The internet changed the world, creating a new paradigm in how people traded across the financial markets. Traders, previously saddled with traditional methods of buying and selling during market hours, were finally able to trade when they wished, and without the oversight of a broker or banker, who often tacked on a large service fee or commission. With the internet, traders could access markets around the world, getting news and prices in real time, without a (costly) middleman.
Ten years ago, bitcoin and the blockchain broke the markets again, and now, it is the tokenization of assets that is creating a new future for traders. eToroX has been instrumental in tokenizing a large number of assets on the blockchain, and the world of finance is responding with excitement.
Revolution in the financial markets
Tokenization is simply creating tokens from assets based on the blockchain, and some old-timers are asking, “Why tokenize assets?” One big reason is that trading tokens rather than the actual asset can streamline the entire process of trading, expanding options and increasing flexibility, which can be seen in reducing settlement cycles to T+0, lowering counterparty risk, and shrinking the overall costs of trading – while at the same time increasing liquidity and creating new markets.
The last issue is probably the most important of all says research from several major players in the arena including Deloitte and KPMG: When creating new markets, it has been found that trillions of illiquid assets are suddenly liquid, bringing with that iteration a wave of accessibility that brings these new markets to light.
Innovator eToroX, the advanced cryptocurrency exchange of eToro, is not the only trading powerhouse in the business of tokens. Index fund forerunner Vanguard is also entering the arena, and one can find token market trading desks springing up around the globe. The idea of tokenization is that any object of value can be tokenized and then bought and sold, from jewelry to pieces of art, real estate properties and antique cars, watches, and the like.
Here are several areas currently being tokenized and creating a new marketplace for traders.
Artwork. Typically illiquid and often too dear for many investors, artwork has been out of reach for all but the wealthiest traders. However, tokenizing artwork lets traders buy and sell portions, or shares, letting more investors into this interesting and unique asset class. Expensive pieces can be portioned into tokens with an added benefit: while a painting can be ruined and a sculpture or piece of glass or pottery broken, tokens are less likely to be tampered with or accidently damaged. In this way, fractional ownership democratizes trading.
Once tokenized, it is easy and inexpensive to distribute the value to traders, investors and fund managers. This was visible to the art world as well as those in the world of investments when Andy Warhol’s 14 Small Electric Chairs, a painting worth millions of dollars, was tokenized in 2018, and the Ethereum-network tokens were then auctioned on Maecenas, the well-known art-as-investment platform.
Rare metals. While rare metal traders often have specific buying and selling requirements, tokenization may be an effective way to make metal trading easier. Russian Nornickel, a giant smelting concern, is teaming up with IBM’s Hyperledger to produce representations of rare metals based on the blockchain. The tokenized metals, including popular investment choices copper, palladium and cobalt, will be traded on a digital exchange.
Real estate. Another generally illiquid asset, real estate is one of the newer resources to have been tokenized. Innovative structures capturing the tokenization tide are making property more tradeable. This typically involves dividing the asset into tradeable sections such as rooms, apartments and areas that can be allocated as tokens to investors. MBK, an investment bank based in Tokyo exploring property tokens, has signed a deal with BitOfProperty, a Tallinn, Estonia-based company to tokenize real estate in the country.
Currency trading. A fertile area for tokenization, currency trading in the form of stablecoins has already witnessed a huge uptick in momentum and activity, surging some 800% this year compared to last, says market data experts TokenAnalyst. While much of the trading was executed against cryptocurrencies in forex markets, fiat tokenization is viewed as the next step in the tokenization arena as it bursts into the broader currency market.
Some believe the clock is responsible for the current and continued expected boost of blockchain tokens, citing the round-the-clock trading afforded to cryptocurrency as the differentiator. While the majority of forex markets trade Monday-Friday, save for those in the Mideast, tokens on the blockchains are free of both time zone and geographic border limitations, trading at all hours across continents. Of course, as it currently stands, the crypto market doesn’t reach the level of the $5 trillion global foreign exchange market. Yet with trading unencumbered by time and location, tokenized currency trading has the potential to disrupt forex trading as we now know it, becoming a continuous global market the likes of which we haven’t seen.
Tokenized assets and trading on eToroX
In 2013, eToro CEO Yoni Assia began his foray into tokenization, co-authoring whitepaper Colored Coins with Ethereum’s Vitalik Buterin. Six years later, eToro purchased Danish Firmo, a startup focused on the ecosystem of tokens, to help facilitate the migration of assets to the blockchain.
“We believe that in the future all assets will be tokenized, and that crypto is just the first step on this journey” — eToroX CEO Yoni Assia
eToroX traders interested in trading tokenized assets have an ever-growing array of stablecoins to choose from, pegged to the world’s most well-known and heavily traded fiat currencies such as USD, the British pound (GBPX), euro (EURX), and Japanese yen (JPYX). In addition, several smaller currencies are also available including the Hong Kong Dollar (HKDX), Turkish Lira (TRYX), Singapore Dollar (SGDX), Polish Zloty (PLNX) and the South African Rand (ZARX).
eToroX has also tokenized commodities, including Gold (GOLDX) and Silver (SLVX), which can be traded in pairs against other tokenized assets and cryptocurrencies, providing numerous benefits for retail and professional traders.
- The ability to trade a new and growing assortment of previously unavailable assets on a reputable and secure institutional-grade exchange.
- Order execution at any time or any place, with the ability to take advantage of changing market trends, news reports, and other immediate events affecting the market.
- Managing positions on demand, including hedging against market movements over the weekend.
- The ability to control tokenized assets by possessing the private keys.
Traders on eToroX have access to the growing tokenized asset market. Trading is available 24/7 on a host of stablecoins, cryptocurrencies and other tokenized assets, giving traders an ideal perch from which to take advantage of this rapidly evolving ecosystem.