In a recent Medium article, OpenFinance Network CEO and co-founder Juan M. Hernandez discussed the high potential embedded in the tokenization of the alternative assets market. While security tokens include traditional securities such as stocks, they can also encompass other assets which are susceptible to never before seen advantages.
How a $7.7 Trillion Industry Awaits Tokenization
OpenFinance Network (OFN) has one fundamental priority, says the CEO: to open investing up to a broader audience with no financial or trading expertise required, through the development of an easy to use platform. This can be done, he says, through the tokenization of alternative assets, otherwise known as security tokens.
According to a Bloomberg report, the value of every stock from every company in the world totals $80 trillion. Yet other investments— such as alternative assets— have an accumulative value of another $7.7 trillion.
Alternative assets can include artwork, various funds, and even real estate. Security tokens entail the tokenization of such assets. Some of the reasons for such tokenization revolve around added liquidity and fractionalized ownership which result in benefits that are simply absent in the traditional financial system. As Hernandez says,
“The alternative asset market has incredible untapped potential to garner returns for investors. The reason for this stems from a history of convoluted processes combined with a lack of liquidity. By leveraging the automation functions enabled by blockchain technology, we at OFN are able to streamline the clearing and settlement for alternative assets process, which makes the exchange time much faster and improves liquidity.”
A Market Demographic Analysis for the Alternative Assets Market
When it comes to tapping into such potential, Hernandez’s OFN has performed significant research to analyze the demographics of those interested in the tokenization of the alternative assets market. Here’s what they found:
- 5% of investors were aged between 18–24
- 5% of investors were aged between 25–34
- 5% of investors were aged between 35–44
- 5% of investors were aged between 45–55
- 5% of investors were aged between 55–64
- And a further 5.5% of investors were aged over 65
The findings can be illustrated by the chart below, courtesy of OpenFinance:
Of additional importance was the male to female ratio: 45.85% of investors were female, while 54.15% were male.
From all of this, Hernandez made three key points.
First, the nearly equal ratio of female to male investors is a great sign of equality. Historically, women have been excluded from the conventionally male-dominated realm of finance. Yet this doesn’t seem to be the case with the future of finance.
Second, young people seem to be a prime fit for the first wave of security token adopters. They typically have an in-depth understanding of technology. They will also have a need for multiple streams of wealth generation due to changing labor forces. Together, these factors make them very likely to openly embrace security tokens.
Third, streamlined platforms with efficient and transparent KYC and AML screening will allow for improved trading models. The increased ease of use is expected to bring in experienced financial traders and investors, as these types of individuals know— better than anyone— the need for updates in the current models.
With all points combined, Hernandez believes that ease of use will play a critical role in the adoption of security tokens:
“What we’ve learned from our research is that easy-to-use and intuitive systems are essential for adoption by all demographic sectors. Blockchain applications need to be accessible to the degree that the average user need never know anything about the backend — much like how individuals can use household appliances without considering the internal mechanisms that make their operation possible.”
Platforms with such simplicity will result in the newest wave of capital markets— security tokens— accessible to all.
What do you think of the demographic analysis performed by Hernandez and the OFN team? Will ease of use be the primary factor leading to global adoption of security tokens? We want to know what you think in the comments below.
Image courtesy of OpenFinance Network.
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