For a long time, experts have been talking about how tokens – the process of creating a digital representation of an asset on a distributed ledger – a financial or real asset to free up trillions of illiquid assets, giving retail investors access to previously expensive minimum capital requirements for partial ownership or immediate settlement of transactions in distributed ledger.
But if we dive deeper into today’s codec offerings, none of them will become popular or please the audience. If the theoretical benefits are correct, millions of investors should participate in exchanges that offer token assets. But this is not the case.
What is the problem with most codecs?
Let’s take an example of symbolic arrows to show current challenges and obstacles. The life cycle of a prey token consists of several stages. The first is legal structuring, followed by embossing (creating) tokens, in most cases using ERC-20 tokens on the Ethereum blockchain. Contrary to many people’s beliefs, hunting is one of the simplest parts of coding, and the biggest problems follow. Since exchange tokens are meant to be traded, we need a trading floor. This also raises questions about code retention, liquidity, compromise and compliance.
If we look at the relevant service providers in this area, no one can offer all phases of issuance, storage, market, liquidity, settlement, etc. in one integrated offer. This has serious implications for why coding is not popular, ie issuers and investors have to deal with multiple service providers. It is possible that these service providers are also located in different jurisdictions, which adds a whole new dimension to this, as stock symbols must be traded internationally, just like traditional stocks. This is not possible because the rules vary from country to country.
Another major problem in the cryptocurrency market is liquidity. Coded markets currently have very low liquidity if we want to look at trading volume, while cryptocurrency volume is currently hitting record highs on a weekly basis. The reason for this is that the few stock exchanges on the market cannot attract enough investors. The simplest solution to this problem is to connect the coded real estate markets to traditional stock exchanges and utilize their customer base because they already have the necessary liquidity.
This is only possible if the UI / UX is similar to traditional stock exchanges, and investors do not see the blockchain and do not interact with it directly. If investors were to create their own wallets and work directly with blockchain, we would never see a large influx of large investors in token assets, as this would make the whole process more complicated and impractical, which is the exact opposite of the ultimate goal. .
When using DeFi platforms, UI / UX is often not user-friendly. People use these platforms because they offer a revolutionary new concept of technology based on decentralization. But arrow symbolism is not revolutionary in itself; This makes the existing one more efficient. Investors will only use token markets if UI / UX is as easy to use as traditional exchanges.
Another important topic in coding is approval from the authorities. If we continue our example of marker arrows, the question is how to approach the digital representation of security. In most jurisdictions, a token is not considered a security. Instead, the token represents only the right to own shares, but shares still exist in their “traditional” form. However, there are fewer permits in other jurisdictions.
While coding is undoubtedly one of the most promising uses for blockchain technology, the current layout is useless in most cases, as it makes things more complex and inefficient. To change this, we need a clear regulatory environment, as in Switzerland, to combine all the elements of the symbol’s life cycle in one proposal and have a “traditional” UI / UI for investors. If we can fix these three elements, nothing will stop the coding and lead to a big change in the rules of the game and open up access to many new asset classes on the market. I believe that token markets should partner with traditional exchanges to provide liquidity, especially for token stocks.