In the robust financial landscape, a seismic shift is noticeable thanks to tokenization, a process drawing considerable attention from heavy-weights like Jenny Johnson, the CEO of asset management titan Franklin Templeton. By describing it as “securitization done on steroids,” Johnson hints at how tokenization could revolutionize traditional finance.
Tokenization operates by translating ownership rights of typical assets into digital tokens, all carried out on a blockchain. A token can represent anything, be it a material asset such as an artwork or a financial asset like stocks or bonds. Johnson laid emphasis on the multiple advantages this process offers, shedding light on streamlined payment mechanisms, programmable smart contracts, and a secure, transparent ledger system.
The interoperability between tokenization and automation is a profound phenomenon in the financial sector. Johnson brought forth an intriguing illustration of pop icon Rihanna‘s hit track transformed into a non-fungible token (NFT). Owners of this NFT could earn royalties from streaming services automatically. Every time a song is played on platforms like Spotify, the embedded smart contracts within NFTs can initiate royalty payments promptly. Thus, tokenization significantly simplifies and optimizes the payment process for artists and content creators alike.
But it’s just not the musical moguls that stand to benefit. Johnson astutely pointed out the potential benefits for athletes. Sports personalities could offer tokens signifying a fraction of their future revenue streams to their fans, thereby allowing fans to invest in their preferred athletes and participate in their triumphs. Offering her finance insight, Johnson stated, “They’ll say to their fans, ‘I’m going to sell off tokens worth 10% of my future revenue stream. I’m going to sell 100,000 tokens, and boom, the fans are likely going to pay a premium for it.”
However captivating this possibility may be, it also beckons the question of regulation, the potentiality of token value decline, and the inherent risk involved with such investments. Nevertheless, it does give us a glimpse of tokenization as the embodiment of securitization on an enhanced, perhaps radical, scale.
Source: Cryptonews
