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There are many ways to boost the appeal of blockchain technology and decentralized finance. Bridging the gap with the real world and its available liquidity remains a valid option. Convergence tackles this aspect by trying to rethink the concept of private investment markets.
The power of real-world investing
Although it may be thought that decentralized finance will one day replace the traditional economic system, this will not necessarily happen immediately. In fact, it may prove more beneficial to bridge the gap between the two industries and create more comprehensive, attractive and robust financial products and services.
Bringing the liquidity of real-world assets to decentralized finance is an approach worth exploring. Since there is a lot of liquidity in the real world – and not always so much in DeFi – it is often best to combine the best of both worlds and see what can be achieved. Decentralized finance currently caters primarily to cryptocurrency users, but those unfamiliar with these assets find it difficult to explore the options available to them.
The introduction of support for real-world assets can improve the overall liquidity of DeFi. More users will be able to enter this fascinating industry to bring liquidity to protocols and services. Tokenization will be an essential step in helping asset owners receive more funding. Digital ownership of assets can unlock benefits including automated issuance and zero settlement times.
A big change for private investment markets
One industry that can benefit immensely from the introduction of real-world assets is the private investment markets. Even though these markets tend to be successful, they are only accessible to a few people. These investments often involve stocks and debts or private companies. For investors, the goal is to increase the value of a company and later resell their stake for profit.
Even so, these markets have a few potential downsides to consider. A private market presents significant liquidity risk because private equity investments are long-term investments of up to ten years. Moreover, it may take a few years before a company can achieve anything, even if it requires more capital. This creates a barrier for investors less experienced as a complex asset class, although this is not necessarily the case.
Convergence, the decentralized protocol of interchangeable assets, can prove a viable partner for private investments. As everything can be tokenized and even split, companies can solve the illiquidity aspect by making these markets more accessible to as many people as possible. As investors may own a fraction of these real-world assets, there will be a much larger market to explore.
Additionally, COnvergence provides a solution for asset owners to access better price discovery. Owners can place all tokenized assets in a liquidity pool on the native ConvX trading platform, making them accessible to any existing DeFi user today or in the future. This allows anyone investing to gain tokenized and fractionated private exotic asset exposure through Convergence.
The attractiveness of private investment markets can increase significantly when coupled with liquidity in decentralized finance. Providing all DeFi enthusiasts with the ability to access private exotic assets is a huge step in the right direction. Although no one can predict the overall demand for these products, it remains essential to explore all options in the wider financial sector.
By making these investment options more attractive to everyone through tokenization and fractionalization, users can explore new use cases and new liquidity for some time to come. Convergence brings something entirely new to the table, as no other provider is exploring this option for exposure to private exotic assets.