Tokenization As A Replacement For Real Assets And The Engine Of The New Economy
The idea of tokenization is gaining momentum. Businesses are more actively exploring tokenization features to tokenize their real assets and expand globally faster. Thus, physical assets, shares, and even services become tokens, purchased on the exchange. Let’s take a closer look at how tokenization fuels the global economy.
What is an asset tokenization
Asset tokenization is the creation of tokens that reflect tangible assets. In theory, the potential for tokenization is unlimited since any real asset can be placed on the blockchain. In addition, the risk of the unlawful use of tokens by third parties is zero.
Here is a basic example: you have an apartment in Paris worth €2 million. They can be easily split into 2 million tokens, each with ownership. At the same time, you can place a part of these digital assets on the blockchain and sell them on the exchange. Buyers will be able to retain ownership due to the immutability of the blockchain.
Types of tokenized assets
Now let’s look at two main types of tokens.
Tokenization of fungible assets
A fungible asset has two characteristics.
- Interchangeability. All tokens have the same value and expiration date. For example, all BTC coins are equal. It doesn’t matter where you bought BTC since all blocks belong to a single network. You can exchange 0.5 BTC for another 0.5 BTC and be sure that their value is the same.
- Divisibility. You can divide the fungible cryptocurrencies into the number of units set during the initial issue of tokens.
Tokenization of non-fungible assets
Let’s move on to the second type. The following features characterize it:
- Non-fungibility. NFT cannot be replaced with similar tokens. The reason is they represent a separate digital or tangible asset.
- Indivisibility. Classic non-fungible tokens cannot be divided into fractional parts. However, so-called fractionated NFTs (F-NFTs) offer to own a fraction of a high-value asset. For example, a Pablo Picasso painting or a Manhattan penthouse.
- Uniqueness. Each token has unique data and attributes. Therefore, no two NFTs are alike.
Tokenization as a global trend
Asset tokenization is rapidly gaining the attention of the global business community. Entrepreneurs want to tokenize their assets for the following reasons:
- The rapid attraction of investments and business growth
- Transparency and security of operations
- Reduced operating costs
Tokenization enables everyone to be an investor, even with small start-up capital. It also opens up opportunities to attract investors from any country. That’s why it’ll help quickly develop businesses and build transparent relationships with investors.