Expert explains what asset tokenization is

Expert explains what asset tokenization is

In recent weeks we have seen an oscillation in the cryptocurrency market. Anyone who knows and understands the crypto market is well aware of the importance of asset diversification and, above all, how tokens can be an alternative.

Diversifying your asset portfolio, according to the expert and CEO of Liqi, Daniel Coquieri, means “allocate your money to different types of assets, keeping a separate emergency reserve for possible times of crisis”, explains Coquieri. .

Liqi, a digital assets fintech created with blockchain technology, has been using this tool as a business model and is a benchmark when it comes to tokenization.

But after all, how does the tokenization process work?

It is important to understand what assets are and which ones can be tokenized. In general terms, an asset is anything that has value and can be traded and convert to cash.

Another important part of the process is the existence of tokens, which are digital representations of parts or fractions of an asset. They can represent both tangible assets (property developments and automobiles) and intangible assets (patents and professional careers) and serve to bring advantages to both the issuers of the tokens and the buyers, with cost reduction and democratization of access to various assets through the acquisition of a fraction of these assets, represented by the tokens.

According to Daniel Coquieri, the tokenization process takes place in 4 main steps.

1st step: choose the asset to tokenize

In this first moment, the owner of the asset selects the asset that he intends to tokenize and sends to the tokenizer (Liqi, for example), the documentation that proves the existence and ownership of this asset, so that the tokenizer verifies if the asset meets the requirements. for tokenization (however, there is no credit risk assessment, no financial structuring to define the discount rate by Liqi). In addition, a contract is signed, usually registered in a notary, which formalizes the assignment of the asset to the token holders and establishes all the rights of the token holders. This contract is reproduced in the block chain through a Smart Contract (self-executing programming according to the rules inserted in the block chain), offering security to the tokenist”, explains the expert.

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2nd stage: token issuance

It is in this step where the answer to what is tokenization. Smart contracts (which are programming codes that have some types of contractual clauses built into them) are created within a secure, immutable, and encrypted network called the blockchain.

This is also where the tokenizer tech team configures the full token, which comes into existence within the blockchain, on networks like Ethereum. It’s time to digitally represent the asset, in a public, traceable, secure and immutable way.

3rd stage: launch of the tokens

Once the tokens are ready, they are released within the tokenization platform. With this, users of the platform who are interested and independently analyze the risks associated with the acquisition of tokens, finally they will be able to buy the tokens with the amount of money they decide to allocate to its acquisition.

4th stage: governance

The above steps explain what tokenization is, the fourth step deals with the control of the tokenized assets, which become the property of the token buyers. Additionally, token buyers can follow the project the token is a part of and contact issuers for any queries.”, adds the executive.

In recent months, following this process, several traditional assets were tokenized in Brazil as: credit card accounts receivable; Agricultural Solutions Company Accounts Receivable Token; consortium share tokens.

The way we see the crypto market has been changing with the use of tokenization. With all the modernization of the system, we have more agility and security in all processes, with fewer intermediaries and lower costs. And this is how tokenization arrives, through blockchain, to transform the market”, concludes Coquieri.

Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

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