Asset-Backed tokens offer a great way for people to own an asset and not have it physically. This forms the foundation to own the world in your pocket. Most stocks that are moving the market are based on this idea- digitization of an existing asset be it money, gold, a company, etc.
Blockchain Technology and Asset Digitization
While trading stocks are great and the most popular way to own a certain portion of companies like Amazon, Tesla, Google, Facebook, etc., blockchain technology has revealed that these matters can be more secured, efficient, and transparent. The first move to try asset digitization on the blockchain is fiat-backed stablecoins like USDT, USDC, etc. After these came gold-backed stable coins like the popular Paxos. More recently, the use cases have extended to other assets such as real estates.
The application of blockchain technology to tokenize real estate assets is becoming recognized among professionals because of some inherent attributes of blockchain technology. It is now possible to own a portion of a building or property with tokenization. But this type of asset tokenization has major weaknesses that may be of concern to people who want to buy tokens like this.
- How do people prove that real assets are backing the tokens they own?
- How are token holders sure the asset will not be sold without their consent since the documents that validate ownership of a particular asset is still with the person who owns them?
So far, these major challenges face asset tokenization and prevent wider adoption of the same. This is because the use case is quite new and there are no laws binding in this case.
Some potential solutions
Below are some potential solutions that can help an issuer or company foster trust in the heart of investors:
If the issuer in question can leave full details of the asset in question online and open for anyone who wishes to do due diligence, then there might be a spark of trust in potential buyers. The issuer must have allowed a known and trusted third-party auditor or validator to testify that the information he presented is correct.
Platforms to create tokens and issue smart contracts like Xinfin’s mycontract.co perform KYC on anyone who wants to tokenize any asset- this can serve as an extra layer of protection and trust for potential buyers.
The matter may be simpler for an already established online Real Estate investment platforms that have ready-made customers that they serve. They only need to present tokens instead of account balances which they give customers before to secure both the customers and the company from hackers.
There must be legally binding documents that give people who buy tokens certain rights over a particular asset. Platforms like Safe Haven’s Trust Alliance Network (TAN) might come in handy in this scenario to help advise individuals on what to do pertaining to legal issues. The network is envisioned to contain verified legal professionals who can advise on legal matters pertaining to assets and blockchain.
Maybe the next big thing…
With this in place, a certain level of trust can be established in the mind of those who are willing to diversify investments. Asset tokenization of real estate investments might be the next big thing after stablecoins if innovative solutions are implemented to cater for loopholes.
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