Illiquid assets are a kind of asset that is never going to be sold or will be sold after a long time and at a very low price. They include: buildings; vehicles and equipment; intangible assets; long-term financial investments; goods that weren’t successfully marketed.

Typically it is very difficult to find a buyer for such goods, since the number of interested people tends to be rather limited. An asset supply and demand may be limited geographically or by industry. A high price of an asset may also influence its liquidity negatively. Niche products are usually hard to sell, especially in unstable economic systems.

Considering new trends of internet development there was a decision to explore asset tokenization as a way to turn illiquid assets into fully liquid ones. It is worth noting that in this article we will address only the two main factors contributing to raising the demand for initially illiquid assets, while there are naturally more factors and advantages to tokenization process.

Tokenization is a process of creating a cryptocurrency token based on blockchain technology and pegged to something from the real world. This way any kind of asset can be tokenized, from airplanes and residential buildings to banking services and government programmes. Generally the tokens themselves represent the right to acquire property, where the subsequent exchange of tokens for the asset would be considered the purchase itself.

To clarify let’s examine two examples representing the two main factors of tokenization that positively influence asset liquidity.

Factor one — its transborder nature.This factor aptly paints the picture of the advantages of blockchain technology. No matter where the user is from, be it East Asia or South America, the ability to use cryptocurrency tokens will be the same. In the majority of cases transferring the asset ownership via tokens will be instantaneous. In other words, if we imagine the token as owning the rights to a box of chocolates, the rights themselves can be transferred to a person from any country in mere seconds. The second undeniable advantage of asset tokenization is their fragmentation. Already these kinds of transactions, real estate for example, are being prepared in various countries. Let’s say an apartment building, where a single token would represent an apartment of a certain type. Like many of you know Bitcoin, the progenitor of all tokens and cryptos, can be divided down to eight decimal places. If we use this rule with tokenized assets, we can divide the apartment property ownership between a bigger number of people, thus organizing a purchase of an expensive or simply illiquid asset.

These factors are not the only ones and we can spend a long time venturing deeper into the more complex legal specifics, as well as the undeniable advantages of real asset tokenization. But we can say for sure that in five years the world may change drastically thanks to the global tokenization, thanks to efficient technologies that have just recently entered our lives.