabric of operation is established. This makes the asset owned by anyone, visible to everyone else in the network. This is something that might not be desirable by all because not everyone wants their assets in front of everyone else, publicly and Paul believes that he is not the only one with the same thoughts. He told BlockPublisher;

I would not want everything I own easily visible in a public database, and I am certainly not alone!

Private ledgers provide an alternative to the public ledgers but they might not provide the same level of trust and transparency. When asked if it is feasible to tokenize every asset? Paul said;

Not today, and maybe never. The answer will ultimately depend on the kind of ledger that is used for the tokenization.

Public or private, whichever ledger is used, tokenizing of highly priced assets can prove to be very beneficial for assets that are not liquid. Real estate is one of the prime examples in this regard. Tokenization allows investors to enter and invest in an asset that is not liquid (real estate in this case) by making fractional ownership possible. If a piece of land is tokenized, it can attract a large number of small investors, allowing the overall market size to grow by increased liquidity. Talking to BlockPublisher, Kyle Asman, partner at BX3 Capital, a New York-based business advisory service provider, said:

Tokenization has the greatest impact when it is used to bring liquidity to assets that are illiquid or otherwise nontransferable.

SEE ALSO: “Tokenizing Securities Do Not Accomplish Liquidity, Demand Or Add Value”, Reckons Chris King

Although private ledgers can help solve the privacy concerns, tokenization just isn’t a viable option for every asset that ever existed. A blockchain network that can be used as public or private ledger, requires a lot of power and resources to operate and it should only be used for high value assets where fractional ownership actually increases the liquidity.