How Does Tokenizing Assets Make Them Easier to Trade?

Asset tokenization and the key benefits it offers investors globally

By Vanessa Malone

The market for tokenized assets is expected to reach trillions by 2030, fueled by the growing adoption of leveraging blockchain technology to make digital representations of a broad range of financial and real-world assets (RWAs).¹

These assets span categories like equities (e.g., stocks), Exchange Traded Funds (ETFs), real estate, commodities (e.g., gold), and alternative investments such as art, collectibles, and intellectual property. Even currencies are being tokenized, offering increased accessibility, liquidity, and transparency across global markets.

What is asset tokenization?

Asset tokenization is the process of creating digital representations of assets on a blockchain that hold the same value as their physical or traditional counterparts. This value and ownership is managed by smart contracts, basically contracts written in code that are automatically executed when certain conditions are met. This enables benefits like peer-to-peer movement, instant trading, and transparent orderbooks.

What assets are ripe for tokenization?

• Equity (public stocks, private equity)
• Investment Funds (ETFs, mutual funds)
• Commodities (gold, silver, oil, carbon credits)
• Bonds (corporate bonds, government bonds, municipal bonds)
• Currencies (fiat like U.S. dollars, the Euro and digital currencies like USD stablecoin called USDC)
• Alternative Assets (real estate, art and collectibles, and intellectual property like royalties)

What are the key benefits of tokenized trading?

1. Fractional ownership. Putting digital representations of assets on a blockchain allow them to be divided into smaller, more affordable units. This makes high-value assets like certain equity, real estate, art, or gold more accessible to everyday investors. For example, fractionalizing gold bars could streamline access to pieces of a full gold bar, opening the door to underserved markets and micro-investments which benefits issuers and investors.
2. Enhanced liquidity potential. Enabling these assets to trade on blockchain-powered markets, for example on Upstream, opens the door to new investors who can buy and sell assets globally using a credit/debit card, PayPal, USD or digital currency at a time convenient for them. Leveraging smart-contract technology, these markets transcend traditional market hour restraints that rely on additional intermediaries. Upstream operates 20 hours a day, 7 days a week and the technology powering the market has the capability for 24/7 trading. Additionally, for assets that are typically more illiquid such as real estate and crowdfunded equity, offering streamlined trading avenues can further increase liquidity potential.
3. Transparency. All transactions and prices are much more transparent on blockchain-powered systems. Upstream’s public orderbook is powered by cryptographic technologies where all bids and offers are shown to users, free of charge. This gives investors more power to make informed decisions using real-time, accurate pricing data.
4. User empowerment and convenience. One initial criticism for blockchain-powered infrastructures was its clunkiness and complexity compared to a traditional trading systems. Again, on platforms like Upstream, all the technology is kept ‘under the hood.’ Investors can enjoy streamlined onboarding, transparency, and real-time, peer-to-peer trading all within a userfriendly and familiar interface.
5. Faster settlements. Right now, trading on traditional stock exchanges involves a T+1 settlement period, meaning that the transactions settle one business day after the trade date. On blockchain-powered trading systems like Upstream, trade executions are real-time and transparently performed on a best bid/offer basis. This reduces counterparty risk because both the trade and transfer of ownership happen immediately.

What should the industry approach be for this wave of tokenization?

It’s clear that the initial approach the blockchain community took on tokenization had a major over-emphasis on the underlying technology, overcomplicating the process rather than putting the key benefits it offers to issuers and investors at the forefront.

Upstream’s stock trading app, part of MERJ Exchange, offers a clear proof of concept for streamlining this narrative of tokenized stock trading. For example, we emphasize that investors are trading traditional securities from companies listed on national stock exchanges like Nasdaq, NYSE, CSE while reaping the benefits of tokenization behind the scenes. As a company at the forefront of this capital market evolution, we are looking forward to the growing adoption.

Ready to experience the future of trading? Issuers interested in listing on Upstream can get started here. Investors (non-U.S.) can download Upstream on iOS or Android.

Source 1 Boston Consulting Group X ADDX

Disclaimers:

U.S. persons may not deposit, buy, or sell securities on Upstream. Anyone may buy and sell Collectibles on Upstream.

This communication shall not constitute an offer to sell securities or the solicitation of an offer to buy securities in any jurisdiction where such offer or solicitation is not permitted. Collectibles have no royalties, equity ownership, or dividends. Collectibles are for utility, collection, redemption, or display purposes only. Anyone may buy and sell Collectibles on Upstream. All orders for sale are non-solicited by Upstream and a user’s decision to trade securities must be based on their own investment judgment.

Upstream is a MERJ Exchange market. MERJ Exchange is a licensed Securities Exchange, an affiliate of the World Federation of Exchanges, a National Numbering Agency, and a member of ANNA. MERJ is regulated in the Seychelles by the Financial Services Authority, https://fsaseychelles.sc/, an associate member of the International Association of Securities Commissions (IOSCO). MERJ supports global issuers of traditional and digital securities through the entire asset life cycle from issuance to trading, clearing, settlement, and registry. It operates a fair and transparent marketplace in line with international best practices and principles of operations of financial markets. Upstream does not endorse or recommend any public or private securities bought or sold on its app. Upstream does not offer investment advice or recommendations of any kind. All services offered by Upstream are intended for self-directed clients who make their own investment decisions without aid or assistance from Upstream. All customers are subject to the rules and regulations of their jurisdiction. By accessing the site or app, you agree to be bound by its terms of use and privacy policy. Company and security listings on Upstream are only suitable for investors who are familiar with and willing to accept the high risk associated with speculative investments, often in early and development-stage companies. U.S. persons may not deposit, buy, or sell securities on Upstream. There can be no assurance the valuation of any particular company’s securities is accurate or in agreement with the market or industry comparative valuations. Investors must be able to afford market volatility and afford the loss of their investment. Companies listed on Upstream are subject to significant ongoing corporate obligations including, but not limited to disclosure, filings, and notification requirements, as well as compliance with applicable quantitative and qualitative listing standards.

Collectible products are akin to a digital sticker of an underlying artwork and should not be considered a financial investment; a security token, an e-money token, or a form of digital currency. Collectibles should not, therefore, be purchased by anyone seeking financial gain or with an expectation to profit from the purchase, ownership in the entity, dividends or distributions, sale or resale of a Collectible. By buying a Collectible, you agree that you are not doing so for investment purposes or for the purposes of obtaining a security or an appreciating asset. You understand that the benefit you receive for buying a Collectible is limited to supporting athletes, celebrities and other brands. You also acknowledge that ownership of a Collectible does not carry with it any rights, express or implied, including (without limitation) copyright, trademarks or other intellectual property or proprietary rights in and to the underlying artwork. The copyright to the digital artwork remains with the copyright holder.

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