Illiquid assets are inherently problematic since they do not accrue instant value, making their owners wait to capitalize on them. This is suboptimal since the time-value of money dictates that such an asset’s worth will always be diminished in relation to its present value: a dollar spent today is more valuable than one spent tomorrow.
While it is easy to think about illiquid assets as being almost exclusively tangible things—such as artwork, livestock, furniture, vehicles, and collectible items—the reality is that the financial industry is full of them.
Chiefly financial illiquid assets include things such as microcap stocks, ownership interest in private companies, partnership shares in hedge funds, alternative investments, and some types of bonds and debt. Hence owners of these kinds of assets have to ask themselves how best to capitalize on them at their highest value. Usually, this is a convoluted and difficult question to answer, and doing so often costs money on its own. Advancement in this area—liquidizing illiquid assets—is slow, and both the tech and finance industries have been trying to figure out how to leverage this optimally. Yet in blockchain, there may be an answer.Read Complete Article