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.
“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:
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.
Meet Tim. Tim is a co-founder of The Tokenist. Originally from Kalamazoo, Michigan, Tim is a mechanical engineer by training and has been investing his whole life. He started his career with GE in engineering and operations management where he held various leadership roles before leaving to pursue an MBA (he is a proud former co-chair of the Milton Friedman Group at Chicago Booth). After business school, Tim spent several years with Baird Capital where he made private equity investments in consumer and industrial companies. He left Baird to found Protective Technologies Capital in 2018, where he continues to make private equity investments in family businesses looking for help with succession planning. Tim lives in Chicago, where he enjoys watching Michigan football and basketball and traveling with his wife Kristen. Like Sia, he also likes telling jokes. However, his wife adamantly insists that he not share his “dad jokes” publicly so he reluctantly sticks to writing about finance and technology.