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#RWA #Risk #Tokenization #TokenizationOfRWA RISKS INVOLVED IN TOKENIZATION OF REAL-WORLD ASSETS (RWA) Part 2 6.Operational Risks: Operations of an organization are important for the success of the product. Tokenization involves complexities in the operational aspect of a tokenized product. Operational issues viz., custody, security, and maintenance of tokenized products are highly complex in nature and would take a substantial amount of time and effort to produce better structure for the product. 7. Fraud & Security risks : Due to permissionless and decentralized nature, there is a probability to commit fraud by stakeholders of tokenized products. The decentralized and pseudonymous nature of blockchain can attract fraudulent activities. Hack, theft, rug pull and other key issues are likely to get involved in a product that are tokenized by an organization. 8. Market Manipulation: Due to liquidity issues, there is a probability that tokenized assets may be susceptible to market manipulation. This could include circular trading, wash trading, fake it till you make it type of schemes. This would drastically affect market players and traders that could permanently make them stay away from the markets. These are the risks that are involved in tokenization of real world assets. An organization has to take care of these risks and would try to avoid or mitigate these risks to provide better products for the customers

#RWA #Risk #Tokenization #TokenizationOfRWA

RISKS INVOLVED IN TOKENIZATION OF REAL-WORLD ASSETS (RWA) Part 2

6.Operational Risks:

Operations of an organization are important for the success of the product. Tokenization involves complexities in the operational aspect of a tokenized product. Operational issues viz., custody, security, and maintenance of tokenized products are highly complex in nature and would take a substantial amount of time and effort to produce better structure for the product.

7. Fraud & Security risks :

Due to permissionless and decentralized nature, there is a probability to commit fraud by stakeholders of tokenized products. The decentralized and pseudonymous nature of blockchain can attract fraudulent activities. Hack, theft, rug pull and other key issues are likely to get involved in a product that are tokenized by an organization.

8. Market Manipulation:

Due to liquidity issues, there is a probability that tokenized assets may be susceptible to market manipulation. This could include circular trading, wash trading, fake it till you make it type of schemes. This would drastically affect market players and traders that could permanently make them stay away from the markets.

These are the risks that are involved in tokenization of real world assets. An organization has to take care of these risks and would try to avoid or mitigate these risks to provide better products for the customers

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#RWA #Risk #Tokenization RISKS INVOLVED IN TOKENIZATION OF REAL-WORLD ASSETS (RWA) - Part 1 1. Regulatory Compliance: Regulatory risk is one of the most important risks involved in tokenization of RWA. So many regulatory authorities are there for trading finance products. From Europe to the US to Australia different regions have different authorities. Protocol that brings RWA in Blockchain needs to comply accordingly to different geographies. This is one of the toughest ask for a tech company. 2. Market Liquidity: Have been hearing from so many quarters that tokenizing RWA in itself would bring customers whereas in reality it is not. The demand for these products depends on so many factors viz., Understanding the product, nature of the products and right mix of the product to attract liquidity towards that specific product. This is easier said than done. 3. Smart Contract & Tech Risks: The use of smart contracts introduces the risk of vulnerabilities and bugs. Blockchain products are totally dependent on code. In Blockchain, Code= Contract. If and when there are severe bugs then the entire product collapses. Blockchain technology is still in its nascent stage, and adopting it by common man is a tall ask. Apart from this there are scalability issues and interoperability challenges for a product. 4. Valuation Challenges: Identifying pricing and valuation for tokenization is an herculean task. In most of the products it’s not possible to understand the market value of a product. The parameters to ascertain market value are simply not found with Tokenized products. 5. Market Perception: Perception in acceptance of tokenized assets is still a tough challenge. This could have a tremendous impact on the value of tokenized products. How the market perceives plays a pivotal role in driving prices of a product. Creating perception is important for holding prices of a product to create value for stakeholders involved in the project.
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#Perpetual #futures #RWA #Risk Why do Futures Market exist? Part 2 of the article 👇👇👇 Hypothesis 1 - $180. He had made a profit of $20/ ton on hedging the contracts he sold. Anyhow he would be providing delivery of those contracts in physical goods. He'd continue his risk mitigation by doing the trade in forward contracts. He made his $20 on mitigating the risk. But in real terms, there is no change in prices. He would keep on continuing to manufacture Aluminium. He would continue to sell his current obligations in spot markets by delivering to his regular customers. This is what we call hedging. In this case, the manufacturer has mitigated the risk by selling in future markets. He would continue to sell his products as he has to do it to continue his business. In future markets, he wouldn't have a substantial premium yet he would continue to do it simply to manage the risk. Hypothesis 2 - $220. He had made a loss of $20/ ton on hedging the contracts he sold. Anyhow he would be providing delivery of those contracts in physical goods. He'd continue his risk mitigation by doing the trade in forward contracts. He lost $20 on mitigating the risk. But it wouldn't affect him as he simply mitigated the risk by placing future contracts. Anyhow he is going to settle the contracts with his Aluminium. He sold the Aluminium at $200 when the spot was around $180. This is how a manufacturer mitigates the risk. In the coming forward markets, he would fetch more premium for his products. It's a win-win situation for him. Now replicate this to crypto and we could understand the concept of derivatives and risk mitigation it plays in the protection.
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