Fractionalisation has essentially provided new opportunities through which people can begin investing in asset classes that might have otherwise been unreachable for them. Specifically, instead of needing to have and pour out thousands of dollars within a specific asset class, now all users need to do is just buy a fraction if for a predetermined amount of money that they already have.
Fractionalized assets are essentially tokens that get locked within a smart contract, after which they can be broken down into fungible tokens of equal value. From there, any person is essentially able to buy as many shares of that specific asset as they want to. Fractionalization brings numerous benefits as a result of this.
What Benefits Does Asset Tokenization Provide?
The key benefit surrounding real estate or any other business is that you have complete ownership over something that can appreciate in value and provide you with passive income. However, this means that these classes of assets also have a high cost associated with their entry. Fractionalized tokens that are connected to the underlying asset essentially aim to remedy this and bring other key benefits.
As the rising prices in property have shut down numerous sections of the market, investors have been looking for new ways through which they can asset the asset class. Through the procedure of fractionalizing an asset, users gain a higher level of accessibility, and the person who’s selling the property also gets access to a broader range of participants, who can then purchase a share, whether this is for their own purposes or simply as an investment vehicle.
Another key benefit is greater liquidity, as having a limited number of buyers, due to the high price can mean expensive items will typically be on the market for prolonged periods of time prior to finding a potential buyer. Once real estate or any other asset gets fractionalized, these more affordable prices will essentially drive purchases both on primary and secondary marketplaces by a greater number of investors and with fewer risks when compared to forking out a huge sum for an asset that might be overvalued.
Better for The Average investor
With the traditional methods of investing in real estate, people will generally not have the capital required to gain access to a property without getting credit or without putting a mortgage on their home. Through fractionalization, however, properties or any other expensive asset class can gain greater exposure to a wider range of people and create a more liquid market. This means that the average person can invest just $100 in order to get started instead of investing hundreds of thousands of dollars and upward.
When we go over the security associated with tokenization, it is clear that these are secured by the smart contracts as well as the underlying blockchain on top of which they are built. As with any token, all you have to do is analyze which blockchain it is hosted on and, if possible, figure out if the smart contract used to transact them has undergone a security audit.
When Will All Assets Become Tokenized?
All assets will become fractionalized at the point in time when there is a successful industry proof of concept. Currently, one such concept is the tokenization of real estate assets.
The fact of the matter is that fractional real estate, NFTs, or any other asset class as a whole has just begun taking off. If you are an investor or someone that aims to essentially invest in something that can provide them with passive income, there is something currently available for anybody. However, this is still a new and not fully adopted technology and method through which people can begin investing.
If you want to try it and experience what kind of benefits this can provide you, make sure that you give Propchain a try, as, through it, you can embrace the future of asset fractionalization and begin your investment in real estate without much capital. This way, you can also benefit from blockchain real estate tokenization. Through it, you will be able to browse through numerous properties and invest in the ones that seem right for you.
Currently, the benefits of tokenization are evident to many people. Specifically, tokenization lowers the barrier of entry for retail investors that want a small piece of the overall asset, and the most significant benefit is obviously the creation of far greater liquidity in one of the largest asset classes in the world.
However, it is important to note that there is still much market confusion surrounding this practice, alongside several knowledge gaps; the tokenization market has remained highly fragmented and, in the eyes of specific people, not that much different than crowdfunding.
Until the point in time when major institutional investments get injected into the market on both sides, large-scale adoption might be further away than we initially thought. Tokenization, as well as the blockchain, have the ability to transform real estate investment, but until all of these barriers are overcome, we are not quite there yet, and all assets will not become fractionalized.
However, the cryptocurrency and blockchain space is one of the quickest-evolving spaces out of any thus far, and their adoption is a representation of this.
As blockchain technology gets implemented across numerous industries, so will tokenization, and only time will tell how quickly or slowly we will begin seeing more assets become fractionalized.