Today we are living in a world full of technology and digital attributes. Cryptocurrencies and various tokens are essential to the development of new business and financial platforms. They also have a great influence on the different economic systems of the world.
Actually, there is no asset that can’t be tokenized. However, the basic principle of tokenization is its uniqueness. That means more expensive the asset, more valuable it is, as an average investor has no means to get it.
For example, a flat in New York is a big deal for an average investor, but not for a top one. The same situation is with any other property, including planes, pieces of land and so on. Such assets usually increase in price over time. The thing is only a limited number of investors can afford such kinds of investments. Besides, to set up a pool for this is really hard from a legal point of view. Another problem is that people are too skeptical to trust their funds to strangers. Tokenization can solve all these problems very easily.
There are three types of tokens operating on the financial market, namely cryptocurrencies, utility tokens, and security tokens. We all know how cryptos work, thus let’s take a close look at two others.
Utility tokens differ from the others due to their tight connection with a particular platform, that also enables them to be treated as shares. They can be traded on the platform, as well as on other crypto exchanges for virtual coins or fiat money. As a rule, there is a fixed number of tokens that can be mined, so the bigger the demand for a token, the larger its value becomes.
Security tokens are powered by blockchain technology and represent a new way of dealing with financial assets. They have a great impact on the investment process around the world, as they enable anyone with an access to the Internet to trade on the biggest crypto market. Besides, small-time investors can participate more easily in securities markets because of such tokens. Trust is guaranteed by smart contracts implemented into the system.