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Huge: US Federal Reserve Bank Releases Paper On Real-World Asset Tokenization Benefits
In recent years, a new financial innovation has emerged—tokenization, a process that transforms real-world assets like stocks and properties into digital tokens.
We cover tokenization developments and fundamentals here often (see the following section for more on this topic).
This process is gaining momentum in crypto asset markets and could potentially bring about significant changes to traditional asset and financial systems.
The behemoth that is the US Federal Reserve Bank recently revealed in a research paper that tokenization offers many benefits, and “is a new and rapidly growing financial innovation in crypto asset markets”.
In essence, it’s a simple idea.
It’s like buying a piece of a big cake, such as a portion of a building, instead of buying the whole cake (the entire building).
These digital tokens can be programmed with special features and capabilities, that for example, can be used to help save money during the settlement of the tokenized asset.
Eventually, settlements themselves could effectively be automated using cryptographically-provable transactions, replacing traditional and slow paperwork processes that take weeks and weeks of back-and-forth to complete.
The most important benefits are that it reduces the hurdles to entering markets and makes these markets more liquid, meaning assets can be bought and sold more easily.
This is because when you break a big, expensive item up into smaller pieces, naturally, many more people can purchase those smaller pieces and gain entry into that market.
So, instead of looking for one major buyer for an item, you could crowdsource 10 buyers, who each only pay 1/10th of the cost.
All of this could be settled and organized directly using crypto.
At the moment, tokenization is still in its early stages and small in scale, but it’s growing fast.
Many projects are in the works, hinting that tokenization could become a significant part of the digital asset world.
By lowering the barriers to entry and making markets more liquid, tokenization could transform the efficiency of many markets. Read more here and the full US Federal Reserve tokenization report here.
Tokenization: A new dawn for insurance, agriculture, and real estate.
Tokenization 101: The future of ownership?
Imagine a treasure chest full of gold, cocoa, and oil.
Tokenization’s appeal could also lie in its ability to democratize access to costly markets.
Next-Generation Splitchain Network’s Edge In The Tokenization Industry
The emerging world of tokenization, as described in the Federal Reserve paper, offers potential paths for Zucoins and its underlying Splitchain network.
Fractional ownership of assets, a highlight of tokenization, is a naturally well-suited feature for Zucoins.
The ability of Zucoins’ Splitchain network to support micro-transactions up to 32 decimal places can allow users to own incredibly small parts of a larger asset, drastically increasing its accessibility.
If there are no network fees, as there are with Splitchain, along with its support for large number ranges, one could imagine it easily becoming a joke to gift someone 0.00000001% ownership of a Jet, for example.
The programmability of tokens and smart contracts, another feature of tokenization, is being adopted by the Splitchain network.
These capabilities and more, albeit implemented differently (for a number of reasons that will be revealed when we can), are being put under the umbrella of Splitchain’s “Smart Assets” abilities.
In light of the potential of tokenization, even though it is currently small in scale, Zucoins and the Splitchain network are pulling-all-stops to continue innovating and provide cutting-edge solutions to this growing side of the industry.
It’s all part of the goal of making Splitchain a truly next-generation layer for the future of the open web.
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All the best,
Peter & Rob
MyZucoins
Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.