We hear about cryptocurrency all the time, but tokenized securities take things a step further. They’re traditional assets—like stocks, bonds, or real estate—turned into digital tokens on a blockchain.

Does this sound like magic/witchcraft?

Think of it like slicing a pizza (I love pizza) into smaller pieces. Each token is one slice of the bigger pie. By owning tokens, you own a fraction of the real asset.

Unfortunately, this article isn’t about fractionalized pizza (I will fund that company if you start it), but you will learn all about tokenization, why it’s important, and why you should care!

Why does this matter?

In the past, only large companies or wealthy people could own big chunks of real estate or invest in things like private equity. With tokenization, everyday investors can now buy small pieces of these high-value assets.

This is called fractional ownership, and it’s a huge deal. It makes expensive assets, like commercial buildings or fine art, more accessible to more people.

How does it work?

Picture a giant public notebook shared on many computers around the world. That’s the blockchain. It keeps track of every transaction and who owns what. When you buy tokenized securities, your tokens (and the record that you own them) are stored in a digital wallet.

You get a public key (like your username) and a private key (like your password). This setup helps protect against tampering or fraud because many computers verify each transaction.

This is riveting, I know, but trust me! It’s important!

Big benefits

1. More liquidity: Normally, you can’t just sell part of your building or private equity fund overnight. But with tokens, you can trade even small amounts more easily on digital marketplaces.
   

2. Lower costs and faster deals: Since these tokens operate on the blockchain, you don’t always need middlemen like brokers or custodians. That means fewer fees and faster settlement times.
   

3. Transparency: All transfers and ownership records are on the blockchain for anyone to see. This makes it harder for people to fake ownership or change the records.

But that’s not all!

Possible pitfalls

• Regulatory gray areas: Governments are still figuring out how to oversee tokenized assets, so rules might shift.

• Market volatility: If a large group of everyday investors decides to sell all at once, prices could swing quickly.

• Technical glitches and hacks: Blockchain is secure, but wallets and private keys can still be hacked if not properly protected.

Are hacks a problem? Technically, yes.

Real-world examples

• RealT has tokenized apartment buildings in New York and San Francisco, allowing investors to purchase fractional ownership for as little as $50

• Pablo Picasso's "Fillette au beret" has been tokenized, enabling art enthusiasts to own fractions of this valuable piece

• Platforms like Aconomy have enabled tokenization of fine wines, allowing investors to buy and trade shares of premium wine collections

Why should you care?

Tokenization opens doors to markets once reserved for giant financial firms. Now, you could own a small piece of real estate, private equity, or even rare collectibles without spending a fortune. Plus, you can trade these tokens around the clock, thanks to 24/7 digital markets.

Sure, there are risks. But as the rules and technology evolve, these digital tokens may become a key part of the investing world.