Thomas GretherIf you divide an apple into equal-sized pieces, each slice contains the same amount of nutrients. This is also the case with tokenization. It allows assets to be chopped up into individual pieces of equal value. This gives you the opportunity to own a certain share of a tangible or intangible item. More and more banks in England and America offer investments via tokens in illiquid assets. This is called tokenization.
You can invest in wine
Especially the investment in real estate, classic cars or wine are suitable for tokenization. After all, not everyone has enough money to afford a whole house or a whole bottle of Château Lafite Rothschild 2018. If you acquire 1% of an expensive bottle of wine via tokens, you won’t be able to enjoy the fine wine – you’ll only own it proportionally. But if everything goes according to plan and the value of the wine increases, you can sell your share at a profit.
Young generation finds favor
Digital expert and entrepreneur Dr. Daniel Diemers can imagine younger people in particular turning to tokenization. “Equity funds and bonds are boring for today’s generation. Young people are looking for new investment opportunities,” he says. The blockchain world offers a wide range of investment opportunities, he adds. One is tokens, the other is non-fungible tokens (NFTs). “There is a whole new investment world emerging, a new investment universe. With our DLT law, Switzerland is a global pioneer.”
Invests for companies and individuals. Auction: art can also be tokenized.
FAQ – frequently asked questions
Yes. Private individuals as well as companies can invest their money in tokenized goods. And acquire tokens and thus shares in houses or other properties. This is possible even with a small budget: Some banks set the minimum investment amount at 500 francs or euros.
Yes. Private individuals as well as companies can invest their money in tokenized goods. And acquire tokens and thus shares in houses or other properties. This is possible even with a small budget: Some banks set the minimum investment amount at 500 francs or euros.
Yes. As with stocks, there can be losses in tokenization transactions. The value of tokenized real estate or cars depends on the market. It is not guaranteed to increase in value – it can also decrease. If you are forced to sell your shares and thus the tokens, you will lose money. However, as a small investor, you can limit the risks. Buy only small shares and different tokenized assets.
When you invest in tokenized assets, you receive ownership rights: For example, you own a share in a work of art. And you do so together with all the others who have participated in the artwork with tokens. The rights are laid down in the so-called smart contract. It is advisable to read this carefully before investing in tokens.
How does tokenization work?
Traditional illiquid assets such as real estate or works of art (known as art tokenization) can be split up and represented as tokens. Once the asset is fragmented, it becomes tokens with a defined value. In essence, an asset is divisible into as many tokens as desired and thus tradable. In detail, this means the following:
- If, for example, the value of a classic car is tokenized, several people can acquire digital shares in it
- A smart contract is concluded for this purpose. This is a contract based on software
- All token buyers now have a share in the value of the classic car
- The value of the token changes in parallel with that of the object
Tokens can be sold with almost any small value. Investors in England and America cannot normally buy a stake in a high-rise bank building or an apartment block in the city. With tokenization, however, this is possible for many small investors. At the same time, they receive pro rata entitlement to the rental income and the profit on any sale.
The following assets can be tokenized: Real estate, wine, art paintings, classic cars. Banks act as intermediaries between the issuer and investors.
The future of tokenized assets
Year | Volume |
|---|---|
2018 | 36 billion |
2019 | 74 bn. |
2020 | 151 bn. |
2021 | 318 bn. |
2022 | 673 bn. |
2023 | 1012 bn. |
2024 | 1441 bn. |
The table shows: By 2024, assets worth around €1.5 trillion could be tokenized. The World Economic Forum (WEF) estimates the volume to reach $10 trillion globally by 2029. For tokenization to take hold, various market participants in the economies will need to interact in the future. However, the token economy has already reached the authorities. In the canton of Zug in Switzerland, it has been possible to pay taxes with cryptocurrencies since 2021.
What role does the blockchain play?
Tokenization is based on blockchain technology. In this process, the blockchain digitally maps ownership, rights, assets and tangible assets. The blockchain is to be understood as a decentralized database. Updates are made chronologically and can hardly be changed afterwards. Security in particular is one of the big plus points of the blockchain. The deposited information is recorded in blocks (block) and connected to each other with a chain (chain).
With tokens, a whole new investment world is emerging. Switzerland is at the forefront worldwide with its DLT law
Dr. Daniel Diemers, digital expert and entrepreneur
What are the advantages of tokenization?
The advantages of tokenization are great, especially in terms of cost. However, it is also an opportunity for people with lower budgets to make investments. For example, with the purchase of 0.01% of an art painting or a valuable wine. Some other advantages at a glance:
- Trading possible 24 hours a day via the blockchain
- Startups and other companies can get the capital they need more easily
- No more tedious trips to the notary public
- No costs for the notary
- No acquisition tax when transferring tokens
When will the breakthrough of tokenization follow?
Right now, there are many expectations associated with tokenization. When will the breakthrough happen? “It takes time,” says digital expert Dr. Daniel Diemers. “With tokens, it will certainly take three to five years until the trading venues are up and running. It takes time until the liquidity is there and the providers have set themselves up with specialized niche offerings.” It’s comparable to bitcoin back then, he said. “Nobody would have thought in the early stages of cryptocurrencies that banks would offer them one day.”
