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Evaluating the Hype of Asset Tokenization | ShipFinex

Updated: Nov 7, 2023


Is Asset Tokenization a hype?
Is Asset Tokenization a hype?

What is Asset Tokenization


Asset tokenization refers to converting real-world asset ownership rights into digital tokens, which can be traded and stored on a blockchain. The traditional process of buying and selling real estate, art, or even commodities involves a long and complex process of intermediaries, high fees and a need for more transparency. Asset tokenization simplifies this process, offers a new and efficient way to raise capital, and provides investors with easy and secure access to a wide range of investment opportunities.


Recently, an announcement by Hamilton Lane and polygon highlighted the growing popularity of asset tokenization this year. Hamilton Lane's $2.1 billion fund opened to individual investors on the Polygon network via Securitize exposes investors to a diverse range of alternative investments, including private equity, real estate, and infrastructure, which were previously only accessible to institutional investors. This development is a testament to the growing acceptance and adoption of asset tokenization, changing the traditional investment landscape by making alternative investments more accessible to individual investors.


In addition, The use of blockchain technology and smart contracts makes the entire process of buying, selling and transferring ownership of assets more transparent and secure.


Benefits of Asset Tokenization:

  • Increased liquidity and access to a larger pool of investors

  • Greater transparency and security for investors

  • Digital tokens are stored on a blockchain, providing a clear and immutable record of ownership and transactions.

  • Reduces barriers to entry and increases the flow of capital

  • Offers a new and efficient way to raise capital and provide investors with easy and secure access to investment opportunities

How does Asset Tokenization work?


Asset tokenization is the process of representing a real-world asset as a digital token on a blockchain network. This is done by creating a smart contract that outlines the ownership rights of the asset.


The smart contract acts as a self-executing agreement that enforces the terms of the tokenized asset. In addition, the smart contract code contains information about the asset and the methods that enable investors to interact with its digital representation. The result is a secure, transparent and efficient way of trading assets without intermediaries. This allows for greater liquidity and accessibility to previously illiquid assets. The process of tokenizing assets is typically done using the Solidity programming language on the Ethereum blockchain network.


However, it is essential to note that tokenization differs from the securitization of assets.


What is Securitization?


Securitization is pooling together multiple assets and issuing a security that represents ownership of these assets. This allows the assets to be traded on a secondary market, providing greater liquidity and access to capital. In the context of Asset Tokenization, securitization is issuing security tokens representing ownership of the underlying assets.


Many companies are working on Asset Tokenization projects, but two that are making a significant impact are Tokeny, Securitize and Polymath.


In terms of projects working on asset tokenization, we would like to highlight Tokeny, Polymath, and Shipfinex. Each of these platforms offers unique solutions and approaches to the challenge of asset tokenization.

Future of Asset Tokenization


According to industry projections, the market for tokenized assets is expected to grow rapidly in the coming years. It is estimated that the market could reach US$16 trillion by 2030, a 50x increase from current levels. This growth is driven by favorable stakeholder sentiment and recognition by monetary authorities, which could push the share of tokenized assets to 10% of global GDP by the end of the decade.


The demand for tokenization is fueled by more investors seeking access to private markets such as private equity, hedge funds, and real estate. This highlights the growing recognition of the benefits of tokenization, such as increased liquidity and reduced costs of ownership transfer, among investors and the financial industry as a whole. And the opening of the Hamilton Lane's fund on the Polygon network is a significant step in the evolution of asset tokenization. It highlights the growing interest in this new and exciting area of finance and the potential it holds for the future


Introduction to Shipfinex


Shipfinex is a tokenization ecosystem that aims to revolutionize the maritime industry by offering multiple solutions. One of these offerings is a platform to tokenizing assets such as commercial ships, pleasure yachts etc . The platform allows ship owners to securely raise capital against assets that are each worth millions of dollars while providing investor pools with an option to balance their portfolio. The platform leverages blockchain technology to provide a secure and immutable record of ownership, transactions, and other critical information related to ship owning operations.

By tokenizing assets in the shipping industry, Shipfinex aims to increase efficiency, reduce costs, and provide greater transparency and security to all parties involved. In addition, the platform offers a new way for shippers to access capital and provides investors with access to a new asset class.


Who else is working on asset tokenization?


Many of the most prominent tokenization companies—such as Securitize (partnering with KKR & Co. Inc., Morgan Stanley, and ARCA) and Securrency (with partners State Street and U.S. Bancorp)—utilize Ethereum and other public blockchains.


Leading financial institutions understand the opportunity that tokenization of assets including financial assets represents. When it comes to turning legacy asset classes, such as corporate securities, into vibrant digital markets, we are witnessing several initiatives, notably by incumbent U.S. and European exchanges that are all developing tokenization offerings. From the origination of trading assets to Corporate Trust, the value chain is evolving.


Two highlights include:

  • JP Morgan Chase executed a live trade involving tokenized Japanese Yen and Singapore Dollar deposits on public blockchain Polygon (MATIC) as part of a Monetary Authority of Singapore Project Guardian pilot project.

  • Hamilton Lane announced plans to tokenize three more of its funds, building on the tokenization earlier this year of its Global Private Assets Fund.


We are still early on the journey towards the tokenization of assets, but it certainly has the potential to dramatically change the dynamic for investors and owners of numerous asset classes.


Who is hiring in Asset Tokenization?


Singapore:


Monetary Authority of Singapore - CBDC Specialist Lead 2 year contract:


Accenture SouthEast Asia- Technology Innovation Strategy Manager (Digital Assets and CBDC)


Americas:


Citi Group - Data Tokenization Specialist - Vice President, Tampa:


Paxos - Senior Software Engineer - Tokenization - New York


JP Morgan Chase Bank - Vice President - Product Manager, Tokenization | Digital Payments - New York


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