5 Benefits Of Blockchain-Based Tokenization Of Precious Metals
Capital marketers and product-driven companies are now beginning to explore the benefits of tokenizing physical assets on public blockchains. Precious metals are ideal candidates for digital tokenization, offering several advantages to consumers and investors.
Gold, silver, platinum, and palladium are some of the most coveted precious metals used in various industries, from jewelry to electronics. Its limited supply and wide utility have made them sought-after investments, especially in recent times, given the volatility of global markets.
So, why is tokenizing precious metals on blockchains an excellent move? Read on to find out five benefits of this exciting new technology.
- Enhanced Transparency Of Value And Authenticity
One of the critical benefits that blockchain technology offers is transparency. Once authenticated by a cryptographic key, every transaction on the blockchain is immutable and traceable. This method makes it easier for interested parties to track the movement of precious metals, ensuring their authenticity and transparency of value.
Moreover, investors can track their inventory with ease using smart contracts. With the detailed reports these contracts provide, investors no longer have to worry about the following questions: how much is a pound of gold worth, where is it stored, how many transactions have been made, and so on. Since the tokenized precious metals market is decentralized and open, anyone can monitor their investments or procure precious metals on the market.
- Safer Storage And Security
Storing physical assets like precious metals can be challenging, as they need to be kept safe and usually stored in a vault. This approach is costly and can often result in high insurance premiums for products deemed to be at risk of theft.
Once digitized, the storage process will be more convenient and secure. Hackers will find it more challenging to access secure information. Consumers can also enjoy better security due to tamper-proof technology, preventing unauthorized users from accessing tokens stored in the blockchain system.
With that said, engaging in blockchain-based tokenization also makes it easy for investors to buy, hold, and sell tokens in a secure environment. It serves as a better storage solution for investors or consumers to keep their precious metals.
- Boost Efficiency By Automating Processes
Transferring physical assets over long distances is a time-consuming process that involves courier services, insurance companies, customs agents, and so on. The process can be expensive and risky. After all, those in charge of transporting these assets might misplace them or mishandle inventory, increasing the risk of errors and losses.
Physical assets tokenization on blockchains can automate this tedious task, making it faster and more efficient. Since each tokenized asset is unique, they’re easier to track using electronic features like QR codes. All the necessary information is encoded onto the blockchain ledger. That means it’ll eliminate the use of paper records and other physical documentation.
Transparency, immutability, and authentication features of blockchains can ensure that transactions are secure and well-ordered. With tokenization on a blockchain, all it takes is a transfer request through a smart contract to automate the entire movement and shipment of precious metals, making it seamless and efficient.
- Increased Liquidity
Liquidity is vital for all assets, whether precious metals or digital tokens. However, it can be challenging to liquidate physical assets as the process is often time-consuming and costly. This is where the tokenization process comes into play.
Converting precious metals into digital tokens can increase liquidity since trading digitized coins on the blockchain is easier. Auctions on the blockchain can be set to occur at specific times or whenever a buyer is ready. This approach allows for better valuation of precious metals as interested parties can bid or buy them at any time.
- Disintermediation Of Transactions
Tokenizing precious metals can offer banks, brokers, and other financial intermediaries independence. When money changes hands during the creation, transfer, or sale of the asset, banks charge a hefty fee for their services. Banks typically make deals only with the major players in an industry, leaving small to medium-sized companies out of the equation.
Tokenization on blockchains can eliminate the need for go-betweens in transactions. That means participants can transact directly with one another, cutting out expensive deal costs typically charged by financial institutions. That’s because blockchain transactions are peer-to-peer, removing the need for third parties in transactions.
Embracing blockchain technology to revolutionize the precious metals industry can significantly impact the market. The investment opportunities will increase and become accessible to a broader pool of investors.
The tokenization of gold and other precious metals on a blockchain offers several benefits. And as more financial institutions, investors, and cryptocurrencies get involved, it’ll surely pave the way for a new era in the precious metals industry.