Blockchain technology is more than a decade old. However, it only started taking off when people realized the value of cryptocurrencies in real-world applications — that you can spend it, send it to other people, and even buy or sell crypto as part of one’s investment portfolio.
In short, it’s the real-world applications that have enabled blockchain tech to have an impact and subsequently gain traction as a viable technology that can scale.
Fintechs and cryptocurrencies have entered mainstream appeal because of how they have revolutionized the way we spend, invest, and transact.
However, one potentially bigger offshoot of blockchain technology is how we can tokenize just about anything. This effectively brings together real-world assets and digital records, along with the numerous benefits that digitalization can offer.
This makes blockchain tech more accessible, more tangible, and more impactful in real-world scenarios. Imagine a world that is fully transparent and yet secure.
By tokenizing all sorts of assets and materials, we can trade and transact in a fair environment, and it will be faster, cheaper, and more accessible.
Here are five reasons how blockchain tech makes this all the more effective.
1. Authenticity of goods
With the popularity of marketplaces, there are a lot of counterfeit goods going around, being bought by unsuspecting buyers, and sometimes being sold by unsuspecting sellers.
For instance, Chinese e-commerce giant Alibaba found and seized half a billion dollars’ worth of counterfeit goods in 2018 alone. That’s just a drop in the bucket — the global market for counterfeit goods is US$ 1.3 trillion annually, according to estimates.
Tokenizing assets can help ensure authenticity, especially if an item’s origin, value, and ownership, are recorded on the blockchain.
This enforces better trading of valuable items, which can be the case for luxury goods, collectables, or even big-ticket items such as automobiles or real property.
In the case of collectables such as antiques, trading cards, and other collectable items with potentially high trade value in the secondary markets, digitalizing such assets provides more than just trading and exchange, but it can create a whole new economy based around such assets.
“The advantage is that while it’s easy to replicate one digital functionality, it’s harder to replicate all moving parts, providing additional security.
By using novel technologies, such as blockchain, it is possible to not only provide a higher level of security but also harmonise digital cards in order to simplify trading,” says Toli Makris, Co-founder of EX-Sports, a platform for digitalized sports memorabilia and collectables powered by blockchain.”
In Makris’ industry, authenticity is key to assuring owners and buyers of the value of their collectables. Such immutability of record gives better credence to the value of a transaction — something that can potentially address the pressing issue of fake goods that have proliferated e-commerce and marketplace platforms.
“By giving each digital card a unique and immutable signature, the network can verify the authenticity of the card. If it does not recognise the signature, it does not accept the trade, therefore preventing counterfeit digital cards from entering the platform,” he shares.
2. Transparency in the process flow
In its very basic form, blockchain is nothing more than a decentralized and immutable ledger of transactions, which are cryptographically hashed to ensure that transactions are valid and cannot be tampered with.
Cryptocurrencies are just an added benefit, i.e., the exchange of value is basically recorded in the ledger. It is the same with tokens — it is the ownership and exchange of these tokens that are recorded on the blockchain.
Since each transaction is verified and recorded on each node in the blockchain network, the record of transactions is also accessible to anyone who wishes to see the transaction history.
When an asset is digitalized, and when all transactions or movement involving that asset is recorded on the blockchain, there is transparency in the process at each and every step of the way.
This can be particularly useful in e-commerce, for example, wherein a buyer can keep track of their item from the supplier, shipper, courier, to their doorstep.
This is also useful in manufacturing and production, or even in logistics – businesses can keep track of each and every step of their product within the manufacturing process.
This can be combined with internet-of-things and machine learning, which enables businesses to collect and process huge amounts of data for analysis.
Such data and analysis can, later on, be used in optimizing the production, supply chain, logistics, or other aspects of the business.
“The timeline of a product right from its inception to where it is at present can be traced through blockchain,” Mayank Pratap, Co-Founder and COO of EngineerBabu, writes on Hackernoon.
“Besides this, the type of accurate provenance tracking can also be leveraged to detect anomalies in any segment of the supply chain.”
3. Transparency in pricing and other product information
An offshoot of digitalizing assets and process flow is transparency in pricing and product details. This can be particularly useful when capitalizing on the grassroots approach, such as farm-to-fork delivery or the marketplace approach.
In such conditions, the platform can eliminate the middleman or at least minimize the exorbitant costs associated with other parties coming in-between the seller and buyer.
Because all transactions are immutably recorded on the blockchain, it can also include value and pricing information, so that all users involved are aware of this information when transacting.
Not only that — consumers can also glean all sorts of information, including expiry dates and each step that their products have gone through before reaching their households.
Perhaps not many people know that there are actually counterfeit food items being sold on the market (such as fake olive oil, for instance).
Here is where blockchain can address the challenge of both price and authenticity. “One of the great benefits of blockchain is that it can be integrated into existing technologies, such as smart labels or apps that help consumers track and learn about their food.
It’s as easy as having a smartphone, and getting more products that have smart labels on them, and customers will be able to find out when their products really expire, and where they come from,” shares Sharon Cittone, the chief content officer at Seeds&Chips.
Being able to track products’ origins and supply chains can prevent instances of arbitrage (e.g., a middleman buying very low and selling very high in a different market when there is imperfect information or imperfect movement of goods).
Also Read: A blockchain perspective: the irony of financial inclusion
In practical terms, it can mean that buyers can get the best price for goods and that sellers can be confident in assigning a value to the goods or services they sell without worrying that other parties might be artificially inflating selling prices or undervaluing buying prices.
4. Security of ownership
Tokenizing assets on the blockchain enhances the security of ownership.
Since the token transactions and ownership are on immutable and irreversible blockchain record, and since there are decentralized nodes that need to verify and record each transaction cryptographically, there is virtually no chance for the digitalized assets to be stolen.
This is a much better way to keep a record of ownership and transactions than, say, a centralized repository.
For example, records on a paper-based notary public or a paper-based registry of deeds might be prone to physical damage through fire, flooding or other such incidents.
The same can be said with digital records based on centralized or on-premises server, especially when the administrator does not have regular and reliable backups.
Since a blockchain is built upon a decentralized network, there is no single point of failure, and the infrastructure will be robust, resilient, and secure against potential attacks.
“The platform is built on top of a blockchain protocol, that you can imagine as a decentralised server — instead of having one server do all the work, you spread out the tasks to millions of computers,” says EX-Sports’ Makris.
In addition, smart contracts provide an immensely secure and convenient means to execute transactions — payments and transfer of ownership can be done automatically once all conditions are met, which minimizes or even negates the need for escrow services altogether.
5. Fractional ownership
Another offshoot of digitalizing real-world assets is that ownership of these assets can be divisible for as long as token ownership can also be divided across different individuals or entities. This can be applied to just about any asset, including capitalization tables or ownership in a company, or even real property.
For instance, if a property is digitalized with 1 million tokens assigned, then in theory ownership of this particular property can be divided accordingly.
Digitalizing ownership of assets also makes it easier to sell or trade this, which improves the liquidity aspect of any digitalized asset.
“That makes it easily tradable on the secondary market, due to the trackability, fractionalisation and the borderless nature,” shares Lord Daniel, a Managing Partner at investment firm Sterk Capital.
Blockchain for everyday use
It can be easy to dismiss blockchain as hype, especially when there are startups that build on blockchain just for the sake of it.
However, there is no question that by tokenizing assets and turning these into digital assets that can be transacted and traded online, blockchain can impact our daily lives in practical terms, even in ways that might seem invisible to us users.
The main benefit with such blockchain projects is that digitalized assets become more accessible while providing a platform for making it more secure, more transparent, and with more utility through token incentives.
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