Asset tokenization transforms physical or digital assets into digital tokens representing ownership or rights. This process enables various assets—real estate, stocks, artworks, collectibles, and more—to be traded in digital form. By dividing ownership into fractional tokens, asset tokenization opens new doors for investors to access assets previously restricted to high-capital investors.

Source: mckinsey.com

For instance, consider an artwork valued at $100,000. Through tokenization, ownership could be divided into 100,000 tokens, with each token representing a small share of the artwork. These tokens can then be traded, enabling buyers to gain partial ownership of the asset.

The potential of asset tokenization is immense, making assets more tradable, transparent, and accessible, while offering new opportunities for investors.

Types of Tokenized Assets

Asset tokenization primarily divides assets into two categories: Fungible Tokens and Non-Fungible Tokens (NFTs).

Fungible Tokens 

• Interchangeable: Each unit has the same value, similar to Bitcoin, where each 1 BTC is identical and interchangeable.

• Divisible: Fungible tokens can be split into smaller units, maintaining the same value across each unit.

Non-Fungible Tokens (NFTs)

• Non-Interchangeable: Each token is unique, representing individual value, like a specific artwork or collectible.

• Indivisible: NFTs are typically whole units, though they can sometimes represent partial ownership in high-value assets like art or real estate.

• Unique Attributes: Each NFT has distinct information and characteristics, making it different from other tokens.

Nearly any valuable asset can be tokenized. From traditional assets like venture capital funds, bonds, and real estate to unique assets like sports teams, artworks, and intellectual property, companies are embracing blockchain technology to tokenize a vast range of asset types.

What assets can be tokenized?

Asset tokenization is transforming the landscape of ownership and investment. By converting tangible and intangible assets into digital tokens, it allows for fractional ownership, making a wide range of high-value assets more accessible to a broader group of investors. This technology is reshaping how we approach assets, enhancing liquidity, transparency, and inclusivity within global markets.

Tokenization is not limited to a specific asset class; rather, it can apply to nearly any valuable asset, from traditional real estate and stocks to unique assets like artworks and intellectual property. Below are key examples showcasing the practical applications of asset tokenization across different sectors.

1. Real Estate

Real estate tokenization enables investors to access high-value properties without the need for large capital outlays. This can democratize property investment, providing more liquidity in the real estate market.

• Aspen Coin: In 2018, the luxury St. Regis Aspen Resort in Colorado was tokenized on the Ethereum blockchain, allowing investors to purchase shares in the property without large capital commitments.

2. Artworks

Art tokenization divides the ownership of high-value pieces, allowing art enthusiasts and investors to participate in the market without having to buy entire works.

• Maecenas: This blockchain platform facilitated the tokenization of Andy Warhol’s “14 Small Electric Chairs (1980),” allowing art enthusiasts to purchase fractions of the artwork through a public sale.

3. Venture Capital Funds

Tokenizing venture capital shares creates liquidity options for investors, allowing them to trade their shares and enter or exit investments with greater flexibility.

• SPiCE VC: By tokenizing its shares, SPiCE VC enables liquidity for venture capital investors, allowing them to trade their tokens on secondary markets for increased flexibility

4. Commodities

Tokenization of commodities like precious metals makes it possible for investors to access and trade these assets digitally without dealing with physical storage.

• Tether Gold (XAUT): Each XAUT token represents one troy ounce of gold, held securely in a vault. Investors can trade these tokens to gain exposure to gold’s price without physical storage.

5. Intellectual Property Rights

Artists and creators can tokenize digital art and collectibles, allowing them to monetize their work while retaining ownership and receiving royalties on each transaction.

• Ethernity Chain: Artists tokenize digital art and collectibles on Ethernity Chain, retaining ownership rights and earning royalties each time their work is traded.

These examples highlight the versatility of asset tokenization, spanning diverse asset classes from real estate and art to venture capital funds and commodities. By utilizing blockchain technology, asset tokenization provides new liquidity options, transparency, and access, paving the way for expanded investment opportunities for both individual and institutional investors.

Source: kaleido.io

The Benefits of Asset Tokenization 

Asset tokenization offers a range of benefits that address key challenges faced by both asset owners and investors. By leveraging blockchain technology, tokenization enhances liquidity, transparency, and security, making assets more attractive and accessible. Below, we outline the specific advantages tokenization provides for asset owners and investors.

For asset owners

Tokenization can significantly enhance the value and manageability of assets for owners. By dividing assets into smaller, tradable units, asset owners gain flexibility and access to a larger pool of potential buyers, while also benefiting from the transparency and security inherent in blockchain technology.

• Increased Liquidity: Tokenization facilitates quicker trades and easier cash conversions by splitting assets into smaller, more liquid units.

• Reduced Costs: Decentralized exchanges lower transaction and asset management costs compared to traditional, centralized systems.

• Enhanced Transparency: Blockchain provides a complete, auditable record of asset ownership, helping to mitigate fraud risks and improve asset management.

• Increased Value: Tokenized assets attract a broader range of investors, often boosting their overall market value.

For Investors

Asset tokenization opens new doors for investors by making a wider array of assets accessible, particularly those typically reserved for high-net-worth individuals. Through tokenization, investors benefit from enhanced efficiency, security, and diversity in their investment portfolios.

• Broader Investment Opportunities: Tokenization reduces entry barriers, allowing retail investors to participate in assets traditionally restricted to larger investors.

• Efficient Transactions: Decentralized exchanges streamline transactions, saving time and reducing intermediary fees.

• Enhanced Security: Blockchain’s decentralized structure offers greater transparency and security, helping investors protect their assets more effectively.

The Future of Asset Tokenization

As blockchain continues to integrate with traditional finance, tokenization is set to become a fundamental investment method. This evolution offers cryptocurrency investors expanded portfolio options and access to new markets. With innovations such as fractional ownership, tokenization is poised to reshape investment strategies, making markets more efficient and accessible for all.

For crypto investors who actively embrace tokenization, the future is promising. Through integration with traditional financial systems and innovative solutions such as fractional ownership, this game-changing technology has the potential to revolutionize investment methods and provide greater convenience for everyone.

For more information read: what is asset tokenization.