Case Study: How Asset Tokenisation is Disrupting Traditional Asset Ownership Models

Published on
June 28, 2023

Medium

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Asset tokenization is revolutionizing traditional asset ownership models. As per a report published by CITI bank, the global asset tokenization market size is expected to reach between $4 trillion to $5 trillion by 2030.

In this post, we’ll explore several case studies that showcase asset tokenization. Specifically how its power is disrupting traditional asset ownership models.

Real Estate:
Real estate has always been one of the most significant, yet illiquid assets. Tokenizing real estate assets can unlock liquidity, increase transparency, and provide greater access to a wider pool of investors. One of the prime examples of tokenizing real estate assets was introduced by Harbor, a blockchain platform that makes it easy to issue and trade tokenized securities. Harbor conducted the first successful tokenized real estate transaction, enabling $18 million tokens representing ownership in a South Carolina student housing complex.

Investors can now invest in commercial real estate without the hurdles of minimum investment and geographic restrictions.

Mistakes to avoid:
Investing in tokenized real estate without performing proper due diligence is a mistake that can cost investors. Make sure to perform the necessary research before investing your hard-earned money.

Private Equity:
Traditional private equity funds can be challenging to access due to high minimum investment amounts and significant fees. Tokenized private equity assets can help democratize (make accessible to everyone) these investment vehicles. One of the notable examples of tokenized private equity assets was introduced by Spice VC, which runs on a blockchain representing a unique venture capital fund. Investors buy tokens in the fund instead of shares. The blockchain serves as an unalterable registry of ownership, and tokens can be traded on compliant trading platforms.

Tokenized private equity enables investors to invest in early-stage ventures with smaller investment amounts and more significant liquidity.

Mistakes to avoid:
Investing in highly speculative early-stage companies that have yet to garner a viable and sustainable business model can be a pitfall for investors. Always invest in companies that have demonstrated a degree of success and have a plan to generate long-term revenue.

Fine Art:
Historically regarded as a highly illiquid asset, art has always been challenging to invest in. Tokenized fine art can be broken into fractions of ownership, allowing more investors to share in the ownership of rare or prestigious pieces. One of the most successful examples comes from Maecenas, a blockchain-based platform that sold a 31.5% stake in Andy Warhol’s 1980 work 14 Small Electric Chairs for $1.7 million. The shares were represented on a blockchain, allowing investors around the world to have fractional ownership of this unique piece of art.

Tokenizing fine art assets opens up new revenue streams for artists and allows potential investors from around the world to invest in art they could only dream of owning.

Mistakes to avoid:
Investing in fine art without understanding the intricacies of the industry can result in undesired outcomes. Make sure to do the necessary research to understand a particular artist’s cultural and historical significance.

Conclusion:
Asset tokenization is a disruptive methodology that’s changing traditional asset ownership models. As we have seen, it’s not just real estate that’s being transformed; private equity and fine art assets are also seeing the benefits. By making these assets more liquid, transparent and available to everyone, assets that were once only accessible to the ultra-wealthy are now at arm’s length for many.

If you’re considering investing in these new asset classes, be sure to do the necessary research to fully understand the risks and opportunities to make informed decisions.

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