Blockchain based tokenization of illiquid assets | Prospects and issues
The present research article deals with the possible tokenization of illiquid assets, focusing mainly on real estate. The basics in theory and the pros and cons of tokenization are the subject of discussion. The so-called token economy is already influencing the linking of digital sales with the real world. There is hardly any real value that cannot be digitized and thus converted into a token model. Moreover, just as unlimited as digital values can be formed from authentic and realistic values, the corresponding business areas and possible uses are just as limitless.
A practical example then provides the approach of an implementation option for the tokenization of a property. The advantages of tokenization are the security and transparency in global token trading around the clock, the real-time allocation of tokens’ possession, and the creation of standards with coinciding flexibility.
Furthermore, the technical implementation of property tokenization has proven to be very simple. However, currently, the broad application of the technology is limited by regulatory uncertainties.
Starting point and problem statement
Illiquid assets such as diamonds, real estate, and works of art are difficult to sell at their actual value in the short term. Real estate trading, in particular, suffers from high transaction costs and long transaction periods. Liquidity deductions such as costs for agent commissions are around six percent of the property value when selling a property, and commissions for selling works of art are up to 20 percent of the collector's value. Tokenizing a property enables the owner to obtain liquid funds quickly and easily by issuing tokens. Hence, the tokens can be traded immediately worldwide on a publicly accessible platform in tiny denominations around the clock.
Another benefit of tokenization is the emerging standardization. This technology makes it possible to acquire worldwide claims on the cash flow of a property using tokens created with the same standard. The standardization has the advantage that a token buyer only needs one software application that allows the uncomplicated receipt and sending of tokens. In addition, the standardization will simplify the search for tokenized properties and sort them according to matching criteria.
Widespread use of tokenization will have price effects because this technology enables the development of new markets. In addition, the tokenization of a property allows the owner to obtain liquid funds, reducing illiquidity costs quickly. Both have an increasing effect on real estate prices. The potential of tokenizing illiquid assets is excellent. The estimated value of all existing real estate worldwide in 2020 alone was approximately USD 326.5 trillion (Tostevin, 2021). However, the tokenization of real estate is only in its infancy. The first object whose tokens were tradable worldwide immediately after the issue on a publicly accessible platform was tokenized with the Marlowe-Street Detroit project in 2019 (“RealT, Inc.,” 2019b).
A token represents a digitized form of an asset that is assigned a specific function or value. A virtual token is thus assigned a specific "something" in an organization, a system, or a network. That "something" can represent a vote, a share, a value, or some other form of ownership. Furthermore, it can also fulfill several roles at the same time. For example, it can embody both a share in a network and voting rights.
Research objectives and structure
The present work is limited to the virtual representation of a value, such as the right to a share in a real estate's cash flow. Further, it focuses on the application of tokenization in real estate.
In the next section, blockchain technology is introduced, and in the third section, a brief overview of token regulation and classification is provided. The fourth section discusses tokenization's benefits, particularly the tokenization of illiquid assets. The fifth section documents the first tokenized property, whose tokens are also traded on a publicly accessible platform. Finally, the final section provides an outlook on how this new technology could transform the real estate and financial markets.
Blockchain and its properties
A blockchain can be considered a distributed database consisting of a chain of data blocks linked together by cryptographic methods and managed simultaneously on multiple computers. Haber and Stornetta documented the first blockchain developments as early as the 1990s, intending to make records tamper-resistant (Haber & Stornetta, 1991). Practically, a distinction is frequently made between permissioned and permissionless blockchains. It is called a permissionless blockchain when there are no access restrictions to the network. Any person can participate in all network activities without asking for permission. At the same time, the blockchain can be viewed and checked by all participants. All the software required to operate a node is publicly available as open-source.
A permissionless blockchain has the advantage of becoming more robust over time. First, bugs in the software are quickly identified because many developers from different backgrounds are working on further software development. Second, if successful, the network grows because more and more nodes are added. The created decentralization means that there are no central points of attack.
A permissioned blockchain is a centralized database in which an institution manages the access rights, for which the identity of the participants must also be known (Narayanan et al., 2016). It is often argued in the corporate sector or by authorities that a permissioned blockchain has the advantage that the data is not publicly accessible. However, storing encrypted data on a public blockchain is also possible.
The work exclusively examines real estate tokenization on a public blockchain (Toshendra, 2018). The properties of the blockchain are explained using widespread bitcoin technology. Since the Bitcoin (BTC) inventor Satoshi Nakamoto (Nakamoto, 2008) wanted to provide a virtual currency that works without central authorities and intermediaries, a technology was developed that makes it possible to run a blockchain in an open computer network. The BTC blockchain is non-permissioned and updated simultaneously by thousands of nodes, allowing a virtual asset to be managed without central instances. Berentsen and Schär(Berentsen&Schär, 2017) aptly describe the fundamental importance of the BTC blockchain: "For the first time, it is possible to unquestionably document proprietorship of computer-generated estate exclusive of the necessity for a central authority. This outcome has the prospect to alter the existing payment infrastructure and fundamentally transform the financial system." The most significant properties of the Bitcoin blockchain are data consistency, data immutability, data ownership, consensus, and pseudonymity.
Consistency of data
The database's consistency is achieved by continuously checking when adding data that the new data does not contradict the existing data. Herewith, so-called "double spends" are prevented in which a BTC credit is spent several times. Hence, each new BTC payment is checked to ensure that the BTC units to be transferred have not already been issued earlier (Antonopoulos, 2017).
Immutability of data
The Bitcoin blockchain is an "append-only" database, which means that data can only be added, but not changed later. Elements that enable the immutability of the BTC blockchain are, on the one hand, cryptographic methods and, on the other hand, sophisticated incentive systems. One of the essential elements is that the BTC blockchain is managed as a distributed database in an open network. As a result, there is no dedicated BTC blockchain, just thousands of identical copies that are updated simultaneously and independently (Schär&Berentsen, 2020).
Ownership of the data
The property of data “ownability” is one of the unique properties of the BTC blockchain. It is based on asymmetric cryptography. The owner of a BTC unit has the cryptographic key couple: the private key beside the public key. With the private key, the owner of a coin proves to the BTC network that he is the rightful owner of this unit. Only a person with access to the private key can dispose of these funds. A public key represents the destination to which BTC units can be transferred. It is said that asymmetric cryptography enables a person to control a virtual asset using cryptographic methods (Antonopoulos, 2017).
Consensus about the data
In BTC technology, the term "consensus" means that all participants abide by the rules set out in the BTC protocol. In a decentralized system, however, no participant can be forced to comply with the rules. For this to work, the rules must be designed to adhere to them in each participant's interest. If this is the point, a Nash equilibrium in the language of game theory is set (Nash, 1951). This approach describes a strategy combination in which each player chooses a strategy that best responds to his opponent's strategy choice. The main implication of consensus in the BTC system is that all participants agree on ownership at all times. In a traditional payment system, this consensus is achieved by centralizing the database management, and ultimately that central authority, or subsequently a court, decides who owns what. In the new BTC world, this can be done without central players. Hence, a technological breakthrough was created (Berentsen&Schär, 2017).
The participants in the BTC network are pseudonymous because only their public addresses are known. Knowing a person's public address is sufficient to interact with them. The Bitcoin blockchain has been working without significant interruptions for more than ten years, although there are no access restrictions, and the participants are pseudonymous. The resilience of the BTC system means that more and more companies and authorities are grappling with the advantages and disadvantages of this technology. However, widespread use has many challenges and regulatory barriers. Furthermore, the lack of scalability, the instability of the BTC price, and the energy consumption of the proof-of-work consensus mechanism have been criticized (de Vries, 2018).
Regulation of tokenization
This section discusses the legal aspects that must be considered when tokenizing a property. The next subsequent section describes the easy implementation of properties’ tokenization.
However, regulatory uncertainties are currently still restricting the broad application of this technology(Voshmgir, 2020).
The conventional capital markets
In most countries, the legislator distinguishes between sophisticated investors and private or small investors when regulating the capital market. It is assumed that sophisticated investors have adequate proficiency, understanding, and skill to form their investment assessments appropriately and measure the correlated threats (Directive 2014/65/EU). These stakeholders are approaching the capital market directly. The mentioned Directive (Annex II) designed the standards for skilled investors. The list beneath includes all authorized entities authorized or regulated: credit establishments, investment institutions and corporations, assurance societies, joint investment schemes, pension funds, commodity brokers and, traders, besides other institutional investors.
In contrast to sophisticated investors, small investors cannot easily access the capital market. Trivial investors are dependent on monetary intermediaries. Only with the help of intermediaries the group of small investors gains access to information and financial products. Capital market law has the task of protecting investors, ensuring the financial system stability, and thus strengthening investor confidence in the markets.
The financial market supervisory authority standard requires financial transactions to be viewed and regulated in a technology-neutral manner. This practice also means that monetary products with relative dangers should be measured equally. Consequently, regulating tokens created on a blockchain predominantly is determined by the token’s risks and properties. Tokens are digitized representations of assets stored decentral on a blockchain. Every token is liberally programmable. Accordingly, it can assume all other imaginable functions plus properties.
The regulatory classification of various sub-groups of tokens is presented below.
Classification of tokens
(i) Payment tokens are also identified as virtual money - these tokens are predominantly utilized as crypto-money for deals amongst consumers, plus they are already transferrable.
(ii) Utility tokens represent a virtual voucher anticipated to deliver the holder with a functional benefit in network access. The tokens explained can carry distinctive privileges, such as exchanging the tokens for services or products.
(iii) Security tokens are linked to a real asset of the company. They are financial instruments that contain a promise to pay. As a result, they are analogous to a bond or a share and might be equaled to established securities (Directive E.U. 2014/65, art. 4 para 1 no 44).
Security tokens are referred to as "tokenized" securities and are treated as securities requiring a prospectus. The conditions to be classified as security are transferability, the trading ability within the financial market, besides privileges similar to securities. Securitization in the means of a deed is not required for these security tokens.
The token categorization of (i)-(iii) is used primarily for convenience and does not imply a critical assessment. Consequently, it is necessary to check every token plus evaluate its content, irrespective of its name or form. Tokens habitually come with hybrid structures. For instance, the utility besides security tokens operates as money inside its system. Accordingly, these tokens are also to be regarded as payment tokens.
Prospectus obligation for security tokens
The classification of standard financial instruments comprises every part of exchangeable securities - except payment instruments - through the resulting characters: tradability, transferability, and standardization. European securities regulation state that securities with a guarantee of monetary benefit are to be treated as regulated assets. Securities meeting the definition of the EU Directive must be classified (2014/65, art. 4 para 1 no 44). Subject to this provision are the newly created tokens by tokenizing an asset. Suppose financial benefits such as the payment of interest and income or a share in the issuer's business results are linked to the token. In that case, these tokens are regarded as so-called security tokens.
This rule affects emission and exchange. To publicly offer the security token on a structured marketplace – for instance, Virtual-Money-Exchange, Organized Trading Facility (OTF), besides Multilateral Trading Facility (MTF) -- the emitter has to distribute a prospectus accepted by the supervisory authority afore its issuance is approved. An infringement of this duty constitutes an administrative offense that immediately prohibits the offer by the competent supervisory authority.
A prospectus is a communication to the public that provides sufficient information about the security in an undoubtedly analyzable and understandable arrangement. The Prospectus Regulation of the EU Parliament determines the components of a prospectus (Art. 6 Para 1 Regulation (EU) 2017/1129). In particular, a securities prospectus must contain the following minimum information (Art. 6 Para 13):
- Venue and elucidation of risk factors distinct to the emitter and its industry or that may impact the capability to fulfill its duties towards investors.
- Presentation of the operating besides financial review, pro forma information built on historical data on the emitter, and forecasts of forthcoming corporate development.
- Declaration of the adequacy of working capital aimed at existing necessities besides info on raising future investment requirements.
- Information about all persons entangled in the management board and work out of the securities.
The Prospectus comprises a resume, a registration certificate, and securities note. The resume explains the proposal briefly plus legibly. If the assets’ tokenization creates a token revealing the properties of a publicly offered security token, it is comparable to assets’ securitization. Consequently, the token’s prospectus requirements are essential.
Tokenization of real estate
From a regulatory perspective, asset securitization and asset tokenization are equivalent. The main difference lies in the infrastructure and technology for issuing and trading these new financial instruments. This section introduces the key technological aspects of tokenization and highlights its benefits. The focus is on the Ethereum blockchain, designed by Buterin (2013), as it has established itself as the standard for issuing tokens. Other platforms, such as Tezos, EOS, or Cardano, also allow asset tokenization. Tokenization is dividing the value of an illiquid asset into interchangeable and tradable virtual tokens. The literature on crypto-assets distinguishes between tokens and coins. A coin is a platform's native currency (for example, BTC for the BTC blockchain, besides ETH for the Ethereum blockchain).
A token is disseminated on an existing platform. Most of the tokens were administered on the Ethereum platform. Ownership of these tokens is held on the Ethereum blockchain, and they can be traded peer-to-peer on decentralized trading venues or centralized crypto exchanges (Antonopoulos, 2017). With a P2P payment, a token amount is exchanged directly between two peers without using an intermediary (Nakamato, 2008). A critical difference between traditional security and a security token is how the tokens' ownership rights are managed. A token can be mastered using cryptographic methods. A token owner can only move the token by creating an operation communication, using the private key for authorization, plus transmitting it to the Ethereum system. The transfer of tokens is also possible anytime around the clock without intermediaries. In contrast, trading traditional security is only possible through financial intermediaries during trading hours.
The term "smart contract" refers to Nick Szabo (1996). It describes the idea that contractual obligations, such as a promise to pay, are not recorded on a piece of paper but as code in a computer network and then implemented autonomously if certain conditions are met. Since the introduction of Bitcoin technology in 2009, the idea of a smart contract has been associated with blockchain technology. However, for decades, automated processes have been the standard custom in the traditional monetary sector besides other areas of the economy. No blockchain technology is required for this. Blockchain technology only allows the smart contract, when deployed on a decentralized platform similar to Ethereum, to be censorship-resistant because it cannot be modified afterward (Schär&Berentsen, 2020). The Ethereum blockchain has quickly established itself as an essential non-permissioned blockchain for smart contracts.
Most smart contracts today are developed using the Solidity programming language(Team, 2022). It allows the development of arbitrarily complex smart contracts. In addition, a smart contract can network among other smart contracts provided by the Ethereum platform. After a smart contract is developed, it is made available on the Ethereum blockchain. In the course of provision, it receives a unique Ethereum address. A user who wants to network with the identified smart contract usually sends a transactional message toward this address. All information and transactions that have taken place within a smart contract are public and can be viewed, among other things, on Etherscan (etherscan.io, 2022) at the smart contract address.
Smart contracts can release tokens on the Ethereum platform according to specific criteria. Many tokens obey to the ERC-20 token standard created by Fabian Vogelsteller and VitalikButerin(Vogelsteller & Buterin, 2015/2022). The most crucial smart contract task for tokenization is the title management of the released tokens. A transaction note can change the public Ethereum address eligible for the token. From the consumer's point of view, owning and transferring a token needs a matching wallet.
A wallet is a software application that permits tokens to be received and sent uncomplicated. The transmitter utilizes the wallet to compose a transaction note for the token’s title transfer. This transaction note includes a contract address, and the receiver’s address, besides the number of tokens to be moved. A possession transmission is commonly recorded on the blockchain in a short time of sending the transaction note.
Various parameters must be taken into account when designing a token. The utmost essential issues are, for instance, the token quantity that is emitted, the token quantity that is obtainable for selling, the token’s release price, the token’s divisibility, the recognized means of payment for the vending, the selling gap plus the deliberation of whichever transaction constraints.
For tokenization on the Ethereum blockchain, ETH is regularly acknowledged as a means of payment. The purchaser must deliver a token address on the Ethereum blockchain for crediting the procured crypto value. In cases an emitter desires to limit the token’s tradability, a smart contract can be used to regulate this. An allow list is generated, recording each public address authorized for token receipt. It follows that transactions can only be carried out between addresses on the allow list.
Different countries have different governing regulations for the token’s tradability. Because the tokens issued are classified as security tokens when a property is tokenized, the relevant legal provisions, such as know-your-customer (KYC) requirements, apply. Fulfilling these requirements requires a complex registration process equivalent to the KYC requirements for opening a bank account in the classic monetary structure. This procedure embraces residence and identity verification and suitable actions to counteract money laundering (Berentsen&Schär, 2017).
Benefits of tokenization
This section discusses the benefits of tokenizing a property. The focus is on costs, liquidity, standardization, flexibility, transparency, and security.
Transaction costs and issuance costs
Currently, the tokenization of illiquid assets, primarily real estate, is still in its infancy. The effort is great to meet all regulatory requirements. As a result, raising capital via tokenization is not necessarily cheaper than the traditional raising of capital. The costs of tokenizing a property are detailed in the next section using a case study.
However, this cost will decrease rapidly for two reasons: (i) legal uncertainty will decrease in the medium term, and (ii) many necessary tokenization steps can be automated and standardized. The ERC20 token contract is open source and can be legally copied and adapted. The legal documents required for tokenization will also be standardized and available at a low cost in the medium term. As a result, fewer intermediaries such as brokers, bankers, and lawyers will be needed over time. The costs of raising capital via tokenization will fall sharply in the long term.
Tokenization's advantage is the ease of secondary trading. Each ERC20 token can theoretically be traded worldwide immediately after the emission, around the clock. For secondary trading, the trade must become active on one of the many decentralized trading platforms, such as Kyber or Uniswap. Every token can be listed and traded on these decentralized exchanges without asking a central authority for permission. Any person can also make the registration. A buyer only needs an ERC20 token-compatible wallet to purchase the token in secondary trading.
Most cryptocurrencies are traded on centralized crypto exchanges like Binance, Bittrex, or Coinbase. These centralized trading venues take a new token into trading if it promises a sufficiently large turnover and is regulatory safe.
The programming language Solidity theoretically permits writing any complex smart contract (Team, 2022). Hence, many processes can be automated, as will be described in more detail later in the practical part of tokenizing a property. In this example, a token holder earns a right to a portion of the rental income from the property. The smart contract automates the payouts to the token holders.
Smart contracts allow payouts to be subject to certain conditions, such as a holding period. Daily or monthly payments are also conceivable. The desired payment can be executed by using Ether, the native currency of the Ethereum platform, or with a stablecoin such as a Tether (USDT) or DAI, which is pegged 1:1 to the USD (Fatás, 2019).
Transparency and security
The public blockchain database allows anyone to scrutinize a smart contract to see if it fulfills the publisher's contractual obligations. However, such an inspection can only be mastered by experienced programmers. There are now more and more firms that specialize in auditing smart contracts.
Another aspect concerning the possible applications of the blockchain is the protection against the manipulation of documents. For this purpose, the hash value of a document - for example, a purchase contract - is calculated and stored on the Ethereum blockchain. Since any document modification inevitably changes its hash value, a document modification will be recognized immediately. Hence, it is almost impossible to change the Ethereum blockchain. A fingerprint can prove that a specific file existed at a specific time and that the composition has not been altered.
Tokenization of real estate
RealToken LLC, based in Delaware, USA, is an incorporated limited liability company managed by RealToken Inc (“RealT, Inc.,” 2019b). The first token RealToken LLC issued in 2019 is called "RET-9943-MARLOWE-STREET-MI" (RealToken Inc., 2019). A single-family home was tokenized. The property is settled at 9943 Marlowe St, Detroit, MI 48227 (RealT, Inc., 2019a) and is priced at USD 57,300. One thousand tokens were issued and sold at USD 63.75 per token. Earnings were USD 63,750. The tokens are currently traded in secondary trading on the Uniswap platform at USD 68.50 with contract address 0xE5f7ef61443Fc36AE040650aa585B0395AEf77c8.
The token was developed based on the ERC20 token standard. With the token purchase, the right is linked to acquiring a part of the rental income. The annual payment is currently USD 8.22. According to the RealToken LLC website, this amount corresponds to a return minus taxes and administration costs of 12.0%. All payouts are made using the stablecoin DAI.
Potential cost savings are often cited as a benefit of tokenization. However, it is too early to decide on the cost savings issue. In the present example, the emission costs were around ten out of a hundred. The understanding is demanding, however, since entire expenditures were subsumed within the budget component "working capital," as shown in Figure 1 (RealToken Inc., 2019).
This paper also mentions that the investment banking advisor fees were USD zero. The fine print says there was a "5% Cash Service Fee" of USD 3,187.50 that the home's seller paid. There is also a further fee of USD 20,000, which the "Managing Members bear." The "Use of proceeds to issuer" table also shows that there were no "offering expenses" because the "managing members also bore the offering costs (brochure costs, et cetera)." The only cost item in the table "Use of proceeds to issuer" is USD 6,450 for "working capital."
Figure 1: excerpt from Private Placement Memorandum, (RealToken Inc., 2019, p. 35)
What is striking about the 9943 Marlowe example is that the token issuer has not charged all the costs incurred. It can be assumed that RealT was willing to bear certain costs themselves during the test phase for the first object to make the tokens attractive to investors and establish themselves as a technology pioneer in the market in the long term.
In the meantime, RealToken LLC has tokenized more than a hundred properties (RealT, 2022).
The tokenization of real estate is in the absolute pioneering phase. According to current knowledge, tokenizing the 9943 Marlowe property is the first tokenization of property worldwide, making a token tradable around the clock.
Comparing costs with traditional real estate investment products is difficult in this initial phase. The emission costs (soft costs) of closed or open fund shares are among five to fifteen out of a hundred. Raising capital via tokenization is currently pricier than funding through conventional means. Because RealToken LLC is constantly tokenizing new properties, the individual properties’ token must be distinguishable. Every property is owned by a SPV (Special Purpose Vehicle); thus, a legitimate construct (called a series). Further, the correlated token has a unique identification number (UIN). Accordingly, all tokens with the same identification number are fungible, but tokens from two different properties are not fungible.
Holding tokens of a specific series from RealToken LLC grants the possessor a proportionate share of the property’s cash flow allocated to this series. The series’ deed demonstrates the property it includes and all essential information about the acquisition of this series. This deed is deposited in the district where the property or the SPV is situated and then publicly recorded. Token holders collect everyday micropayments created from rental revenue.
The market price of a security that pays a dividend usually falls after the dividend is paid. These price fluctuations become smaller the more often a dividend is paid out. Hence, the advantage of a daily dividend is to keep the security value fluctuations as slight as possible before and after the dividend payment. The payouts are a settlement that takes place within the smart contract.
According to the U.S. Securities and Exchange Commission (SEC), trading with RealTokens is not permitted under the 1933 Securities Act, as revised (SEC FinHub, 2022).
Consequently, the RealTokens of series #1 are only distributed (i) to "accredited investors" (analogous to Securities Act, Regulation D, Rule 501) and (ii) outside the United States to persons other than American citizens (analogous to Securities Act, Regulation S). U.S. citizens seeking to invest must provide evidence of their status as accredited investors that is satisfactory to the issuers.
Every investor is checked for accreditation requirements when buying a RealToken via the secondary market or directly on the RealToken platform. In addition, each investor must identify themselves (KYC) and sign the AML procedure to combat money laundering. The KYC procedure is used to verify the identity of RealToken buyers, while the AML procedure is intended to ensure that payments for RealToken do not come from illegal sources.
Conclusion and outlook
This research paper sheds light on the technology and regulation involved in tokenizing a property and then trading the token. Uncomplicated and quick procurement of liquid funds by tokenization can be an advantage for property owners. After the issuance, the tokens can be traded immediately around the world on the publicly accessible Ethereum platform, around the clock. This platform enables the transfer of ownership of tokens in a matter of seconds. The only requirement for purchasing a token is an ERC20 compatible wallet. The other advantages of tokenization discussed in this work are high security, transparency, standardization, flexibility, and the possibility of an arbitrarily small token denomination.
Following the practical analysis, a factual tokenization project was presented, namely the tokenization of a property under the token name 9943 Marlowe. It turned out that some of the theoretical advantages have not yet been realized in practice due to current uncertainty concerning the financial market regulation of tokens. Many countries still missed developing ample lawmaking that can be relied upon as a token emitter or investor. Consequently, many token issuers are nowadays still restricting their trades.
Regulatory uncertainties are a significant issue. In addition, the Ethereum platform is presently under high utilization, resulting in high transaction fees (gas fees). The energy consumption of the proof-of-work consensus mechanism currently used by Ethereum has been heavily criticized. In the medium term, however, the new Ethereum 2.0 release should solve both problems.
The Internet has demonstrated that new models and behaviors emerge when communication costs become negligible. However, the effects of such a development on society and the economy are unpredictable. Hypothetically, blockchain technology allows the worldwide exchange of values at negligibly small costs. Tokenization enables 24/7 global trading of illiquid assets.
Public offerings on the blockchain and the issuance of tokens make capital market financing of medium-sized companies significantly easier (Nyffenegger&Schär, 2018). Security tokens are not yet a standard financial instrument. Traditional investment advisors, investment brokers, or securities trading companies have only been found sporadically in this market. Nevertheless, if more investors learn to appreciate the liquidity of digital security tokens, these professions will not close their eyes to the new technology either.
In addition to conventional financial instruments, tokens offer other options for quickly financing previously illiquid assets. The great flexibility in the design of tokens gives rise to other innovative financing methods. As a result, the world of finance is becoming more diverse and probably also opaquer.
The future will reveal whether these technologies will become established and their effects on society and the economy.
Author: Erich Auer
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