As we know, blockchain technology is a complex technology and is used for all crypto projects in various industries like finance, banking, insurance, etc. Blockchain technology brought a new era of security, privacy, transparency, fairness, and democratization of finance. At this current time, several blockchain-powered decentralized applications are helping to make the digital world a better place by reducing financial barriers. Among them, asset tokenization is gaining prominence and it helps the asset owners to sell a portion of the whole asset and earn profits
Tokenization is an alternative way for traditional stocks. In the tokenization platform, shareholders can purchase their desired stocks easily in the form of crypto tokens. So this type of token will offer high liquidity. In recent years, security tokens are playing a major role in the global crypto marketplace. Also, they might play a vital role in the future. Security tokens are completely developed under the SEC Guidelines and the country’s regulations. Besides, the developers must satisfy all the rules and conditions for creating these tokens. Moreover, these tokens offer higher liquidity, regulatory compliance, good transparency, and more.
There are three main types of security tokens in the blockchain industry. Such as asset-backed crypto tokens, equity tokens, and debt tokens. Among these token types, the asset-backed crypto token is popular among traders, investors, and speculators. Asset-backed crypto tokens are backed by blockchain technology. So that every token transaction will be recorded securely in digital format. This type of token has gained crucial importance in recent years. That’s why many crypto startups are willing to create asset-backed tokens for their business.
This article is intended to provide you with a clear perception of Asset-Backed Crypto Tokens and all essential factors regarding asset-backed crypto token development.
What is an Asset-Backed Crypto Token?
Asset-backed tokens are one of the top-notch Blockchain applications which facilitate the cost-effective, quick, and secure trading of real-world assets. These tokens value derives from the underlying asset which is backed.
Asset-backed tokens are digital assets that facilitate the cost-effective, quick, and secure trading of real-world assets. The asset-backed crypto tokens are built on top of any blockchain platform like Ethereum, Tron, BNB chain, waves, and more. It is a kind of security token so the value derives from the underlying asset which is backed. The asset-backed crypto tokens can be pegged with any real-time assets like precious metals, commodities, real estate, etc. These tokens act as an alternative way for traditional stocks and have some major differences. As already said, investors can purchase their traditional stocks in the form of crypto tokens. Besides, these tokens will provide high liquidity and hassle-free trading.
However, asset-backed security tokens are offered during security token offerings. These tokens can carry an actual value since they are correlated with an external and real asset token value. Asset-backed crypto tokens offer secure, reliable, and minimal costs of trading for traditional assets through blockchain technology. The owner of the asset-backed token will own a product that is tangible and has the rights as the owner. Unlike a speculative cryptocurrency, asset-backed tokens represent the following:
- Legal rights of owners of the tokens
- The value of the underlying assets that holders are entitled to per token
Every crypto enthusiast knows that utility tokens aren’t backed by anything tangible. But they perform the action which will be more valuable for traders and crypto investors. As we know, Asset-backed crypto tokens are completely tangible, so the value of these crypto tokens is directly linked to the value of the tangible asset that is pegged with the token. Thus many crypto startups and entrepreneurs are emerging to the best asset-backed crypto token development service in the marketplace for creating a secure crypto token by pegging tangible assets.
Popular Asset-backed Crypto Tokens in the Marketplace
Crypto tokens backed by physical/traditional assets like gold, oil, etc are now gaining prominence in the crypto space. Besides, many traders are showing interest in buying and selling asset-backed crypto tokens. As per the current crypto market, there are many tokens pegged by real-time assets. But only some asset-backed crypto tokens grabbed the attention of crypto traders and investors. Here we list some of the top asset-backed tokens that are ruling the global crypto marketplace.
- Digix gold token
- Hello gold
- Gold mint
- Hi coin
- Pax gold
- Karat Gold coin
- Aurum coin
- Zen gold
- Jinbi token
How do Asset-Backed Crypto Tokens work?
Initially, asset-backed crypto tokens are transferred and verified by a middleman who will be in charge of safeguarding these assets. Then, the custodian will code the ownership of these assets and their cash flow with security tokens. Token holders become the legal owners of the rights for the underlying assets. Also, they can exchange or divide them simply when compared to how it is handled now. By transforming the asset into an asset-backed crypto token, smart contracts are embedded. This means that the token holder automatically receives the cash flow related to the asset easily in a risk-free manner.
Why it is beneficial to create an Asset-Backed Crypto Token?
Most utility tokens do not have much intrinsic value. They aren’t backed by anything tangible. Utility Tokens rarely perform an action which is unique and valuable. But in the case of Asset-backed crypto tokens, they are completely tangible. The value of these tokens is directly linked to the value of the external asset. These Asset-backed crypto tokens are beneficial for crypto fund managers to create cryptographically traditional assets to increase liquidity which are sold at a reasonable price.
Generally, bonds and stocks are the products that come with high liquidity, trading volumes, trading on exchanges, etc and traditional assets like vehicles, real estate, jewelry, lack them. Moreover, liquidity is very important in asset-backed crypto tokens. Liquidity correlates strongly with an asset’s trading volume, and can also affect the asset’s price. Higher liquidity can enhance the value of the underlying assets, as it negates risk factors. In a tokenized asset trading market, one can trade tokens on a 24*7 basis, and also they can get reduced price volatility.
Here we shared some of the noteworthy reasons to invest in asset-backed crypto token development.
- Globally Accessible
When you invest your hard-earned money in asset-backed crypto token development for creating a token with pegged real-time assets. Then your crypto token can be easily accessed everywhere across the globe at any time. By doing this, you can attract global crypto users quickly.
In case, anyone buying the crypto token which is backed with a physical/traditional asset, the ownership rights will not be removed. The asset-backed crypto tokens can be transferred from one user to another user in a highly secure manner. If any unwanted or fraudulent activities happen during the token transaction, then that conflict can be solved quickly by looking at immutable records of ownership.
As we know, all the token transaction records will be completely maintained on a blockchain network. Thus, there is no possibility of hacking or any other fraudulent activities. This kind of token will have high transparency so it will make every individual have a clear view of the latest ownership records.
- Higher Liquidity
Liquidity is one of the main reasons to create asset-backed crypto tokens for your business. Asset-backed crypto tokens will always have higher liquidity in the crypto space.
Another major reason to invest in the asset-backed crypto token is cost-effective. This type of security token will remove the involvement of intermediates or third parties that often restrict investment accessibility. Avoiding the middleman will reduce the asset-backed crypto token transaction fees.
- Lower Risk
In general, all types of security tokens will not have any risk. It is due to the security token system being completely protected with tightened security entities. So it neglects cyberbullying and other malware activities.
- Easy to Invest
As previously said, asset-backed crypto tokens will provide higher liquidity with fractional ownership. Therefore, this type of security token will avoid the need for minimum investment.
By considering these valuable reasons, you can get an asset-backed crypto token development service for creating a feature-packed asset-backed token.
Asset-Backed Crypto Tokens: Real-Time Use Cases
Tokens are usually backed by external assets that are somewhat comparable to gold-backed paper currencies such as traditional currencies which were under the gold standard. But the situations become worse when we examine tokens associated with assets that are non-fungible.
The Real Estate industry is fairly illiquid and is affected by inefficiencies. It includes a middleman who receives a portion of an investment for taking on counter-risk. But with asset-backed tokens which would tokenize a portion of an individual position in a real-estate asset.
In addition to this, here are the other use cases with asset tokenization:
- The issuance of corporate debt or equity through a security token.
- Tokenization of commercial real estate equity or rental income. The commercial real estate investment sector is separated. The fractionalization of ownership through tokenization could democratize commercial real estate investing.
- IP asset Tokenization of multi-pronged cash flow such as licensing or royalty payments which is applicable to everyone who has a claim to a patent, movie, or book.
Four categories of Asset-backed crypto tokens use cases:
There are around four categories of Asset-backed crypto tokens use cases:
1. Equity or Debt
Equity and debt tokens are the tools for fundraising in the early stages without the use of investment banks, middlemen, and stock exchanges. Fractional ownership of equity in traditional assets can bring in factors like immutable, trustless, etc. By implementing Blockchain Technology, the process is made more efficient.
Exchange-tradeable commodities can be converted into fungible assets-backed tokens. Be it oil, gas, sugar, wheat, or whatever, it can be tokenized with an intermediary. But Blockchain technology, creates market confidence.
3. Non-fungible hard assets
Let us take real estate tokenization as an example. When compared to private ownership, tokenized real estate is expected to a more profitable, borderless, and democratic. Moreover, with a tokenized real estate and rental income, all investors can build a diversified, compliant portfolio with no or low fees.
4. Non-fungible soft assets
These are generally illiquid and have no secondary marketplace to perform trading. Conceptually it is not difficult to tokenize intellectual property ownership and with huge benefits.
Asset-backed Crypto Token Development Process
Here we list the creation steps that are involved in asset-backed crypto token development.
- Choose the real-time asset to be tokenized for your business
- Do market research
- Choose the blockchain platform
- Auditing the specific asset
- SPV/SPE Formation
- Set up a price for the asset-backed crypto token
- STO Dashboard Development
- Listing tokens for Sale
Advantages of Asset-Backed Security Tokens:
The primary advantage is Divisibility. The ownership of an asset, financial or not is traditionally very difficult to split. One cannot cut a company’s share but can split a security token backed by this share. This can, in turn, enhance the liquidity of the financial assets.
Secondly, with security tokens exchanging the assets become more secure. Moreover, Blockchain technology used in the issuance and trading of tokens limits counterparty, settlement, or counterfeit risks. But with Blockchain, the settlement and transactions provide a streamlined investment environment.
Using tokens as a way to enhance the security asset will improve the liquidity in any market. This means that tokens are easy to trade. Moreover, increased trust in transactions can also increase liquidity.
To put it in simple words, Asset Tokenization is going to make a major revolution in the crypto industry. Using security tokens backed by real or financial assets will make the process cheap, secure, and transparent. This will pave the way for dividing the assets and transferring them instantly. For creating and deploying an asset-backed token, you need to hire a team of well-experienced blockchain developers from the reputed asset-backed crypto token development service provider. One such ideal provider in the crypto sector is Icoclone. We are specialized in affording best-in-class asset-backed crypto token development services and premium STO script software at an affordable cost.
If you have any urgent requirements on the same, then you can get in touch with us right now for a top-notch solution!