In recent years, the use of blockchain technology has expanded beyond its original application in the financial sector, with the tokenisation of stocks being one of the most promising and disruptive innovations. Tokenisation involves converting the ownership of an asset into digital tokens that can be easily traded and transferred on a blockchain platform. The use of blockchain technology in tokenisation provides several benefits such as increased liquidity, transparency, security, and reduced transaction costs.
Tokenisation of stocks involves the issuance of digital tokens that represent ownership rights in a company’s shares. These tokens can be bought and sold like traditional stocks, but with the added benefits of blockchain technology. By using blockchain technology, tokenised stocks can be easily traded and transferred between buyers and sellers without the need for intermediaries such as stockbrokers or custodians.
The process of tokenisation involves creating a digital representation of a company’s shares that is stored on a blockchain network. This digital representation is then divided into smaller units, each of which represents a fraction of the total shares issued by the company. These units are then sold to investors in the form of digital tokens.
One of the major benefits of tokenising stocks with blockchain technology is increased liquidity. Traditional stocks can be illiquid, meaning that it can be difficult to buy or sell them quickly without affecting the price. In contrast, tokenised stocks can be traded on blockchain platforms that are accessible 24/7 and allow for instant settlement, providing greater liquidity and flexibility for investors.
Another benefit of tokenisation is increased transparency. Because all transactions on a blockchain network are recorded in a tamper-proof and publicly accessible ledger, investors can have greater visibility into the ownership and trading of tokenised stocks. This can help prevent fraudulent activities such as insider trading and market manipulation.
Security is another major advantage of tokenisation with blockchain technology. By using cryptography and decentralised networks, blockchain platforms offer robust security measures that can prevent cyberattacks and unauthorised access.
This provides a high level of security for investors’ assets, reducing the risk of theft or loss.
Finally, tokenisation can also reduce transaction costs by eliminating the need for intermediaries such as brokers, custodians, and clearinghouses. This can help make investing more accessible to a wider range of investors and reduce barriers to entry.
Overall, the tokenisation of stocks with blockchain technology represents a promising innovation that can significantly disrupt traditional financial markets. By providing increased liquidity, transparency, security, and reduced transaction costs, tokenisation has the potential to transform the way that investors buy and sell securities. As more companies and investors embrace this technology, we can expect to see a new era of financial innovation that is more accessible, efficient, and inclusive.
– Journal article by Crypto Valley Malaysia Association