0/ Just because tokenization has a ton of benefits doesn't mean stakeholders' incentives are aligned.
That is, if it benefits the token issuer while creating 0 value for token buyers or vice versa, it's unlikely to work.
Thus it's important to understand who benefit from what.
That is, if it benefits the token issuer while creating 0 value for token buyers or vice versa, it's unlikely to work.
Thus it's important to understand who benefit from what.
1/ The most mentioned benefit of tokenization is liquidity. IMO it's misleading and it really boils down to two things: liquidity premium and price discovery.
Let's look at liquidity premium first.
Let's look at liquidity premium first.
2/ Liquidity premium is the price difference between an illiquid asset and a liquid asset that are otherwise identical.
In our case, it's the difference between the asset that is going to be tokenized and the same asset that has been tokenized.
In our case, it's the difference between the asset that is going to be tokenized and the same asset that has been tokenized.
3/ As such liquidity premium only benefits issuers (and other pre-tokenization owners if any), because they are the only stakeholders who own the asset pre-tokenization *and* post-tokenization.
Conversely it doesn't benefit buyer who will then trade on liquid, secondary markets.
Conversely it doesn't benefit buyer who will then trade on liquid, secondary markets.
4/ Price discovery is not a direct incentive. Would issuer and investor transact just for the sake of knowing what the fair price is? Unlikely.
Price discovery is mostly a second-order effect that benefits the larger society. It improves capital allocation.
Price discovery is mostly a second-order effect that benefits the larger society. It improves capital allocation.
5/ So it looks like the liquidity aspect of tokenization provides a direct incentive only to issuers.
Then what incentivizes investors to buy tokens from the issuer?
The only things I can think of is speculation and fractional ownership.
Then what incentivizes investors to buy tokens from the issuer?
The only things I can think of is speculation and fractional ownership.
6/ If this line of reasoning is correct, then the likelihood that a given market will be tokenized is directly linked to, among other factors, 1) how speculative it is and 2) the level of unit prices.
For example, we have seen 1) with ICOs, and may see 2) with comm real estate.
For example, we have seen 1) with ICOs, and may see 2) with comm real estate.
