Asset Segmentation, Tokenization, And Blockchain Technology

– Contributed content –

21 May 2018. In terms of industries being able to survive, perhaps the notion of relying on the wealthy 1% of the world makes sense. They not only have a lot of capital, they also are generally people more seasoned with money. They’re calmer and able to see money as an object, therefore, they don’t attach emotions to their investment making them great clients. Survival is never the aim of an industry, thriving and advancing is, however. So would it be best to rely on just a small percentage of the population to do all the heavy lifting?

Of course not, because the more people there are ready to invest, the more chance there is expanding and success throughout the industry. Allowing as many investors as possible regardless of their capital seems like the only way for modern companies to achieve their grandiose goals. This is where blockchain technologies come in as they have the system of segmenting already figured out. The more opportunity you give to small investors, the more people are holding your entity upright. But is this all just theory or could this be the future of investing?

Opening new doors

Blockchain technology is like a slow rumbling avalanche. Economists and technology experts can see it coming but the vast majority of people are facing the other way. The mainstream knowledge of blockchaining is very limited which means traditional ways of investing seem to not only be the best option but the only option. Sooner or later the avalanche will sweep you up whether you’re prepared for it or not. Imagine for a second that you aren’t considered a wealthy investor. You don’t have money to throw around as you wish, but you have saved up enough to where you have a small amount of capital. Now, you don’t have enough to buy a house or an expensive car, but what if you could own a piece of a valuable property and performance car?

You’ve probably raised an eyebrow and asking yourself if that’s even possible. Take the new exciting business of Bitcar. Don’t have enough money to buy that exotic supercar you’ve always wanted? Well with Bitcar you can own a piece of a supercar, which comes in the form of asset tokenization giving your fractional ownership. The title of each asset is split up and each piece is assigned a token. The token value is pegged to the US dollar value of the asset on the market. If you wish to own all the tokens of an asset, you effectively own the title to the car. You can take the car you now own off the Bitcar platform and use it as you would a normal car or choose to still keep it on the platform. Since the hard asset price on the market can go up and down, tokens can end up making you money if you sell at the right time. In the meantime, you still have the right to take the car out for a spin since you own part of the title. Pretty awesome for those who can’t afford to outright buy an exotic car for themselves with cold hard cash.

Chopping up property

You’ll never look at a commercial office building the same ever again. Picture a 30-story building which has different investors for each floor. It’s an amazingly intriguing thought but it’s an actual reality. Giving normal everyday people access to a lucrative asset means that a property has a stable foundation of interested investors. Now if a property owner wants to garner as much attention and investment as possible, rather than going to a real estate agent, they would go to a blockchain platform. Real estate blockchain technology allows them to first register with the platform and then with a smart contract, segment their property. These segments will go through a financial institution that then offers them to the wider public. The public can buy the segments and enter into the tokenized economy of the blockchain platform. Their token represents a security i.e. the piece of the asset they bought.

Since the value of the property of which they partly own can go up or down, their token may end up being worth much more than what they paid for it. As with the principles of a blockchain, the exchange of ownership is done on the blockchain platform. The history of ownership and the smart contract openly states what the property consists of. The buying and selling is done in front of the entire community which keeps records of the transaction. There’s no need to involve a financial institution or government authority for them to give their approval. No need to sign a contract, you simply inherit the contract once the exchange has occurred. What this means for the wider public is that they have an increased chance of getting into real estate investments. If you don’t have enough capital to buy a commercial office or residential property, you can access parts of it through tokenization and blockchain trading.

(Gerd Altmann, Pixabay)

Would values go down?

To someone looking in from the outside, they could be forgiven for thinking that values of assets would go down thanks to the segmentation effect. It makes sense at first because surely an intact chocolate bar is worth more than one that has been broken up in the wrapper right? Assets have been almost exclusive to a certain part of the investment world. Usually, you would be expected to be somewhat wealthy so asset owners could rely on you to pass a credit score of their satisfaction. They want someone who is reliable and enough stomach to not get the jitters if their industry the asset was in were to experience a period of volatility. With more investors involved in the prosperity of an asset, this gives the asset more time and reliability to mature and increase in value. Whenever there are more people to prop up an asset, the less risk there is that having one or a few investors; it’s simply a numbers game.

Wouldn’t you love to say you own a piece of the title to a supercar? Not only can you take your exotic car for a spin but you stand to make a profit the more the market value of the car goes up. Tokenization in the real estate market has allowed asset exchanges to be faster and safer thanks to the blockchain technology platforms.

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