Jun 04, 2021
Tokenization is going to disrupt the financial markets and change the way we invest. More traditional assets will be converted to digital tokens residing on blockchains, which will make markets more liquid, secure, and accessible to a broader range of investors.
In this article, you will discover a list of innovative tokenized assets operating on the Algorand blockchain.
Algorand provides the ideal blockchain network to tokenize both physical and digital assets.
The underlying infrastructure is both robust and flexible, a combination that is hardly achievable today. Thanks to a unique consensus mechanism known as Pure Proof of Stake (PPoS), which was invented by MIT Professor and Algorand founder Silvio Micali, the network delivers all three key elements of an ideal blockchain – scalability, decentralization, and security – without compromising on any of them.
In fact, Algorand is currently the only blockchain that addresses the Blockchain Trilemma, which makes it the perfect technology for tokenized assets.
Businesses and entities looking to create tokenized assets on Algorand are benefiting from the Layer-1 capabilities, which revolve around speed, security, instant finality, high throughput, and true decentralization.
Tokens are issued through Algorand Standard Assets (ASA), a framework that supports the creation of both fungible and non-fungible tokens, as well as security tokens. ASA represents a mechanism that pays special attention to user experience, enabling developers to issue tokens within minutes.
Thanks to the unique benefits, many businesses and organizations are counting on Algorand as the best blockchain infrastructure for tokenization processes.
Australian tech firm Meld Gold has built a digital platform that aims to transform the way gold is traded. The platform can be integrated into existing gold supply chains to speed up processes by reducing manual work and eliminating human errors. Meld’s gold trading platform ensures a seamless trading process and quicker settlement.
Thanks to Meld, all the key players in the gold supply chain, including mints, refineries, dealers, and vaults, can connect efficiently and seamlessly.
Meld uses Algorand to tokenize gold, letting investors and consumers transact both with physical gold and digital tokens representing the precious metal.
Meld Gold director Michael Cotton explained that the platform was bringing transparency to the gold market for the first time by connecting buyers and sellers. He said:“Currently the gold market provides limited access and little visibility into its supply chain, which makes trading time-consuming, expensive and inefficient.”
Algorand has a major contribution to ensuring transparency, as blockchain is immutable and enables all parties to monitor transactions. Trading digital gold is way more convenient and affordable. Algorand’s Layer-1 blockchain handles thousands of transactions per second while providing a high degree of security.
The main benefits of the Algorand-powered Meld platform are the following:
Gold remains one of the most important assets, especially with what the COVID-19 pandemic has highlighted, a need for reliable safe havens. Institutional and retail investors may allocate part of their portfolios to the precious metal, as it represents a good store of value.
Meld uses Algorand to tokenize silver as well. The white metal has been among the best-performing commodities since the start of the pandemic.
Meld’s gold and silver tokens reside on Algorand and are traded under the tickers MCAU and MCAG, respectively.
Technological advancements, including the internet and mobile devices, have encouraged stock trading among retail traders worldwide. However, some stocks, such as Google or Amazon, are still too expensive for retail investors, who have to spend thousands of US dollars for a single share. Moreover, they are only accessible to investors that can purchase stocks on US exchanges.
During the last few months, stock trading platforms like Robinhood and Fidelity introduced fractional shares, which enable users to buy smaller pieces of a single stock.
The International Blockchain Monetary Reserve (IBMR) went even further with this idea and developed an entire exchange platform that supports fractions of shares. The great thing about it is that users can trade the digital tokens representing fractional shares that reside on Algorand, thus leveraging blockchain’s security, transparency, and speed.
IBMR’s Microequity Stock Exchange (MESE) is the world's first microequity exchange that enables retail users to get exposure to the global tech equity market by purchasing fractions of shares on blockchain.
MESE’s microequities are ASA tokens representing 1/10,000th of a stock. Users can invest in Amazon, Apple, Tesla, Microsoft, Google, Twitter, and Netflix, with more tech stocks to be added soon.
Note that MESE’s Algorand-based tokens are not derivatives like contracts for difference (CFDs) but digital units 100% backed by actual stocks.
MESE takes stock trading to a whole new level, as the platform is available all over the world and is live 24/7. More importantly, there are no entry fees and users can get exposure to tech giants with only a few cents.
At the end of 2020, Valentus Capital Management, a private equity firm registered with the US Securities and Exchange Commission (SEC), partnered with blockchain firm Realio to tokenize a $250 million investment fund on Algorand.
The tokenized fund, called Credit Opportunities Fund I, is run by a newly created entity known as Valentus Digital and focuses on credit assets, such as Residential-Backed Mortgage Securities (RMBS), Corporate Loan Obligations (CLO) and Asset Backed Securities (ABS).
Realio and Valentus have issued 250 million VAL 1 tokens, which represent the economic rights to shares in the fund. VAL 1 tokens are built as ASAs and thus benefit from the security, decentralization, and scalability of Algorand.
Valentus was able to reduce the entry barrier for an investment from more than $2 million to only $10,000. Thus, investors who pass through a compliance check have the opportunity to get exposure to credit assets and invest alongside top-notch institutional investors.
These are only a few examples of how Algorand can be used to tokenize real-world assets. While there are certain regulatory barriers that have to be gradually addressed, tokenization is poised to transform traditional financial markets, and Algorand is leading the tokenization trend.
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