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While cryptocurrencies introduced new digital asset categories like currency and utility tokens, connecting existing real world assets into blockchain environments enables wider mainstream bridges.
Tokenization refers to porting real world assets from physical title deeds, contracts and certificates into crypto coins/tokens held natively across web3 rails expanding accessibility.
This guide examines popular real world asset tokenization categories including real estate, invoices, commodities and even esoteric IP assets alongside risks needing mitigation.
Before surveying tokenization, understanding current friction points helps illustrate the significant efficiency gains decentralized alternatives introduce:
1. Legacy Process Inefficiency
Transferring private securities like commercial real estate or alternative investment fund units requires exhausting paperwork, middlemen fees up to 8% with settlement delays taking weeks hampering liquidity.
2. Fractionalization unlocking access
High minimum investments like $100Ks for property or VC funds massively limit investor access by smaller retail participants.
3. Trading Hour Dependency
24/6 legacy environment dependency shuts average person out of vital moves happening globally during after hours or weekends which institutions leverage greatly via sophisticated connectivity.
4. Settlement Finality Risks
Lengthy clearance risks even across public equities pose rollover vulnerabilities where transfers remain pending allowing intermediaries ability to renege introducing counterparty risks absent immediate settlement finality.
These inefficiencies severely constrain real world asset progress across onboarding, accessibility and redistribution pathways necessitating decentralized upgrades tokenization introduces.
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