Asset-backed tokens

Asset-backed tokens

The underlying concept is simple: instead of a commodity (like gold) being backed by actual commodities (like real estate), asset-backed tokens are backed by digital assets (like digital currency). If you think about it, this makes sense because the currency is not physical but merely an idea. Just like an IOU is not backed by anything tangible, an unsecured piece of digital currency does not have any tangible physical connection to any particular commodity.

The next logical step following the adoption of asset-backed tokens on the part of the general public is for private investors and businesses to adopt the same technology and use it for themselves. However, the problem comes in when NFTs (network-of-trust) become too difficult to achieve. Asset-backing solves this problem by establishing a new network of trust that will be a virtual bridge between private investors and businesses. The success of this technology relies heavily on the ability of both sides of this network to establish trust.

Basically, asset-backed tokens are like a digital version of an IOU; however, instead of being tied to a specific commodity, they are tied to a particular digital asset, usually a digital currency. This digital currency acts just like any other form of currency in the marketplace; however, instead of being backed by precious metal (like gold), asset-backed tokens are backed by a digital IOU. Once the network of trust is established, there will be rapid growth in usage by small and medium-sized businesses. Asset owners will be able to convert their assets into cash and hold this money as cash; this will also allow them to partake in the economic process through the use of the ATM machine. The major benefit of this technology is the fact that it removes the barrier to entry for small and medium-sized businesses; it will make it easier for them to enter the marketplace and become a major force in the global economy.