The Power Blog

Assets tokenization: what & for what


If you read topic articles for the last couple of years, it`s easy to notice that blockchain and cryptocurrencies there always stand close. However, they are not synonyms and do differ pretty much a lot. Blockchain as a technology has the ability to impact many old-fashioned, slow operating industries and configure many existing algorithms. Its security, transparency and transaction speed bring many advantages which can be grouped at several big categories.
One of them, assets tokenization on the blockchain, became a steady trend of 2018. Today it`s possible to tokenize everything: from paintings, diamonds and company stocks to real estate.

Tokenization — the crux of the matter
Having set out to understand what asset tokenization is and whether it is as revolutionary as everyone says, let’s first define what it is. Authoritative online publications offer a definition close to “the process of converting an asset into tokens that can be transferred, recorded or stored in the blocks”. In other words, tokenization implies converting the value of some tangible (say, picture) or intangible (carbon emission quota) object into its digital equivalent — token, and managing it using the blockchain technology.

They say that the possibilities of tokenization are endless. But even this supposed infinity can be divided into three or more big groups. Let’s look at them from the point of view of introduced innovation.

Intangibles
Intangibles are a fitting for the universe of blockchain on the grounds that they don’t generally exist, in any event of the conventional sense. That may sound talkative, however, it’s valid. Intangibles speak to thoughts or ideas, instead of physical items, thus they all the more promptly loan themselves to impalpable markets — be they conventional paper markets or blockchain markets. Copyrights, licenses, mark acknowledgement, and generosity are prime models.
How much will the design of a new microchip under the logo of a famous brand cost? How much to evaluate your new (absolutely brilliant) business idea?

Creating tokens for intangible assets provides them with real security for the transfer of value and a reliable guarantee of their legality. How, without having to store or physically transport intangible idea, can you transfer it to another person from the point of view of law and finance? Of course, making an appointment and getting up early the next morning, sign a pile of papers in the notary’s office; or exchange a digital token with a unique signature and the code that represents this asset.

Fungible Goods
The following development stage lands with fungible products. An asset is fungible when it very well may be traded for another indistinguishable good of equivalent esteem. The most recognizable fungible products are commodities. A liter of water is equivalent to another liter of water or an ounce of gold is equivalent to another. Indeed, even stocks can be viewed as fungible, if they are gathered together in identical bundles. Regularly, fungible resources are upheld by a physical asset — gold or wheat in a warehouse, water or oil in a pipeline.

This feature makes them hard to physically exchange. The trouble is intensified when the volume of exchanges becomes possibly the most important factor. Fungible goods are frequently managed in masses, and simply cannot be delivered right away. A shipment of 10,000 short tons of line pipe, for instance, is pretty bulky. Exchanging an ownership of that asset from one entity to another either involves moving 10,000 short tons of steel or creating a paper trail, whereby the steel is transferred via a trusted third party, like a bank, to the new owner before it will be physically delivered.

That tokenized blockchain system can significantly simplify this process. In this case, the digitization of the supplied steel through tokens will allow them to be traded virtually, recording transactions through smart contracts, and without intermediaries — there is no need for sales representatives, port workers, piles of receipts or rental warehouses. Uniquely recorded in the blockchain, your steel becomes someone else`s in a moment, along with all the information about storage and delivery. The act of sale is recorded in the blockchain, forming a receipt or check, inaccessible for changes and cancellations.

Non-Fungible Goods
Here’s the point where blockchain innovation truly gets fascinating. Tokenization empowers real sector and non-fungible merchandise to be represented by digital “shares,” which would then be able to be purchased, sold, or exchanged a full or constrained mold with people in general. The two most convincing use cases offered so far concern workmanship and land.

In all the world, there is just a single original Mona Lisa painting. This physical painting is exceptional, and it must be purchased or sold as a unit — that is, the littlest distinct unit of the “Mona Lisa” is one whole picture of “Mona Lisa”. In addition, this “Mona Lisa” isn’t equivalent to a huge number of prints or photo duplicates of the “Mona Lisa”. As such, an image or notice of the “Mona Lisa” isn’t actually the true “Mona Lisa”, and it doesn’t convey a similar esteem or value.

Tokenization of an art masterpiece brings a digital label that can’t be changed. The digital token standing for the “Mona Lisa” is exceptional. It’s anything but a duplicate. In any case, the token can be divided into sub-tokens, each additionally carefully marked. Along these lines, “shares” of an exceptional bit of workmanship can be sold to the general public.

Potential to tokenize non-fungible assets implies that proprietorship can be disseminated. Funds can be raised all the more effortlessly, and more extensive gatherings of elements assume liability for the care and upkeep of that object. Every holder of a “Mona Lisa” token doesn’t have a real duplicate of “Mona Lisa” — they really possess a piece of the fine art itself, which they can keep as a store of significant worth or pitch to another ready purchaser.

Tokenization aims to change how widely asset classes are purchased and sold, democratizing the way toward owning everything from business ideas to real estate. Blockchain offers a streamlined option in contrast to customary paper markets and one of a kind method for sharing responsibility for owning objects like painting or land. Through the blockchain, proprietorship is gradually going up against new importance.

References:
  1. https://blockonomi.com/tokenization-blockchain/
  2. https://www.investopedia.com/terms/i/intangibleasset.asp
  3. https://medium.com/@bonpay/how-tokenization-changes-the-world-c068408360c1
  4. https://bitcoinmagazine.com/articles/op-ed-how-tokenization-putting-real-world-assets-blockchains/
  5. https://flowchain.co/Tokenized-Hardware-WhitePaper.pdf
  6. https://www.maecenas.co/
  7. https://hackernoon.com/is-it-possible-to-tokenize-the-real-estate-industry-4dde4b66f814
  8. https://masterthecrypto.com/tokenization-tokens-create-liquid-world/
  9. https://medium.com/@apompliano/the-official-guide-to-tokenized-securities-44e8342bb24