Topic: Tokenization of Real-World Assets (Read 149 times)

As a child and youth, I was very fond of reading the novels of the American writer Jack London.  I was especially impressed by the hero of the novel of the same name "Time Doesn't Wait".  

He was an avid gambler and enjoyed playing poker with other gold diggers.  At that time, players made bets with brass tokens.  At the same time, all the gold diggers were honest people.  All their gambling bets were backed by gold sand or the right to own a gold-bearing area.  Among these harsh people there were no swindlers.  

However, at present, the entire modern financial system is built on scams and fraud.  Derivatives will never be paid in real gold if their owners choose to call for payment.  In fact, all these derivatives are fiction.

An interesting concept but it doesn't dabble over the problem of proof of security. Is it like buying USDT where we buy a representative of the USD in the cryptocurrency world, or does it have physical backing so there's no chance of it going to the gutter? This is an important dilemma because we can't just tokenize everything without making sure that the people could trust the representative token. Imagine walking into a bar or a restaurant, eating a hearty meal or accumulating a hefty tab, only to get punched in the mouth because they apparently don't take your USDT or whatever the fuck they're going to use in the future. That's just going to be a little embarrassing wouldn't it? So yeah, until the question of proof of security gets answered the way people want it to be answered I don't think we'd have a fruitful discussion about Real World Assets getting Tokenized.

People have already forgotten about it. Gold tokenization already looks like a scam, because there is not as much physical gold in the world as it is traded on the markets.

https://bernstein-bank.com/en/mega-gold-scandal-in-china/
"Raised eyebrows at gold bugs: A new counterfeiting scandal shakes the precious metal market. The Kingold affair is probably the biggest gold scam ever. The financial world is amazed by the machinations in China. The question is how high the proportion of counterfeit precious metal in the People’s Republic really is. We examine the consequences for the gold market."

https://www.forbes.com/sites/forbesfinancecouncil/2022/10/11/understanding-todays-gold-market/?sh=9ea05824885a
"Another concern is that there is vastly more paper gold than physical gold, some $200 trillion to $300 trillion on paper compared to $11 trillion of physical gold. The potential exists for an upcoming paper gold crisis."

It can also provide new opportunities for scams and fraud.  I am still uncomfortable with this tokenization stuff.  The problem lies in how each token is backed.  Authority can lie about it and create a scheme with auditors, creating false audit.  Buyers don't really have the access to what they are buying, just the token or certification of something that is possibly non-existent.  I think I shared the doubt in @zasad@ mind.  We keep on debunking banks and fiat currency about the notes not being backed by gold but we are allowing the tokenization of tangible assets and buying on the idea that a token is backed by this kind of asset (which is possibly not backed at all).

At the end of the day we might be falling into the same traps banking system had laid on us and this time through tokenization stuff.

It is true that physical gold often entails storage, security, and insurance costs, which can be a barrier for some investors. However, the use of encryption can reduce this cost by enabling split ownership and real-time payments 24/7, as mentioned in the article.
As for your concern about a legal claim against a bank, it should be noted that cryptography does not necessarily mean that an investor will not have a legal claim. Encryption can be implemented in a variety of ways, and the legal structure can prescribe the rights and obligations of investors and issuers. It is important to carefully review the terms and conditions of any investment before deciding to make it.
Overall, the tokenization of real assets like gold could provide new opportunities for investors to access these assets more efficiently and conveniently. However, like any other investment, thorough due diligence and an understanding of the potential risks and benefits should be carried out before making an investment decision.

And what is the interest of the company that stores your gold? If it is money, then it can be invested in the market and make a profit.
The company pays for storing gold, the company pays for insurance, the company pays for ongoing audits. Does this minimum commission cover all costs? I don't understand it.

the coindesk article is a copy and paste article he spread to other news sources
he is part of DCG which owns paxos so the lack of mention of actual gold tokenisation companies is done to avoid it appearing as a promotion..

but
lets take Paxos as an example

they have a gold vault in london where each ounce has a serial number. which is minted into tokens and traded
where you can then trade in 0.01 token amounts (0.01 ounces)
there is obviously no storage fee becasue they know they stay in custody of the gold so at the end of the day there is no big admin cost. its just close the door and let it sit there.

they cover other admin costs like auditors via trade fee's and the obvious spot price spread deals they do
so the maintenance/storage fee is hidden in market trade fees
(much like how CEX dont charge to custodianise and audit bitcoin but CEX get paid by the market order fee's)


https://paxos.com/wp-content/uploads/2023/02/pax-gold-investment-onesheet-2-23.pdf
this means 1 ''coin' is 1 ounce

you can only redeem whole ounces

you can trade using tokens at 0.01 coins(tokens) but remember only able to redeem whole physical ounces if you want them delivered to your home
each serial number in token matches serial number on ounce of physical gold

you can ask for the official token to be 'burned' and get official physical gold delivered(LBMA) or trade your token on secondary market with someone wanting to buy it with their unallocated(not in vault) gold (p2p)


silly thing about this
although LONDON has the LSE and fca and everything seems like its british. the paxos company are HQ in america with american licences and exchanges... not british
i will say this that LBMA has vaults in many countries. but having US regulations on a london vault/safe. is a mismatch of communication and jurisdiction

I think obviously legally there will be claims against the bank for the gold that they have tokenized. But the problem of storage fees can be solved by transaction processing reward. If we bring a blockchain based system, in every transaction the gold storing person also gets some kick backs and certain portion goes to transaction approver. I don't know exactly how it could work but this is a preposition. If they are just some coins in the air there is no point of bringing such a thing altogether.

There has been so many gold-backed tokens in the past, and look where they are now. This isn't going to work without government regulation and enforcement, too easy to pull a scam. But with government regulation it would be no different from buying gold online and owning it in your account and not physically.

This is the fundamental problem of tokenizing real world assets - if it's decentralized, you can't enforce ownership. If it's centralized, it shouldn't be on blockchain.

In my opinion, the tokenization of real assets is possible only in the situation of a corresponding change in national (international) legislation. 

A bank account, government bonds, the right to real estate, shares of public and non-public joint-stock companies, the right to own gold - the state protects the ownership of all these assets.  Tokens can also become such assets, but only if such a method of confirming the right to use, own and dispose of a real asset is recognized by the state. 

If not, then the token is essentially worth nothing.  After all, a token is a virtual world asset, and its corresponding asset is a real world asset.  These are fundamentally different worlds...

This is the genius of the idea of ​​Bitcoin - Bitcoin belongs entirely to the virtual world.  It is connected to the real world only through technical infrastructure (specialized computers and sources of electrical energy).

I'll write an analogy for everyone. Have you heard of the Grayscale Bitcoin Trust and their large supply of bitcoins? But where are these bitcoins, I have not been able to find the addresses of these coins for more than a year. It's secret.
"Grayscale is not an ETF, although it is made in the likeness of an ETF." But Grayscale's investors don't own his bitcoins. Where am I wrong? I consider such schemes to be a possible scam.

I think there are better ways to tokenize assets so they can access to that market easily and around the world.
For example, I personally like the approach of DAI.

A protocol could create a smart contract where people could mint gold tokens using collateral, also they could add or implement oracles, so the protocol can know the price of the gold in the physical markets.

The result could be a similar coin to Dai, but pegged to the price of gold (perhaps a gram or a onz).
The challenge would be the interaction and the way to incentivize people to deposit over-collateral, because gold does or have as much demand as stable coins have in the crypto space.  

Tokenization is not the future, it's a reality! Take a look at the mutual fund schemes, it's a tokenization of stock market. Check REIT, it's a tokenization of real estate projects. Both of these investment avenues offer fractional ownership of the underlying assets and are highly regulated.

To catch up with the trend, we are seeing paper gold which also offers same facility. I personally think these are great ideas which effectively removes the entry barrier for a large amount of population.

By the way, I personally invest in paper gold and have been doing it since last two years. Yes, it comes with a premium because banks earn on spreads. That's acceptable!

Even with me, I don't think it's really going to be profitable for investors to invest in these tokenized precious metals. The liquidity of ETF is really great compared to physical gold, and that is a drawback that cannot be overcome. They have said the tokenized gold will provide exposure to real-world gold, but do they really think they are going to peg this tokenized gold to all the gold that has yet been discovered? Well, even if this is done, I really don't think the value is going to be the same as for the physical gold, as people will still value physical gold more than the tokenized one

It is not only scam, but I liken it to selling fish in water, if stablecoins fail to prove that they have enough dollar reserves and claim rates of less than three percent despite the ease of obtaining cash and depositing it in banks or bank accounts, let alone gold or Real-World Assets, which is difficult To find a bank depositing your gold for commercial purposes or practices that are not legally permitted or that there is no law regulating them.

Binance tried to Tokenization some stocks, but they stopped after a short time. microsoft-apple-microstrategy-to-be-listed-on-binance-as-tokenized-stocks/

I feel that there are still a lot of gaps that I have to understand regarding real assets that are tokenized in this case, and it is true that the article does not provide a full explanation of this gold, yes I also think that we will easily store and trade assets without having much taxes and bureaucracy that is done in the transaction.

I think it's more correct to have no token limit because there might be a lot of demand in the long term so the token value adjustment should be matched with the amount of gold available, and even though the gold has just been sent from mining it doesn't affect the ongoing price.

But I think in this case there can be fraud or empty claims with the gold they have, there should be an audit and monitoring of the amount of tokens and gold owned to prevent money laundering.

Since this gold is tokenized, does it mean it's being pegged with physical gold that will be locked somewhere?
It can't be a scam, and it can also be a form of withholding physical gold from real owners and giving them a tokenized one, which can be disvalued at any time.

I believe there should be some sort of license and document agreement that will be reached between the Bank of America, their investors, and their target audiences since its operation system will be centralized and there won't be any form of privacy protection. 

Their won't be; the supply will keep on increasing the more the demand increases, and the more physical gold that is deposited as a form of collateral backing up the tokenized one.

They did not clear this point wheather there will he full proof security of asset or this will be just token trading like other coin but i believe that you will he able to claim asset too because if its not possible than what is meaning of real asset tokenization. If backup available then this is good way to store real asset in very easy way. You have not to pay big tax for buy and sell gold, car, house and other asset.

I don't know is there will be limited supply of these tokens and there will be same value of gold backed up or not because i read full article and i did not find information about it. This tokenization will allow everyone to be owner of smart parts of any big asset too.

https://www.coindesk.com/business/2023/04/14/tokenization-of-real-world-assets-a-key-driver-of-digital-asset-adoption-bank-of-america/
“Tokenized gold provides exposure to physical gold, 24/7 real-time settlement, no management fees and no storage or insurance costs.” The low minimum investment increases accessibility and “fractionalization enables the transfer of physical gold ownership and value that was not previously possible,” analysts Alkesh Shah and Andrew Moss wrote.

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I want to comment on this Just the physical gold requires the cost of storage, security, insurance, and who will do it for free? Isn't it a scam that investors will trade virtual ETF tokens, but legally there will be no claims against the bank?