Securitized Tokens concept

A cryptocurrency is like a token that has an underlying value priced by the market. This means that if you own 0.5 bitcoin, you have an asset of 50% of the price of a bitcoin. This concept of a token can be taken further with assets. Just like how a crypto token can represent an underlying value that is used for trading, a security token can also represent an underlying security that it represents. The underlying security can be an asset from a real estate property, a collectable watch, fine art or even a car. The possibility is limitless as any asset that you see can be represented as a security token. The question is would you want to represent it as one?

For example, tokenizing a collectible watch has a lot of benefits to it. Let’s say we have a Rolex Explorer to tokenize and we call the token an RE token. Having this watch tokenized will allow you to own a portion of it instead of buying the whole watch for yourself. This is of course if you would only want to hold it as an asset and not wear the portion of the watch(although it could work in an agreement made to token holders!). Owning a portion of the watch lowers the barrier to entry to ‘own’ high end watches to benefit from its value appreciation over time. This is also the same case for fine art.

The above example of tokenizing a security can be replicated to other assets and also be combined with a ‘smart contract’ that could help facilitate the transaction of maintenance fee in holding the asset(read: automate maintenance fee). I will be discussing how a smart contract can be meshed together with securities in my next article using real estate as an example and how this ties in very well for an Islamic economy. See you!