Tokenization: The path toward greater market liquidity

I actually believe this technology is going to be very important … I believe the next generation for markets, the next generation for securities, will be tokenization of securities

– Larry Fink, CEO & Chairman of Blackrock

Background

Markets crave liquidity, and three factors drive liquidity – authenticity, provenance and demand. Blockchain’s inherent immutability and auditability coupled with the ability to trade peer-to-peer, anytime and anywhere support those factors. If you’d like your business to trade assets globally, 24 x 7 you should consider asset tokenization.

The act of tokenization is simply the creation of a digital twin, or a token, that captures an asset’s attributes including proof of authenticity, proof of ownership and provenance. From that point, the asset also offers the ability for self-custody, providing you unfettered access to your assets.

Using the right technology foundation, tokenization can revolutionize markets and empower investors, unlocking liquidity for previously illiquid assets.

The journey has begun…

Here are some asset classes that have been tokenized on the Chia blockchain

Carbon Credits

• Asset Tokenized: High quality carbon credits
• Market Benefit: Providing greater transparency into carbon credit markets and providing project developers a path to higher monetization.
• Why Chia: Leveraging unique primitives such as DataLayer, Chia is the technology behind the World Bank’s Climate Action Data Trust (CADT), a decentralized metadata platform, like Edgar, that links, aggregates and harmonizes all major carbon credit registry data to enhance transparent accounting in line with Article 6 of the Paris Agreement.
• Applicability: Any asset class that is traded in fragmented and opaque markets.

AI Compute Resources

• Asset Tokenized: AI compute resources (GPUs today)
• Market Benefit: Allow excess idle capacity to be monetized for owners, and for users access to vast GPU compute resources without capital outlay and lead times.
• Why Chia: Leveraging the inherent security of the Chia blockchain along unique primitives like Offers, the physical AI infrastructure is represented as digital twins, providing a transparent, permissionless market.
• Applicability: Secure and compliant infrastructure to deploy Decentralized Physical Infrastructure Network (DPIN) for industries tanding from energy to data storage.

Luxury Goods

• Asset Tokenized: Luxury goods.
• Market Benefit: Ability to integrate proof of authentication and ownership along with Digital Product Passport (DPP) compliance.
• Why Chia: Market specific modular solutions for authenticity, proof of ownership and provenance, available for integration into existing brand applications.
• Applicability: Any high value asset class like Art that suffers from counterfeiting and theft.

Dealer Floorplanning

• Asset Tokenized: Cars
• Market Benefit: Automate the transfer of ownership and loan repayment without the need for manual lot audits. (Floor plan lending is a revolving line of credit that lets car dealers borrow against retail inventory)
• Why Chia: The solution attaches a car’s vehicle identification number (VIN) to a blockchain and uses telematic and geolocation sensors for real-time identification of inventory on the dealership floor along with payment automation leveraging smart contracts.
• Applicability: Any asset class that uses inventory financing inventory to manage cash flow.

What’s next

McKinsey estimates that the tokenized market capitalization across asset classes could reach about $2 trillion by 2030 (excluding cryptocurrencies and stablecoins). Broadly, tokenization revolutionizes markets and empowers investors through transparent, tamper-proof record keeping and is the foundation for asset sovereignty and peer-to-peer trading, anytime, anywhere.

original source – Chia.net