ETFs and Blockchain: Pioneers in Asset Tokenisation

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ETFs and Blockchain- Pioneers in Asset Tokenisation
Midjourney prompt: A vast cityscape as viewed from the clouds, with buildings transforming into digital tokens that soar and interconnect.

This is number 3 of a multi-part article series. In our last article we looked at the similarities of how both ETFs and blockchain democratise finance (read here) and in our first one we looked at the efficiency parallels (see here).

When discussing asset tokenisation, a concept that often springs to mind is blockchain, thanks to its integral role in creating digital tokens representing real-world assets. However, a pioneering model of tokenisation had already been at play in traditional financial markets even before blockchain made its appearance. This pioneer is the Exchange-Traded Fund (ETF).

ETFs: Pioneers in Asset Tokenisation

In essence, ETFs were the financial world’s first attempt at asset tokenisation, enabling a pool of assets to be represented by a single, tradable entity. ETFs encapsulate a diverse portfolio of assets, such as stocks, commodities, or bonds, and allow investors to buy or sell these bundled assets on a stock exchange, similar to trading individual stocks.

In a sense, each ETF unit is a “token” representing a proportional interest in the underlying asset pool. The tokenisation model provided by ETFs has opened up opportunities for individual investors to gain exposure to a diversified portfolio with a single transaction, democratising access to a wide range of asset classes that would have otherwise required significant capital to individually own.

Blockchain: The New Frontier in Asset Tokenisation

Blockchain technology has taken the concept of asset tokenisation to a whole new level. With blockchain, practically any asset — real estate, artwork, precious metals — can be digitally represented or “tokenised” on a blockchain network. Each token can represent a unique piece of value that is interchangeable and can be traded on a global platform without intermediaries.

For instance, through tokenisation, a high-value asset like a building can be divided into multiple tokens, each representing a fraction of the building’s ownership. This means individuals can buy a “piece” of the building by purchasing tokens, much like buying a piece of a company by purchasing stocks.

Just as ETFs democratised access to diversified investment portfolios, tokenisation is democratising access to a broader range of asset classes by lowering the barriers to entry and making these assets more accessible and liquid.

A Confluence of Benefits

When comparing the tokenisation offered by ETFs and blockchain, it’s essential to appreciate how they both democratise finance, increase efficiency, and introduce a greater degree of liquidity to markets.

Both ETFs and blockchain-driven tokenisation allow for fractional ownership, making expensive assets more accessible to average investors. This kind of fractionalisation can enhance market liquidity, as smaller, more affordable units of expensive assets are likely to have more potential buyers.

Moreover, both bring increased transparency and efficiency to transactions. With ETFs, investors can see the portfolio of assets they own, and with blockchain, every token transaction is recorded on a transparent, immutable ledger (and for those who worry about this transparency for business transactions, then check out our ZK proof tech helping bring confidentiality where needed).

Looking Forward

The journey of financial markets has been one of constant evolution and innovation, and both ETFs and blockchain technology play key roles in this narrative. While ETFs brought the initial wave of asset tokenisation, blockchain has the potential to bring a tidal wave of change, further opening up the world of investing to everyday individuals.

As we look to the future, we should not only anticipate how blockchain could reshape our financial systems but also appreciate the innovations, such as ETFs, that have led us here. The evolution from ETFs to blockchain demonstrates the power of technology in creating a more democratic, transparent, and efficient financial landscape.

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Mark
Monfort

Mark drives innovation with his deep understanding of AI, blockchain, and data technologies. His experience spans over 15 years of contributions to finance, technology, and operational strategy across Australia, Europe, and North America.

In 2021, he transitioned from Head of Data and Technology at a leading Australian accounting firm to startups. Prior to this, he worked in equity and macroeconomic research in the capital markets space.

Mark brings a passion for data and insights to NotCentralised. His understanding of AI and blockchain technology is central to the development of workplace productivity and financial system modernisation products, including SIKE and Layer-C. Mark’s dynamic and solutions-focused methods enable the navigation of complex technological landscapes and new market potentials.

Mark holds an Executive Master’s and a Bachelor of Commerce. He led the creation of the Australian DeFi Association and serves on the advisory board for the Data Science and AI Association of Australia. His commitment to such communities demonstrates his enthusiasm for emerging technologies and vision of positive change through technology adoption.

Nick
Bishop

Nick spearheads product strategy and institutional business development, leveraging a rich background spanning 23 years in capital markets and financial services across the UK, the US, and APAC.

In 2020, Nick transitioned into startups, bringing extensive experience in asset management and corporate advisory from roles including Director, Head of Australian Fixed Income at Abrdn and Managing Director, Head of Corporate Credit at Gresham Partners. His expertise extends to client management across the government and private sectors.

With a First Class degree in Law and Criminology and Chartered Financial Analyst experience since 2002, Nick is known for his energetic and creative approach, quickly appraising business models and identifying market opportunities.

Beyond his role at NotCentralised, Nick actively contributes to multiple startups and SMEs, holding various Board and advisory positions and applying his institutional expertise to early-stage ventures. Nick is fascinated by emerging technologies with significant societal impact and loves to immerse himself in nature.

Arturo
Rodriguez

Arturo leads product development and software engineering, applying over two decades of experience in technology, capital markets, and data science. With his years of programming expertise, Arturo smoothly transitioned into blockchain, AI, and machine learning.

Arturo has built and sold technology startups across Europe, following quant derivatives roles in global investment banks. His prior experience includes data projects for the NHS in the UK, Strategic Technology Advisor at Land Insight, and Senior Advisor to OpenInsight, where he built predictive models for vessel usage in commodity markets.

A mathematics and statistics graduate from Stockholm University, Arturo’s early grounding in logic problems and data manipulation techniques is evident in his practical applications. His work building equity derivative pricing models for Merrill Lynch and Royal Bank of Scotland showcased Arturo’s highly specialised skillset.

Arturo relocated from London to Australia in 2020. Beyond NotCentralised, his passion for technology and industry involvement extends to the Australian DeFi Association, which he co-founded, and regular contributions to the Data Science and AI Association.