white papers

Tokenisation: Revolution or Evolution?

Tokenisation: Revolution or Evolution?
Jeroen van Oerle - Portfolio Manager

Jeroen van Oerle

Portfolio Manager

Tokenisation represents a revolutionary method of bringing real assets to market in a tradeable, accessible form. We believe we are on the brink of large-scale advancements in this field.

Tokenisation of an asset, in a nutshell, is the issuing of a digital representation of that asset, administered on a blockchain, which is the infrastructure layer of an enhanced network architecture, such as the internet. Payment tokens such as Bitcoin were the first application on this infrastructure layer but are far from the only one. Asset tokens represent another application which has far greater potential than that of payment tokens.

Blockchain forms a public transaction ledger, keeping a distributed record of all transactions that have happened on the chain and thus creating an auditable trail of activity. One shortcoming of the internet, in its original form, is that information which is shared does not need to be synchronised, implying that a record in one place can differ from a record in another place. To solve the issues related to centrally stored data, blockchain creates new services on top of its infrastructure, which cannot be done with the same level of security and traceability on any existing infrastructure, such as the internet.

Asset tokens use the blockchain infrastructure to administer ownership claims to an underlying, tradeable asset. The benefits of tokenisation over other forms of trading are in some cases simply down to cheaper, more efficient and secure infrastructure, but there are also completely new use-cases which would not be possible without blockchain. Fractional ownership of direct real estate is an example of an asset group that is impossible without asset coins. Likewise, owning part of a painting is a potential future new case too.

The potential implications of asset coins are significant. There are, however, two major hurdles in the form of regulation and technology standards. Mass adoption can only be reached when a technology is simple to use without having to think about it. Regulation is an extra layer on top in the case of tokenisation, which makes it harder to implement and will inevitably slow down the process.

Once the infrastructure is there and the regulatory framework is properly set up, however, it will be possible for any investor to own any form of asset. Asset management will change substantially if tokens become part of the investible universe.

At its heart, asset tokenisation represents the democratisation of investing. In our view, it is very likely that 2021 will be the year in which multiple developments in the space come together, and retail and institutional investors will have the first exposure to fully-regulated, transparent and liquid asset coins.


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