Why did we decide to tokenize markets? 5 reasons why tokenization makes sense

Justyna Laskowska
Justyna LaskowskaNovember 4, 2021
5 minutes to read
Why did we decide to tokenize markets? 5 reasons why tokenization makes sense

After years of being ruled by the harsh rules of capitalism and a closed environment of financiers, Blockchain puts control in the hands of society. Thanks to it, we can digitize goods and manage the distribution of value in a whole new way, without having to involve big lobbies or millionaires. In this way, we can bring in the ideas of the future, such as developing renewable energy sources, cultivating public access to culture, and ultimately supporting innovative entrepreneurs. Thanks to tokenization via the blockchain network, we can finally democratize access to capital, markets, and investors, and implement projects that would otherwise have no chance of funding.

To harness the potential of tokenization, we created Norion, a space where traditional assets meet the latest technology. With networks like Ethereum, Waves, Cardano, Polkadot, Stellar, or EOS, we digitize real estate, businesses, and luxury goods (the list is truly endless here). Moreover, Norion is not only tokenization, but above all an environment that allows everyone to create their own ecosystem for investors / fans / partners and facilitate the promotion, distribution and management of token issuance.

But why did we get interested in tokenization in the first place? And why should you hear about it too?

1. Openness for small investors

Traditional assets such as property, artwork, jewelry and supercars have a very high price tag and are out of reach for less wealthy investors. Furthermore, the fees involved in traditional trading of attractive assets are often prohibitive for lower value transactions. Thanks to digitization, investing in luxury assets no longer has to be the preserve of millionaires. Tokenization allows the value and ownership of a given asset to be shared among many smaller investors, and also lowers transaction costs.

2. Availability

The digital wallet where tokens are stored after purchase can be opened online - in minutes and without leaving home, going to the bank or opening an account with a broker. In addition to the formal side, tokenization also removes capital barriers. There are no limits for digital wallets - neither for deposits, starting balances nor transaction volumes. All of this makes digital assets more accessible than traditional financial instruments. For this reason, investing in cryptocurrencies and tokens is the first financial investment in many people’s lives.

3. Compliance

Many aspects of the regulatory compliance process (such as KYC / AML) can be automated within the tokenization ecosystem architecture. Norion provides token issuers with ready-made tools for implementing and monitoring KYC / AML, making buyer verification not only maintenance-free and effective from their perspective, but also quick and convenient for the investors themselves.

4. Increase of confidence

The transparency and immutability of the blockchain, i.e. a distributed ledger, guarantees and reduces the risk of the transaction partners. It makes it possible to monitor the actual state of the digital property. Since blockchain operation is based on a peer-to-peer network (no central administrator), it eliminates the need to involve government authorities to validate transactions. In addition, thanks to the use of smart contracts, intermediaries such as notaries are no longer needed to complete the transaction. A contract written in code automatically executes, controls and documents legally significant events and activities in accordance with the contract. The use of blockchain technology increases the transparency of digital reality, builds trust and influences the perceived security of all parties involved in the transaction.

5. More liquidity

By tokenizing assets, especially private and those with limited liquidity (real estate, copyrights or artworks), we obtain tokens that can then be traded on the secondary market, mainly through popular decentralized DeFi platforms (Uniswap, PancakeSwap) or centralized cryptocurrency exchanges (Kucoin, Binance, Coinbase). This way, you get access to a broad base of traders, which increases the liquidity of the token. This benefits not only the issuer itself, but also investors who have greater freedom to trade tokens. In addition, the elimination of intermediaries to process transactions lowers the cost of acquiring tokens and improves their marketability. This fortunate combination of events gives the token what is known as a “liquidity premium,” and it is much better valued by the market.

Summary

Investing in traditional financial instruments has many limitations that discourage small business owners and investors, the most important of which are certainly low liquidity, high barriers to entry, cost and low transparency of transactions. Thanks to the use of blockchain technology, we can effectively circumvent these problems and provide universal access to financing and investment. The market for tokenized assets offers a number of benefits to its participants - it increases efficiency, improves transparency, and shortens the time of many processes in financial markets through automation and elimination of intermediaries. In addition, tokenization allows assets that were previously considered illiquid to gain flexibility - by fragmenting equities, but also by creating new investor segments in markets that were previously reserved for large entities, such as smaller companies or individuals. Finally, tokenization is creating new sources of capital for small and medium-sized businesses, as well as for various types of ventures and independent organizations that previously had a very hard time obtaining funding. Thanks to blockchain, we can break down the barriers to innovation development and put wind in the sails of entrepreneurs. This idea drives us to create the Norion ecosystem.

Also read

Norion integrates with Polygon to streamline the tokenization process
The World Economic Forum, cryptocurrencies at the gates and other historic moments
Tokenization in games – play to earn. What benefits blockchain unlocks for players and game developers?

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