Generally, a pre-established will/statement represents the division/transfer of wealth and assets to the legal heirs. The legal heir has the right to the said assets and can get them transferred accordingly through a few legal formalities. Though it is simple, officially there are lots of processes involved in asset transfers. While the procedures are followed differently in various countries, the concerned person has to undergo a tedious approach from registration to recording subsequent transactions and information with the government and revenue authorities, especially in the case of property. In this article, we go through the application and benefits of tokenization in managing inheritance-Author: Loha Hashimy
Usually, countries use the cadastral system to document the title and property rights in an electronic form. But, they still rely on heavy paper transactions. In the case of a typical land transfer, the parties perform the deal in the paper as a title deed, and then the land authorities acknowledge the paperwork and later file it in the electronic database. The documentation of records is secondary and happens only after the transactions have been carried out in paper form. Apart from this, people usually encounter family issues over equal division and titling of assets. Inheritance of assets provokes massive expenses for notary, property registrars, transfer costs, etc. which gradually slows down the entire process. And so, it calls for an efficient mechanism to transfer property rights with less time-consuming paperwork. Thus, some pain points can be listed as:
Companies notably introduced technologies to ensure promising, secure, and authorized transactions. For instance, card companies usually tokenize the card’s PAN by substituting it with a random string of numbers to prevent anyone from breaching the card details. Tokenization is often confused with encryption -- where one can access huge sets of data when exposed to the encryption key, which is the opposite of tokens. Tokenization was first invented by Shift4 through their first tokenizing technology in the payments industry in 2005. So, tokenization is a process of replacing sensitive information with non-sensitive data (random numbers) in the form of tokens. The tokens are kept safely in the databases for organizational uses without bringing them into reach. The primary purpose of tokenization is to provide protection and security to sensitive information like CVV codes, medical health records, last will or testament, record and transfer of asset ownership, etc. Combined with other technologies, it can provide a completely digital way of transferring any asset and digitizing the whole process of asset transfer. Since the tokens are a combination of random numbers, they do not have any value of their own.
Tokenization is popularly used in the financial and banking sector to protect the classified information of firms, organizations, and customers. This payment data technology is a fraud-prevention mechanism to shield the data from cyber-attacks, data breaching, and payment frauds. Therefore, tokenization is a security technology -- stores the randomly generated numbers in data servers called token vaults which is the replacement of original numbers. Following are a few advantages of tokens:
In recent years, the importance of digitalized assets has been recognized for their value in life. While digital assets like software, social media, user accounts, downloaded content, gaming, etc. are considered valuable, some assets can be transformed as digital assets, which pose a remarkable counterpart to the conventional assets. Thus, Digital assets represent the unit of value in the form of digital representations of real-world assets. What tokens have to do with this? Tokens indicate the part or share of a digital asset, and the process involving the digital conversion of real-world assets is referred to as Asset Tokenization. Except for the online end-to-end transactions and internet in-built internal structure, the traditional financial system is slow, less flexible, and liquid. Hence, tokenization of an asset creates a medium to facilitate businesses to conduct the secure, ascendable, and rapid transfer of assets across countries, blockchain-mandated companies, tokenized micro-economies, and decentralized transparent entities.
Tokenization is not strictly restricted to financial assets and transactions, it is also applicable to assets passed down through inheritance. A few companies like Amazing Blocks have pioneered using tokenization as a key to ease the complexity of inheriting assets to their kins. The reason for tokenizing the inherited assets is to reduce the colossal paperwork involved in the entire process.
In the context of property inheritance, blockchain works as a decentralized platform with huge public repositories of land titles and property rights, and it helps manage the ownership and transfer of assets/data. DLTs facilitate conducting peer-to-peer transactions while directly managing the property. Tokens, on the other hand, are based on blockchain technology which expresses the title and property details. Tokens are units of accounts that are technologically connected with the cadastral data containing information on property rights, leases, mortgages, leases, superficies, and other encumbrances and liens. Here, the tokens are a title of ownership in the digital form. Once the property rights and land titles are tokenized, the party does not need to maintain the records elsewhere, as blockchain itself is a registry. The presence of title records on the blockchain requires no further registration every time a transaction is completed. Thus, in the digital world, tokenization acts as an easy medium to transfer assets at less cost and time.
Once the real asset is tokenized, users would be able to allocate their tokenized real-world assets to their heirs. Users may also decide who, where, and how their tokenized assets should be distributed. This enables a completely digital process that can be better, quicker, easier, and more affordably.
There are nearly $256 trillion of real-world assets however, most of them are highly illiquid and still embodied in the paper form. Nevertheless, with the advent of blockchain, people can choose to possess/own from an artist-their art, financial assets, estate trusts, to illiquid assets. Similar to securitization, tokenizing assets allow fractional ownership through enhanced security, flexibility, cost reduction, and confidentiality. Tokenization of assets enables an easy and transparent transfer of inherited assets to the heirs. It not only solves the undesirable family issues over the distribution of assets but also cuts the middle man costs and enables fractionalizing the assets to ensure equal distribution. Now, you can imagine the transfer of an inherited asset as easy as pressing a click. This is what Blockchain technologies induced innovations will bring fruitful outcomes, and they form an integral part in revolutionizing the business world and asset management in the future.
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Amazing Blocks offers a tokenization solution that enables its clients to tokenize various assets according to the Liechtenstein Token Act (software-as-a-service). The software covers both the issuance of tokens and investing in tokens. It suits the needs for tokenizing all kinds of assets (e.g. machines, cash flow generating contracts, trademarks, real estate, cars). Imagine that some asset should be tokenized. For this asset various tokens would make sense: Equity tokens, debt tokens, participation rights as tokens, ownership tokens, or any mixture of these tokens. The software of Amazing Blocks helps issuers to handle multiple assets and to issue multiple tokens for these assets. This is possible by integrating blockchain technology with the law (that is, the Liechtenstein Token Act). At the core, there is the "digital legal entity in Liechtenstein" based on “tokenized shares” which allows a very efficient foundation, a very efficient operation of the company and, thus, an efficient and flexible possibility to tokenize assets. This should now make a wide variety of tokenization projects possible, because the costs for tokenization are significantly reduced.
Interested? Then contact us! Visit our website, write an email to firstname.lastname@example.org, or follow us on LinkedIn or Twitter. Or provide your email address here and we will immediately send you more information.
Our software helps to tokenize shares of legal entities in Liechtenstein. But we do not provide custody or token generation services.
Liechtenstein made the first move. With the quite new Token Act, it is now possible to found digital legal entities based on tokenized shares. The Liechtenstein Token Act allows any right or asset to be tokenized such that it can easily be traded or transferred.
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