How to Invest on tangible assets in crypto market

People all around the world are eager to invest their extra money in hope of making more money in the future. Traditional investments like investing in governmental bonds, stocks and shares are still popular and shape a major part of an investment portfolio.

However, the importance of alternate investment has been increasing over time, especially after the 2008 financial crisis. 

Alternative investment on tangible assets like real estate is increasing in popularity. However, illiquidity has always been an issue to be considered when it comes to real estate investment. Here is where the blockchain industry steps in. Let’s dive deep and see what is tokenized tangible assets and how they resolve the liquidity issue for real estate investment.

Real world asset tokenization

Asset tokenization is another usage of blockchain technology through which an asset is converted to tokens, either fungible or non-fungible. Almost all tangible assets as well as virtual assets can be tokenized and fractionalized. Think of a valuable artwork or a licensed precious piece of diamond. Not many investors are able to invest in such real world assets. However, the blockchain industry extends the borders for small and medium scale investors to invest in assets with prices far higher than their investment budget. For instance, a tokenized real estate like a luxurious property in Palm Jumeirah can be fractionally divided into smaller portions, making it available for a wider range of investors to buy a share of that property. Every single portion represents the owner and their share of ownership. 

How does real estate tokenization work?

Once you select a property and ensure the authenticity, ownership and all legal requirements, you must choose a blockchain network. Through the chosen network, you can create tokens that all information including ownership and share are stored in the token within the blockchain network. Token holders are entitled to any passive income from investment on the underlying asset that is a property in our case, on a pro rata basis. Besides, tokens can be traded across the blockchain network to new investors. Smart contracts within the blockchain network define the rules about how to trade towns and how the asset generated income is distributed to token owners.

Advantages of investing in tokenized tangible assets

• Transparency and security

All transactions are recorded in the blockchain network and are visible to all parties. The information including ownership, authenticity, share, etc. are securely stored in the blockchain network and can not be changed or replicated. Transaction history is also available to all parties. 

• Liquidity

One of the major risks associated with investing in tangible assets like real estate is illiquidity. Your targeted audience for selling an investment property is more or less limited to people living in the area. With tokenized real estate, you are only a few clicks away from selling your token, which is basically a share of a property. Potential buyers are all investors across the globe who can purchase your token within the blockchain network 24/7.

• Fractional ownership

Investing in a USD 20 mil villa in Emirates Hills is not an option for a wide range of investors. Even though most investors are aware of the high potential for capital growth in the future, it is not affordable for most of them. Thanks to the blockchain industry and asset tokenization, it is now viable for most investors. It goes without saying that investing in the same villa that is tokenized to 1,000 tokens worth USD 20,000 each is affordable to a wider range of investors. As such, with an investment fund as little as 20 grand, you will be the proud owner of a fraction of a villa in Emirates Hills and enjoy the capital growth and rental income on a pro rata basis.    

•   Easy Project Finance

If you want to implement a project in either the digital or the real world, you need to go to either banks or local investors to finance your project. Blockchain industry has removed the borders and limitations in terms of project finance. Once you define your project and upload the whitepaper, you will have access to a worldwide network of investors. As you can see, it sounds like a revolution in the finance industry. 

Conclusion

There are many benefits associated with investing in tokenized tangible assets. We have gone through a few most important ones in this article. Having said that, there are also downsides with investing in such tokens as the blockchain industry and tokenization is within their infancy period and it suffers from lack of regulation and governmental support.

If you are eager to invest in a tokenized real estate or other types of physical asset, be vigilant about fake projects and scams coming up frequently by cyber criminals. More importantly, make sure that the project is accredited and supported by the local government.