Blockchain is no longer a stranger to the investment community. Faster settlements, improved risk management, and streamlined back-office processes are just of few of the many ways distributed ledgers have already impacted the investment sector.
Now blockchain technology promises increased liquidity and expanded investment access through asset tokenization.
Asset tokens, also known as asset-backed tokens (ABT), are digital tokens representing real economy assets. ABTs differ from utility tokens, which are not intended to be used as investments, and they are poised to become big business.
With the global tokenization market expected to reach nearly $2.7 billion by 2023, the tokenization of assets offers tremendous opportunities for portfolio managers and investors alike.
In this article, we will explain how we built Smartlands a security token (SLT) issuance platform on Stellar network, what asset tokenization means for stakeholders, and how real economy assets can be converted into digitized tradeable units.
Smartlands is a leading asset tokenization platform, developed by our team of experts at Technorely.
The robust and full-featured tokenization platform runs on the Stellar blockchain network, and represents the future of trading for real economy assets across the globe.
The Development Process
The client had a remarkable concept. Build a digital assets platform that would run on Stellar. It must enable the creation of a new class of low-risk tokens, backed by real assets in the main sectors of the world economy. The platform would include a personal client to manage all the details of creating asset tokens that could be traded on the secondary market. Furthermore, the digital property platform had to have certain features such as:
- Manage cryptocurrencies
- Make payments with ease
- Issue tokens and trade etc.
And they needed it done fast.
The client had no in-house experience to develop such a robust platform on Stellar. Also, the project had to be done on a very tight schedule, moreover, on a shoestring budget. Having being disappointed in hiring IT freelancers with meager experience and qualifications and no actual results in the end, except for exorbitant services. The client needed a reliable IT partner who could provide the needed expertise and fully complete and comply to the project requirements.
Understanding the scope of the work as Technorely, we not only offered relevant expertise but rendered Dedicated Team services, solely committed and devoted to executing the project. Providing such a solution brought the client’s idea to fruition. The platform was required to meet the demanding performance standards required by the global marketplace. To achieve the client’s objectives, we pooled our experience in bleeding-edge technologies, including Stellar, Stellar JS SDK, React, Redux, Node.js, and Semantic-UI.
We had the project running in full beta within two months.
Smartlands perfectly represents the client’s goal to create a platform to democratize wealth, and to provide global access to low-cost, high-yield investments. The reason for providing our top-notch dedicated services to Smartlands was out of pragamantic experience.
This provided the client with:
- Security and Cohesiveness.
- Ease of scalability and reduced cost
- Direct management and oversight
- Full-time commitment team
- Accurate estimation of the development time
- Effective business communications and high team loyalty
In June, Smartlands entered into a strategic partnership with Archax for Smartlands’ security-backed tokens to be listed on the forthcoming London-based Archax exchange for secondary trading.
We measure the success of any development project by its proven value to the client. With Smartlands, the client realized the product’s value almost immediately:
- The token price increased by 269% within the 3 months of beginning operation.
- The capitalization grew up to 274% in less than 3 months.
The Smartland website includes instructions for asset owners and investors wanting to capitalize on real economy assets.
Smartlands has done more than sell tokens. The platform has proven to be a crucial element of the burgeoning token market infrastructure. The platform is poised to create significant value for the crypto community, and to positively impact the world economy.
The Asset Tokenization Process
Let’s look at how assets can be tokenized in the first place.
Tokenization of real-world assets follows a methodical process. A greatly simplified one is shown below:
1. Identify an Asset—Before you can tokenize an asset, you must identify one that you want to offer. Assets may be virtually anything of real value.
2. Valuation of Asset—Since real-world asset tokens must represent real value, rather than speculative value, you must have a credible organization evaluate your asset and set its market value. The more credible the auditor, the more likely you are to receive the value you ask for your tokens.
3. Smart Contract Generation—You will use smart contracts to create your tokens. Smart contracts are one of the most powerful features of blockchain technology. These mini-programs are what handle the digital part of token transactions.
4. Distribution of Tokens—Converting your asset to tokens is only half of the job. Next, you must decide how you will make tokens available to buyers, and how the complex details of the transactions will be handled. Of course, you will be required to meet the regulatory requirements for trading securities in your country.
As we will see in a moment, use of a tokenization platform greatly simplifies the process.
Benefits of Asset Tokenization
Tokenization allows asset owners to get quick liquidity, even for assets that are usually considered illiquid, or hard to sell. From the buyer’s perspective, it offers investment opportunities that were previously inaccessible, especially for smaller investors.
Here are some of the advantages this new technology offers stakeholders on both sides of the transaction:
- Cost-effectiveness. One of the most inherently-valuable features of blockchains is that they eliminate the middleman. Since smart contracts execute transactions, there are no intermediaries to demand high fees.
- Accessibility. Tokens can be created, accessed, and traded anywhere in the world.
- Divisibility. A token can represent an entire apartment building (and it’s rental income) or just a fraction thereof. This greatly improves liquidity, by making smaller, lower-cost units available for the investment market.
- Immutability. Once a transaction is completed, the record can never be altered or erased.
- Security. Despite a few notable breaches that resulted from deficiencies in third-party code, there has been no breach of a major blockchain infrastructure.
- Transparency. Blockchains provide transparency for the entire process, leaving no room for corruption or mishandling of the transaction.
- Speed. Since smart contracts are self-executing code, transactions are completed in near real time.
- Lower risk. Since tokens can represent smaller parts of the asset, investors can put less money at risk.
- Improved liquidity. Tangible assets, in particular, can be fractionalized to make it faster and easier to attract investors.
Digital tokens offer opportunities for owners and investors. In deed, this nascent technology creates a whole new class of investments for the market.
Asset Tokenization Risks
Of course, without risk, there would be no such thing as investing. Fortunately, the challenges facing this new market are likely easy to overcome:
- Security concerns. Technology offers great benefits to this sector of the financial market. At the same time, care must be taken to ensure that the security of data moving in and out of the blockchain is maintained.
- Lack of standardization. As more and more platforms emerge, the lack of protocol standardization will make it difficult for third-party applications such as wallets to interface with platforms.
- Legal enforceability. Legislators are still wrestling with how to best regulate blockchain-based financial services. No doubt, asset tokens will gain more regulatory interest as popularity grows.
Asset Tokenization Platforms
The asset tokenization market is destined to make up a major part of the investment market in the near future. The earning potential has attracted several innovators, each wanting to capitalize on the market.
A few players include Bankex , Maecenas, and LaToken. While some platforms focus on enabling a narrow class of investments, such as fine art, Smartlands facilitates tokenization of the full range of real-world assets, including:
- real estate & land
- precious metals
- natural resources
- new businesses
Tokenization facilitates easy administration of investments across a wide variety of asset classes.
Capturing your share of the highly competitive fintech market doesn’t have to be a gamble. Like any investment, a well-crafted strategy is the key to success. If your strategy requires a technology partner, you should consider Technorely.
We are experts in the technologies that keep blockchain, healthcare, fintech, and industrial automation moving forward. Our world-class developers have the experience to take your idea from concept to market—on time and under budget. If that describes the technology partner you need to enter the marketplace, contact us today for a no-cost consultation.