Introduction to Tokenization, the Benefits it Brings, and How it Works

09-03-2023

• url: https://info.polymath.network/blog/introduction-to-tokenization-the-benefits-it-brings-and-how-it-works
• related links
  • https://www.sustainablefinance.hsbc.com/mobilising-finance/blockchain-gateway-for-sustainability-linked-bonds
  • https://www.entoro.com/news/cost-benefits-of-digitization-vs-traditional-private-placement
  • tokenisation guide - https://info.polymath.network/hubfs/Q3%202021/Tokenization%20Guide/Polymath-Tokenization-Guide.pdf?hsCtaTracking=4481248d-9c70-46be-beeb-38bec72ca7ee%7Cbd1bcc1e-d364-4c9f-9d96-afd1245a1d68
• security token
  • a financial instrument that represents an ownership interest in an asset
  • digital representations of securities on a blockchain
• benefits of tokenisation
  • increased efficiency
    • remove legacy middlemen
    • reduce settlement time
    • cost savings for issuance, corporate actions, reconciliation
  • reduced cost
    • automation and transparent record keeping
    • reduce bond issuance costs
    • reduce fundraising costs
  • better compliance
    • reduce risk of error and manage complex compliance requirements
    • program compliance rules directly into each token
  • improved liquidity
    • trade illiquid or non-fractionable assets (private placements and real estate)
  • increased transparency
    • one golden source of truth
    • cap table updated, reduce disputes around record keeping
  • facilitated innovation
    • fractionalized securities, liquid share revenue agreements, dynamic ETFs
• tokenisation process
  • ecosystem assembly
  • security token creation
  • compliance set-up
  • token distribution
  • corporate actions execution and management