Since the dawn of blockchain technology, there’s been an ever-louder narrative for digital assets. Disruption of this, tokenization of that. Fast forward a few years later, we’re still talking about digital assets. Is there any real-world value beyond the hype and the crypto community? What assets could be digitized? Those are two of the questions we’ll try to answer in this article.
But first things first. What are digital assets?
Digital assets, usually represented by a token, are tradeable assets representing the rights to something (e.g. currency, stock, piece of real estate, a sports card), that’s digitally stored and cryptographically secured. Assets could be tokenized in a fungible or non-fungible manner, where non-fungible tokens (NFTs) are unique and no two tokens are the same (or hold the same information). Fungible tokens, on the other hand, are identical (e.g common stock shares).
The emergence of Bitcoin and subsequently, Ethereum as a platform, opened for the narrative of tokenization of assets. Few years and an ICO (token) bubble later, we’re starting to see a maturing market for digital assets across, adding actual value across a number of industries.
Equities and Investment Funds
A clear use case is the tokenization of investment funds or equities. Each share is represented by a security token, giving certain shareholder rights and stored securely on an immutable public or private ledger. A great example is Mogul Productions – a decentralized investment fund for film financing, where investors can buy security tokens which give them the right to vote on investment decisions and further receive dividends/returns from those investments. Mogul takes it a step further by implementing a continuous funding model – more info on that here.
Another great use case is the tokenization of real estate which offers tremendous value to investors on both sides. On one hand, tokenizing real estate allows for fractional ownership – each investor could buy only a part of the property, represented by tokens. On the other hand, real estate developers end up having liquidity of a traditional non-liquid asset. There have already been a bunch of companies tokenizing real estate and we expect this space to heat up tremendously in the very near future. Stay tuned.
Although a drastically different industry in comparison to real estate, the use case in terms of technology and value add is almost identical. Liquidity, fractional ownership and digital distribution of traditional art pieces are all extremely attractive to artists who often struggle to commercialize their labor.
What’s super interesting is the emergence of digital art. Digital collectibles, e.g. CryptoKitties, have caused an absolute frenzy and the space shows no signs of slowing down. Each digital collectible is represented by a Non-Fungible Token (NFT) and easily tradable.
Sports and Entertainment
Remember the baseball cards of the 90s? Stepping on the concept of digital collectibles, here is how an entirely new market is created. Sports organization can now easily create digital collectibles to engage the new generation of fans. Dapper Labs (also creators of CryptoKitties) are already doing so in partnership with the NBA and the UFC through their Flow blockchain platform. Imagine special content like NBA videos, cards and what not, as a unique Non-Fungible Token, easily tradable online. That’s a huge market by itself. Now imagine that for all relevant sports and entertainment organizations globally.
In conclusion, those are only four of the more developed use cases of tokenization and digital assets. More and more assets, across all kinds of industries, will be tokenized going forward. And while we’re relatively early in the space, that’s nothing but a big opportunity. As a blockchain development company, at LimeChain we’ve already been involved in a number of tokenization projects and are super excited to see them pick up traction and work on new ones.