Cryptocurrency 101: How Do You Tokenize an Asset?-In today’s fast-paced tech world, new buzzwords constantly emerge. One such term making waves right now is asset tokenization. You may have heard people chatting about it – and for good reason. It’s got tech experts and enthusiasts alike all abuzz. But what exactly does it mean? Well, at its most basic level, asset tokenization refers to the process of converting a real-world asset into digital tokens, which can then be used on a blockchain. For example: turning ownership rights for a piece of valuable artwork or a property deed into one-of-a-kind virtual representations that can be easily tracked, managed and traded.
The upshot? Companies are finding that by leveraging this novel approach to both ownership and transactions – not to mention taking advantage of the security and transparency features baked into technologies like blockchain – they can open up new possibilities for their business models.
Table of Contents
Which are the Real-World Assets Tokenized Commonly?
A business transfers ownership rights in different ways to virtual investors, including bonds, art items, real estate properties, stocks, and intellectual property. The following are real-world assets that are ideal for tokenization.
Precious Metals
Platinum, gold, and silver bars
Financial Assets
Bonds, securities, and stocks
Luxury Products
Expensive accessories, designer clothing, internal brand jewelry, and supercars
Intellectual Property
Trademarks, patents, and copyrights
Industrial Goods
Agricultural, electrical, and mineral products
Art Products
Photographs, paintings, and sculptures
Real Estate Properties
Office spaces, land plots, new building apartments, houses, and warehouses
Tickets
Tickets for business events, exhibitions, concerts, and theatrical performances
Collectibles
Stamps, coins, antiques, sports cards, and wine
Tokenization is advantageous when swapping ownership rights to a real-world asset, as it includes additional value to the business. For example, tokenizing kitchen linens or curtains in a store doesn’t make sense. There is hardly anyone who can buy tokens for bed linens or curtains. It is a different story when people tokenize real estate ownership rights or precious metals. Such real-world assets are frequently bought and sold. They are liquid assets, and their values fluctuate, and trading them in the virtual world is profitable.
Steps for Asset Tokenization
Creating a Business Plan
Businesses should consider two questions:
- What to tokenize?
- How do we seek to profit from asset tokenization?
Establishing a business plan is critical because it determines what real-world assets to tokenize, the pricing strategies for asset trading, recognizing the target clients, estimating the related expenses, and creating strategies to attract maximum clients. Creating a business plan enables the company to formulate a marketing strategy. Asset tokenization is ideal for major companies willing to take risks and allocate significant budgets to launch new projects.
Picking the Token
Asset tokenization completes using either regular tokens or NFTs.
Regular Tokens
Exchangeable tokens are ideal for asset tokenization as they are easy to exchange and available in huge quantities. For instance, one silver bar is equal in value to another. In such a scenario, the silver bars are exchangeable, and there is no need to establish unique NFTs for both.
Non-Fungible Tokens (NFTs)
NFTs are for real-world assets whose value is directly related to their uniqueness. For example, NFTs are ideal for tokenizing art pieces where the distinctiveness of every item is a critical factor.
Choosing the Platform
The process of asset tokenization demands a specific blockchain platform. A company opts to create its platform or engage in an existing one.
Proprietary Platform
It is ideal for big companies with strict security parameters and custom technological solutions. Global and federal corporations prefer the platform.
Intermediary Platforms
Small and mid-scale businesses opt for trade tokens on preexisting blockchain platforms. Intermediary platforms are best for issuing Non-Fungible Tokens (NFTs).
Planning the Process of Token Issuance and Related Activities
Participants should assess and analyze the origins of tokens, their method of issuance and regulations, and the reasons to own and trade them. Asset tokenization mechanics are similar to preparing and regulating conventional bonds or stocks for public offering and extending offers to potential investors.
Issuing Tokens
Token issuing is the final stage of asset tokenization. Following the step-by-step process, real-world assets become accessible to cryptocurrency and digital-world investors, attracting investments. Throughout the process, companies comply with the rules confirmed by the blockchain platform, aligning with the business plan and the mechanics of real-world tokenization.
Conclusion
The process of asset tokenization is a holistic approach that is redefining the ways businesses leverage and handle their virtual assets. It ushers in a new phase of adaptability, efficiency, and security. The power lies in embracing the technologies and encouraging businesses into the future, where virtual assets trade successfully in blockchain platforms.