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How to start investing in tokenized assets: Beginner’s Guide
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How to start investing in tokenized assets: Beginner’s Guide

Everyone is talking about tokenization, but you are unsure about how to invest in this area and why you need it? In this article, we will explore all these issues with simple examples.

Tokenization has become a trend in recent years, replacing ICOs that have discredited themselves. STO has become a more reliable and regulated way to get business funding and democratize investment. Investing in any object, whether it’s a piece of art, startup’s digital stock, or a stake in a luxury resort on the other side of the world, becomes much easier thanks to tokenization. In this article, we will tell you how to invest in tokenization if you have not looked into this topic closely yet.

What exactly is tokenization?

Many interested in investing in global tokenization believe that this is some kind of new trendy technology. We may surprise you, but in fact, tokenization began back in the 1970s. True, its goal was not to attract new investments but to preserve user data. Confidential information was encrypted and transferred to the ledgers in the form of a sequence of letters and numbers. The same system is still in use today. However, another use of tokenization has now been found.

The development of blockchain made it possible to use it as a single immutable and secure ledger, where all records are publicly available. At the same time, the transactions themselves remain mostly anonymous. Any tokenized asset can be divided into many tokens representing part of its value, which makes it more liquid. Investors worldwide can buy these tokens and further profit from owning the asset or sell it on the secondary market for a higher value.

Types of tokens

Tokens are all assets added to the Ethereum blockchain. However, there are differences between them. If you want to know how to invest in tokenization stocks, you should first be aware of the three main types of tokens:

  • Utility tokens provide the owner with some utility benefits. If you have a utility token, it doesn’t mean you own a share of the company or a commodity – instead, it is a tool for using some kind of service. The cost of a utility token is determined by the volume of tokens in the market and demand. Such tokens can be freely traded and are most often used as a means of payment.
  • Security tokens are stocks or bonds issued by private companies on the blockchain. With the help of security tokens, companies that didn’t go public can still access the capital market and receive the necessary blockchain investments. Generally, STO (security token offering) is the most reliable way to crypto invest in tokenized assets right now.
  • Non-fungible tokens (NFTs) differ from other tokens since they represent a digitalized right to own a unique object, such as a painting or sculpture. The main feature is that these tokens are not fungible. Each token is tied to a specific item with specific characteristics and cannot be replaced by another token, as with utility tokens.

What assets can be tokenized?

It may seem like a bold statement, but literally any physical object or ownership right can be tokenized, and any business can receive blockchain investments. If you are wondering how to invest in tokenization, you should first know about the assets that can be transferred to blockchain:

  • Commodities. The tokenization of natural resources allows producers and processors to open up new opportunities and receive investments not only from large funds. The money received can be used to upgrade equipment, protect the environment, expand production, and so on.
  • Real estate. In this scenario, fractional ownership becomes available. This allows companies to expand the list of investors, lower the entry threshold, and make real estate investment more accessible to everyone from anywhere in the world.
  • Goods. Low-liquid assets such as art, wine, diamonds, etc., can be tokenized. There is a real NFT boom going on right now.
  • Private equity shares. Tokenization allows companies to interact with stakeholders more efficiently using a single and reliable ledger.

How blockchain investments work in simple terms

Let’s forget about complex technologies, decentralized exchanges, smart contracts, and blockchain. We will look at a simplified example of how to invest in tokenization and why you may need it.

Let’s say you want to invest in real estate, but you only have $6,000. Previously, it was impossible to invest with such a small amount – it would hardly be enough for a few square meters in the most ordinary residential or commercial building, not to mention luxury complexes and resorts.

On the other hand, there is a property owner who needs money (for repairs, for example). The entire property’s value is $200,000, and the owner needs $30,000. This is where tokenization comes in. The property owner turns ownership rights into tokens. For example, an object worth $200,000 can be converted into 200,000 tokens, each of which will mean holding a 0.0005% share of the asset. If you buy all 200,000 tokens, you become the owner of 100% of the property. But you can also buy one, a hundred, or even two hundred tokens, receiving a particular share in the object. Thus, no matter how much money you have, you can buy a token or several and become the owner of real estate rights anywhere in the world.

How to invest in tokenization

To become an investor in tokenized assets, you need to go through a few steps:

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  1. Carefully study what STO is and make sure that you understand all the features, risks, and benefits of this type of investment.
  2. Find a project that interests you. You can explore the projects available for investment on any STO site.
  3. Examine whether the project complies with the regulations in a particular country.
  4. Carefully study its terms and whitepaper. You must understand what kind of project it is, its goals, and what the raised funds will be used for. At Stobox, we only work with reliable companies with a real business plan and approved legal checks.
  5. Check out the project team, their background, and their experience.
  6. If you believe that the project can be profitable, you can invest in it on a reliable platform. However, remember that you should not put more money than you are ready to lose, and remember to diversify your investment portfolio.
  7. Monitor the progress of the STO and wait for it to end. After that, you can make a profit or sell the token on the secondary market.

When registering on the platform as an investor, you should pass verification and KYC/AML verification following the requirements of regulators. As for the requirements for the number of blockchain investments, there are none. You can start tokenization investing with absolutely any amount, even $100.

Related: 8 Crypto Investment Tactics: Get better returns on Bitcoin, XRP, Cardano, Litecoin

Is crypto worth investing in?

Tokenization is now at the peak of popularity, as is STO. Owning a token of a promising project can really bring you profit, either from the development of the project or from the sale of the token on the secondary market. Therefore, the answer to whether it is worth investing in tokens is unequivocal: yes, if you understand the risks and are familiar with at least the basic principles of tokenization investing.

Summary

STOs have become very popular in recent years precisely because these investments are available to almost everyone. How do you invest in tokenization stocks? Well, it’s pretty easy and affordable for anyone. STO does not require a high entry threshold. All you need to do is choose a reliable project that seems promising to you. Next, you need to carefully study the project’s goals, whitepaper, methods for achieving profit, etc. It is also worth paying attention to the legal conditions of tokenization investing.

If you’re not sure you can figure out how to invest in blockchain stocks on your own and need professional help in investing, you can book a free 30-minute consultation with one of our experts.

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