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Digital Asset Markets: Exploring 5 Key Themes. Part 3

Tokenisation: Transforming the Digital Landscape

In our ongoing exploration of the ever-evolving digital asset markets, we dive into an essential theme that is reshaping the digital landscape: tokenisation. Part 1 unveiled the underrated potential of NFTs, and in Part 2, we witnessed how Web2 giants are embracing Web3. Now, in Part 3, we unravel the profound impact of tokenisation and how it's bringing various exogenous assets on-chain.

Tokenisation: A Gateway to the Digital Realm

Tokenisation is a revolutionary concept that involves creating digital representations of real-world assets, spanning a wide array from securities and funds to artworks and collectibles. This theme has swiftly become one of the most crucial narratives in the Web3 era, driven by the multitude of benefits it offers. The momentum behind tokenisation is undeniable, and it's vital to understand why this theme is gaining such immense traction.

The Benefits of Tokenisation

Tokenisation offers a spectrum of benefits across different asset categories, making it an attractive avenue for investors, institutions, and the broader market. Let's explore these advantages within the context of tokenised securities, funds, and tangible assets like real estate and art:

Tokenised Securities:

· Better Accessibility: Tokenisation opens up securities markets to a global pool of investors, democratising access to investment opportunities previously limited to a select few.

· Better Efficiency: It enhances market efficiency by increasing liquidity, facilitating faster settlement, and reducing costs.

Tokenised Funds:

· Better Accessibility: Tokenisation makes institutional private market strategies more accessible to individual investors with lower investment minimums, streamlining onboarding processes, and potentially providing better liquidity.

· Better Efficiency: It optimises the utilisation of resources by transforming relatively liquid assets into easily tradable digital goods.

Tokenised Real Estate, Art, and Collectibles:

· Better Accessibility: It allows for fractionalisation, making it easier for a broader audience to participate in co-ownership of valuable assets.

· Better Efficiency: Tokenisation provides a platform for more efficient trading and exchange of ownership in assets that traditionally had limited liquidity.

The Enormous Opportunity of Tokenisation

The potential of tokenisation is colossal, and estimates from industry experts support this claim. According to HSBC, the tokenised market volume is projected to reach an astounding $24 trillion by 2027. This forecast underlines the transformative power of tokenisation in redefining how assets are bought, sold, and traded.

Tokenisation in Practice

How does the theme of tokenisation manifest in the real world, particularly in the realm of liquid token portfolios or non-fungible assets (NFAs)? The answer lies in smart contract platforms that provide the necessary infrastructure for these tokenised assets to thrive. Major players like KKR and Hamilton Lane have already taken the plunge, tokenising their assets through blockchain platforms such as Avalanche and Polygon.

Decentralised applications (DApps) like Maker, Centrifuge, Maple Finance, and Ondo Finance are also instrumental in this movement. These DApps serve as bridges, connecting real-world assets (RWAs) to the decentralised finance (DeFi) ecosystem. This convergence of the traditional and digital worlds is transforming how we perceive, interact with, and invest in assets.

As we continue our journey through the dynamic landscape of digital assets and blockchain technology, tokenisation emerges as a pivotal theme that promises to reshape industries and redefine the nature of ownership and investment. Stay tuned for more insights as we explore the remaining key themes in this series, shedding light on the future of digital asset markets.

Contact SAXE Global for more insights or consultation here.

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