From works of art to real estate, the way to invest and transact assets is about to change radically with the modernization provided by tokenization.

With a huge potential to cause significant changes in various sectors, asset tokenization refers to the process of issuing a token on blockchain that digitally represents a real tradable asset.

With its specifications described in a smart contract it is in many ways, similar to the traditional process of securitization, but with a modern touch, allowing much more efficiency and liquidity.

The concept is relatively popular with computer enthusiasts’ cryptocurrencies, but is also beginning to advance in traditional industries and has the potential to provide significant changes in various sectors, simplifying trading operations around the world.

BUT WHAT ARE TOKENS?

They are a digital representation of real assets. Assets mean any economic resource, something tangible or intangible that can be used by the holder to produce economic value. See some examples:

• TANGIBLE ASSETS: money, loan, machinery, equipment, furniture, real estate.
• INTANGIBLE ASSETS: copyrights, patents, software, trademarks, financial assets such as bonds and stocks.

Thus, the tokenization of assets allows the conversion of rights these assets with economic value in a digital format.

When tokenizing assets, you can start trading them, with rules specified through a smart contract written on a blockchain.

For you to have an idea, the representation of real assets in a blockchain is spreading to: raw materials, real estate, final products, royalties, financial services and insurance, telecommunications, works of art, power generation, services education, private equity holdings, metals precious and countless other possibilities.

TODAY THERE ARE SOME TYPES OF TOKENS, TWO OF THEM ARE:

• UTILITY TOKEN - gives the holder access to a product or service. It is the monetary unit within the ecosystem, where products and services can be purchased and paid for through it and can also be used as a reward to members.
• SECURITY TOKEN - it is considered as a security, an income generator and constitutes the real property of an asset. It can represent a share of a company, a part of a building, the participation in a fund of investment and is traded based on the metrics specified in smart contracts.

SOME OF THE MAIN BENEFITS OF TOKENIZATION ARE:

• GREATER LIQUIDITY - the ease of transaction promoted by tokenization increases the freedom and liquidity for buyers and sellers interested in a certain asset, facilitating the attraction of investors and the trading process. In addition, it makes it possible to increase the volume of trading both for markets with little liquidity (art), as well as for larger markets.
• ACCESSIBILITY - new forms of fundraising, allowing projects under development to issue shares in token format, providing reach to a much larger audience. As the asset can be divided up, it reduces the minimum values needed to invest, in addition to enabling 24/7 trading and eliminating territorial barriers.
• SPEED AND COST REDUCTION - the automation generated by smart contracts allows a great reduction in administrative costs involved in the processes due to the decrease in intermediaries, providing faster and more dynamic operations.

According to the consulting firm Plutoneo, the expectation is that in Europe the asset tokenization market will reach € 1.4 trillion in 2024.

The global tokenization market, which in 2018 was estimated at US $983 million, is expected to reach US $2.670 billion by 2023, growing at an annual rate of 22.1%.

North America is expected to represent the largest size in the overall tokenization market during the forecast period.

One of the industries in which tokenization was recently used of assets was sports. Currently, the sector is fraught with obstacles for promising athletes from poor backgrounds and less economically developed countries.

These young athletes often depend on scholarships or being seen by a sponsor. However, if investors had a simpler way to invest in the future success of these athletes, it would be the ideal way to generate new opportunities for professional growth.

Tokenization is a way to achieve just that. An example from the sports market was that of 2019, when American professional basketball player Spencer Dinwiddie announced the tokenization of a percentage of his contract with the Brooklyn Nets.

As part of the deal, investors would have the opportunity to buy fractions of Dinwiddie's contract with the Nets and would earn an annual return of around 2.5%.

Although not quite as planned, due in part to a long-running dispute with the NBA and several delays caused by the U.S. Securities and Exchange Commission, the player managed, with the offer of security tokens (STO), to raise $1,35 million.

If up to 1% of the global sports industry changes to a tokenization model, the overall tokenized sports industry could be worth $6 billion. To put that in perspective, it is about six times bigger than the $1 billion e-sports industry.

In addition, tokenization can drastically increase the annual fee for collegiate sports, from the $1 billion industry, which is now a multi-billion dollar industry, making it more accessible, more liquid and diverse. This will help the global sports industry to grow, ensuring that the next generation of great athletes is better funded than ever.

Only by this example is it possible to have an idea of the disruptive power that this can cause, allowing to unlock a large flow of additional revenue, giving many athletes the chance to access new growth opportunities.

At the same time, it offers professional and casual fans and investors the chance to help boost athletes' careers, increasing their chances of being chosen by professional teams.

Asset tokenization will provide many tools to help companies raise funds more efficiently.

Even if it does not remove all intermediaries, it will undoubtedly promote much more efficient processes to traditional commercial relations, replacing and transferring the needs of trust, previously entirely centered on individuals, for mathematics and technology.

The result of this is improvements at a global level for the cast forms, as the current asset trading happens. Even with the obstacles arising from regulation, this market should surprise and companies that are willing to adapt for the future will be much more likely to prosper.

The following infographic, similar to Gartner's research, shows the trend of adopting new technologies. It is possible to observe that we are in a phase of transition to a moment of consolidation of tokenization in the next two years.