Tokenization 101:

What is Tokenization?

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Tokenization is the process Stratofied uses to make a digital “twin” of a real-world asset through software and advanced, secure cryptography. The resulting smart contract token simply represents a physical asset in the digital space.

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The token exists in a blockchain network to make exchange and servicing both easier and less costly. Blockchain technology combines immutable record-keeping in a digital ledger. The record is secure and accessible across networks, making the tokenized assets perfectly portable.

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The real-world asset and its token “twin” are the same in all material and legal respects, but the token is much easier to administer because it contains the entire history of the real asset and its functions are automated by the network. The token and network allow an otherwise clunky real-world asset—such as a student loan—to become tradable, accessible, and attractive for anyone to buy, sell, or hold, while the real-world asset is maintained by a custodian.

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Tokenization is ideal for assets or financial instruments with:

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• Illiquid markets: tokens are individual assets with high portability. They can change hands quickly in comparison to securitized assets.

• Long or difficult processes of exchange: digital assets enable investors to get in and out of positions quickly and painlessly.

• Complex administration and servicing: the blockchain ledger provides instant, clear, and immutable record-keeping for each smart contract token. This includes faster price discovery, valuation, and reporting.

• High investment minimums: tokenized assets open the market to wider participation whereas before, only banks or large institutions could buy in.

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Tokenization displaces securitization.

Stratofied turns portfolios from securitized to individual tokens. The benefits are clear: assets enter a market with more participants instantly. The costs associated with securitizing a set of debt instruments and servicing a large, physical asset evaporate. 

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Stratofied acts as broker, servicer, document custodian, and market, all in one. Purchasers can slice, dice, sort, and bundle tokens with a “brokerage account” experience, all in an intuitive user interface.

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Tokenization is the Future of Lending

As more and more assets come on-chain, tokenization will doubtless overtake securitization as the go-to process for financial assets. We believe the future of lending is on-chain. While there are many areas of financial markets that will benefit from blockchain technology, Stratofied is positioned to test the viability and attractiveness of these potential innovations and enter a market long overdue for innovation.

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