Benefits of Asset Tokenization
Asset tokenization is the process of moving specified assets away from traditional centralized systems onto new decentralized ones. Assets that can be tokenized include finances, physical property like homes and cars, and more.
The benefits of asset tokenization are wide and varied, including increased processing speeds, easier transfer of ownership, and better security. Read on to learn more about the benefits of asset tokenization.
Increased Processing Speeds
One of the main reasons businesses like banks are on board with asset tokenization is that it increases processing speeds. While businesses love the control of a centralized approval process when it comes to transferring money (think a wire transfer), the reality is it takes a long time, often several business days, to process these transfers.
With asset tokenization, the process of sending the money becomes decentralized—allowing for a blockchain to approve transactions without needing to contact a central authority. As such, the transaction processes much more quickly, making it more convenient than a traditional wire transfer.
Less Expensive
As you can imagine, whenever you decentralize something, it becomes less expensive. This is because, unlike with centralized assets, which typically must pass through a single entity (such as a single approver), decentralized transactions need far less oversight, something that financial institutions are on board with.
Unfortunately, human labor is expensive, and the costs are growing. This means banks and other financial institutions are always looking for ways to cut costs, and asset tokenization is one of these ways. No longer will they need to pay someone to oversee international transfers—now the automated processes handle it for you.
More Defined Ownership
In a centralized society, you own very little. And even if you do own something, because of the challenges of the ownership transfer process (and how it relies on a centralized entity), you may find it difficult to pass off your ownership even when you do own something on paper. This leaves many “owners” without power over their assets.
Asset tokenization returns the power to owners, allowing you to transfer your assets to whomever you please, whenever. You no longer have to wait for the approval of a centralized authority, which will leave you actually feeling like you own something—for real—not just on paper. And you have far more choices for whatever it is you own, as there is no big bank or company breathing down your neck over it.
You Can Divide Ownership
The centralized world is not conducive to shared ownership. For example, say you and four friends would like to buy a house. If you can find a bank to allow you to do so, it will be very challenging going forward, as each time you would like to do something, such as apply for financing for renovations or approve said renovations, you would likely need all five of you to show up, in person, to sign papers.
With asset tokenization, this all becomes easier. Digitally, it is very easy to split the ownership of the house and set up decentralized apps whenever something needs to get done. Not only can everyone approve changes remotely, but also if one friend decides they want to leave the co-ownership, it is very easy for them to sell their share to one of the existing members or sell it to someone else entirely—without having to rely on a bank to process paperwork in a timely manner.
Better Transparency and Security
One of the major issues with centralization is the fact that you are relying on one single entity to do the right thing. You are trusting your bank to send the transfer to the right person, or for one bank employee to approve or deny your loan application. This leaves a single fail point, something many people discovered when a single payment processor (Synapse) went under in May 2024, leaving hundreds of Americans without access to their funds.
With decentralized asset tokenization, the processes used to decide whether or not a transaction is approved are transparent and easy to follow—ensuring you understand why your money didn’t end up where it was supposed to or why you were declined for that loan. Not only that, but the process is more secure because there is no single point of failure. No longer do you have to worry about a disgruntled bank employee making the wrong choice, and if a single payment processor goes under, you will have other options for connecting to your assets.
Increased Liquidity
As we mentioned above, tokenizing assets makes it easier to buy and sell them at will. While this may not benefit you much in the NFT market (which is the usual example of asset tokenization), imagine a world where you can sell your house or car with the click of a button rather than waiting for lengthy underwriting processes.
While this isn’t the reality now, it is something that can happen with asset tokenization and a direction we hope this technology heads in. Of course, we know the banks, realtors, and escrow services will fight it tooth and nail (they are the current centralized entities behind these processes), but tokenizing these assets will remove the need for these, making the process of buying a house not only cheaper, but more accessible to all.
Available 24/7
Last, but certainly not least, asset tokenization allows easy settlement of assets around the clock. The world is becoming bigger, and the need to be able to handle financial transactions outside of normal business hours continues to grow. Although banks have tried to adapt by moving some employees to the night shift, it is better overall if they adopt asset tokenization, which allows customers to process transactions 24/7.
Overall, there are so many benefits to asset tokenization and very few downsides. Of course, the financial institutions don’t want you to know this because it will put them out of business. Whether you are looking to buy a house or car, or simply move assets with ease, we recommend looking into options that are tokenized, as they truly return the power to you instead of a single, fallible financial entity.
