"Tokenization Process and its Disadvantages"

Assalam O Alaikum

Hello, dear friends! Well, come to my post. How are you all? I hope you will be doing well, by the grace of Almighty Allah. I'm also fine and enjoying my day. Today I'm here to share my knowledge about the topic "Tokenization Process and its Disadvantages" in this Steem Alliance community. So let's start without any further delay.

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Friends, in the previous article, we briefly discussed the tokenization of real-world assets, which is revolutionizing crypto traders by providing them with an opportunity to hold expansive crypto currencies and other assets in the form of digital tokens and then get benefits from them. They also have some great benefits in the crypto market in terms of liquidity, security, and efficiency.

This is because they are based on blockchain technology, which is highly effective. Anyway, after learning about tokenization and its advantages, it is very important to understand the process through which it occurs, what things we should keep in mind during tokenization, and also their disadvantages. So now let's have a look at the process of tokenizing real-world assets.

Process of Tokenization

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• In the first step of tokenization, you just have to identify and select the assets that you want to tokenize. During this, understand the characteristics of that asset and its value in the digital market too.

• Secondly, approve your selected assets from the legal authorities, learn their policies on the tokenization process and frameworks, and get a security license as well to secure your assets.

• After identification and verification, the third thing to do with your assets is to make them well structured. Yes, in this case, you have to learn about the rights, terms, and conditions of your selected assets.

• When the assets are divided into digital tokens, they are showing their values and rights differently, which all depends on the amount of digital assets that are tokenized.

• After that, select the platform where you want to tokenize your assets, and keep some key factors in mind while selecting. These factors include security, scalability, and efficiency of the platform.

• Then develop smart contracts for your tokenized assets, which show that your tokenized assets can be traded and transferred easily to your desired platforms or people.

• Finally, after the completion of the tokenized process, it is now up to you to do whatever you want with them. You can trade these tokens and earn profits from them.

Disadvantages of Tokenization

According to me, everything in this world isn't 100% effective, even though we are getting benefits from it. On the other hand, it can also bring many disadvantages to us. So before diving into the sea of tokenization, we should also understand some disadvantages of that process. So now let's have a look at them.

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• Yes, there are different types of regulatory uncertainties that can be found in tokenization. In this way, a sudden change in security, laws, and regulatory frameworks can affect the tokenization process negatively.

• As we know, the tokenization process is based on smart contracts and blockchain technology, so some sudden bugs and software failures can affect the process. It may create many errors in the network, which may break the security barriers and result in financial loss.

• Some updates in the blockchain network may lead to its being unavailable, which makes things unaccessible for us. Thus, during the downtime, we may bear losses and scalability issues as well.

• The market may manipulate, which results in an increase in pump and dump schemes. In this way, fluctuations in prices may result in losses.

Conclusion

In conclusion the Tokenization process involves the combination of different things such as technical operation and legal concerns because they have a great role in this process. Also the Tokenization is a very useful process as through we can convert real world assets into digital tokens and then trade them at any desired Blockchain based platform. But also it is very important to understand about the disadvantage which are associated with that process. Anyway in that article we have discussed about the Tokenization process and their disadvantages as well and I believe it will be helpful for you.

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Written by @abdullahw2

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Thanks All 💗

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