can I tokenise debt?
Yes, you can, and today we want to tell you how and why. Among the immense number of things that can be tokenised around us, today we want to highlight debt. What is it, what is it for, how does it work, how does it work?
Don't be left in doubt, make yourself comfortable and join us on this journey.
Tokenising debt, what is it?
Let's explain what tokenisation is with a very clear example. Let's suppose you want to build large sports facilities in your city with a market value of 400 million euros. Through a decentralised application (DApp), we create a new token called X, to which we assign a value of 100 euros. Therefore, we have 4 million X tokens for sale.
Any user in the world can buy them to own a small amount of these facilities. The token entitles the user to whatever is specified in the smart contract to which the token is linked, such as a share value of the dividends generated by the facilities.
Tokenisation can revolutionise the economy by increasing liquidity and transparency, as well as democratising project financing.
When we talk about tokenising debt, we refer to the process by which we represent debt through a digital asset or token, so that any entity can issue debt, which is very common for companies seeking project finance.
Debt tokenisation involves the presence of security tokens, i.e. cryptographic assets based on blockchain technology that are linked to a financial asset, for example, the debt that companies issue for financing.
As a result of these tokens, a series of rights are granted to the holder, such as obtaining a dividend related to the profitability of the money they finance or invest. The presence of security tokens has great advantages for companies:
- It makes it easier to obtain financing for companies or projects that cannot be achieved with their own funds.
- Itimproves the visibility of companies that are listed on some kind of marketplace on the trading of security tokens.
- It guarantees security and transparency thanks to the immutable nature of blockchain technology.
- Itreduces the bureaucracy traditionally used in the transmission of tokens, thanks to the peer-to-peer nature.
Tokenising debt is the way many companies choose to raise finance.
Real estate debt: the popularity of tokenisation
Among the many types of tokenisation that exist, as well as everything that can be tokenised, real estate debt stands out, i.e. real estate projects in which investors can sell their debt through the sale of tokens. As a result, the investor obtains a fixed interest rate, greater security and liquidity in securities.
The news shows how important the tokenisation of real estate debt has become in recent years in Spain, such as the following report published in El Periódico in 2020: "First tokenisation of real estate debt through a smart contract on blockchain in Spain".
is it a competition for banks, is it an alternative means of financing, and leave us your comments.
7 things you should know about asset tokenisation
what is an asset? What is a token? What is tokenisation?
An asset can be a property, a house, a car, a piece of land, a contract, a work of art, etc. They are assets because they have a value.
A token is a share or participation in the digital environment, i.e. a unit of value that is issued by a private entity and represents an asset. It is issued by a person or company through blockchain technology.
Tokenising, however, is taking the value of an asset into its digital version and fractioning it so that it can be traded more easily. These fractions are tokens.
what is the purpose of a token?
Its main function is to monetise a real asset in order to trade it in the virtual world, so that users can obtain value from a good that is not accessible in real life. It manages to stop being a unit and become fractions through tokenisation.
what is blockchain technology?
The blockchain is the technology with which tokenisation works. Through it we secure the process, increasing its trust, security and transparency. It allows us to keep a distributed, synchronised, decentralised and very secure record of the information that is stored. Likewise, it allows us to identify each device and each user in a unique way.
how can I use the tokens once I have acquired them?
Not only to invest in property, but also to acquire rights, to tokenise projects, obtain financing, pay for services, etc. Everything is tokenised in order to invest or obtain financing. And although it is a technology that is taking its first steps in some Latin American countries, everything indicates that it will evolve significantly. In Spain, debt tokenisation is becoming increasingly popular.
why is tokenisation important?
Because it allows you to invest anywhere in the world in a matter of minutes, without red tape and with the maximum security offered by blockchain technology; it is a financing tool through the tokenisation of projects with a professional; it is available for use from today.
what are the advantages of tokenisation?
When you acquire a token, depending on the agreement, you get some advantages or others. In general, it allows you to operate without borders at a low cost, you can trade on different decentralised platforms at any time of the day, it has high liquidity and allows access to markets that would otherwise be practically impossible.
how do I invest?
- Inform yourself before making any investment.
- Think about what you want to invest in.
- Check the conditions for acquiring tokens.
- Research the way to acquire them, sell them, etc. In general, they are acquired through cryptocurrencies. That is, a token representing a specific part of a property has the value of X cryptocurrency, such as Bitcoin. Therefore, with X amount of cryptocurrencies you acquire the token, so you must first acquire them and then acquire the token.
- Consult a professional.
The more token financing platforms there are, the better, as there is a much greater chance that the project in which you have invested will grow. When this happens, the value of the token increases, so you can trade it on some platforms. It is important to check which ones are accepted worldwide, as well as whether the bidder is outside the country, among other things.
Tokenising debt, now what?
Increase your opportunities to participate in the global economy. Achieving your goals, optimising your time and multiplying your income is easier than you think.
ask all your questions about how to tokenise debt!