Distributed registry technology promises a revolution in exchange, moving from a centralized exchange of information to a decentralized peer-to-peer exchange of valuable transactions, stored digitally and securely.
Finance is thus one of the most obvious areas for the application and realization of such applications, particularly through the tokenization of assets.
Tokenization, the process of registering an asset and its rights on a token or “digital token”, makes it possible to combine the advantages of a blockchain protocol, in particular the absence of paper, while retaining the characteristics of the asset. A parallel is often drawn with the fact that the digitization of assets enabled by tokenization is the counterpart of the digitization of information enabled by the Internet. Automation, instantaneity, liquidity, transparency, near-zero transaction costs, auditing ease: the promises of tokenization are numerous.
However, between theory and practice there is still a large gap that needs to be narrowed in order to benefit from all the opportunities offered by this technology. Tokenization is currently facing several obstacles before it becomes immersed in our daily transactions. There are two speeds today: that of technology and that of regulation, which is still struggling to adapt to the contours of tomorrow’s world. Existing laws must be adapted to the technological shift offered by the blockchain, and central institutions and administrations are defending their role as intermediaries.
The opportunities that will result from an adaptation of regulations will make tokenization more suitable for everyday use, particularly with the creation of a more dynamic secondary market, as opposed to the blockages that go hand in hand with venture capital. The management and resale of tokens will therefore be essential in order to bring real liquidity to the market. The secondary market is currently still a complex stage due to the creation of a regulated market place in line with this technology.
With the decentralization of exchanges also comes the question of individual responsibility. Indeed, without intermediaries, individuals are then solely responsible for holding and storing their tokens. There is a user-friendliness problem with private key storage solutions, which is a barrier to adoption. Generally speaking, we are still in a phase of educating individuals about this technology.
The massive adoption of traditional asset tokenization will probably take a few more years before regulations and education are in line with the opportunities offered by the blockchain.
However, the movement is already underway with the arrival of the first tokenization platforms. This is notably the case of Wecan Tokenize, a pioneering system that allows the tokenization of assets for real estate developers, investment funds and private equity. As for investors, they can already participate and become familiar with the finance of tomorrow through a fully digital investment process, from KYC control to investment.
Tokenization is one of the greatest opportunities in the financial markets, and now is the time to prepare for it. To move forward, education, awareness and partnerships are essential to create ecosystems that can shape the economic world of tomorrow.
Sébastien Flak – Wecan Tokenize & Camille Ernoult – Wecan