Over the course of the last decade or so, there have been some major shakeups and changes in the world of finance on several fronts. Not only has the United States gone through a massive recession and a real estate market crash, but we’ve seen the rise of what is, essentially, a brand new type of currency – cryptocurrency. While things have started to improve for the economy in the United States, as well as many other parts of the world, many are still waiting for cryptocurrencies to become more mainstream than they already are.
One of the ways that this is likely to happen is through asset based tokens. If and when this occurs, it is going to influence the stock market and other areas of finance in a massive way. It will all depend on a range of factors, though. While there are some companies offering investment in cryptocurrency and asset based tokens today, all of this is still relatively new.
All of the barriers to exchange need to be handled before this will take off, whether it is buying traditional cryptocurrency or the asset based tokens. Investors want something that they can understand, and they want to know more about the risk associated with these types of investments. Because they are new, there is still an element of mystery when it comes to the overall risk and how they can be used. The promise of something new has caused some institutional investors and traditional investors to sit up and take notice, though, and as this field moves forward, the interest is growing.
The idea of true asset based tokens, which have real and tangible value in the real world thanks to their assets, does seem very promising.
However, as more and more different types of assets become tokenized, this could change. If more companies that have offerings in the stock market were to adopt the use of blockchain technology, then it would almost be assured that the stock market would be entirely tokenized in the future.
Currently, there are many different types of assets that could be tokenized, including real estate. In addition, gold, oil, and carbon credits are assets that could be tokenized. It is even possible to tokenize stocks. With the benefits that this technology can offer, it is likely that this is going to be the direction that the stock market goes in the future.
Why Are the Blockchain and Tokenized Securities Attractive?
Why might more and more companies want to turn their assets into tokens using blockchain technology? The benefits go beyond companies that are involved directly with cryptocurrency, as you will see below.
One of the first benefits that the blockchain technology can offer, is the fact that everything is traceable and transparent. This means that it is easy to track assets and goods to know where they are currently and who is holding them, as well as the history of those assets. The transparency can help to reduce the instances of fraud and other issues that have often plagued the finance industry in the past. The transactions are all recorded sequentially in the blockchain, and they are kept forever. It is possible to see everything that has happened with an asset, which virtually eliminates the possibility of fraud, while making auditing much easier.
You will also find that there is a substantial amount of security thanks to blockchain technology. The technology will provide verification for all of the transactions that take place in the network. It becomes easy to share information, and overall, you will find that this tends to be an efficient and fast way of making transactions. The speed at which the transactions can be made is one of the reasons that this is popular in other areas, and this is likely to hold true when it comes to buying and selling stocks.
You will find that the benefits of tokenized securities tend to be quite similar, as they are based off of the blockchain technology. They are independently controlled, and they are easily moved. When you think about the way that other securities are typically handled, there are far more restrictions on them. That is not the case, at least currently, with tokenized securities. In addition, when this type of technology is applied to other assets, it has the potential to reduce the overall costs associated with them.
With all of the benefits that can be offered with blockchain technology and secured tokens, such as being faster and safer, it is no wonder many in the financial fields believe that it will be the future of not only the stock market, but also many other areas of finance and investing.
What Does the Future Hold?
Currently, we are still in the early stages of cryptocurrency, and asset based tokens for digital currencies are even younger. Because it is still so new, it is impossible to tell with 100% accuracy exactly what is going to happen with any of the cryptocurrencies. However, with the added security of tokens that are based on actual assets, there has been more and more interest from a range of different fields, such as real estate. When more items, and traditional assets that investors like, are able to become tokenized, there is a very good change that many more options on the stock market will use tokens, and they will be readily accepted as a common form of investment.
However, it does seem as though we are still at least a few years away from this happening to a major degree. Many feel that in the future, far more assets are going to become tokens, and this is truly going to change the landscape of finance. It will be interesting to see just how these asset based tokens affect the market over the months and years ahead. In fact, in Australia, the stock exchange is already getting ready to utilize a blockchain technology system.