The Rise of Tokenized Assets in United States Businesses

Tokenization is a major development in digital finance, and interest in tokenized assets has been growing in recent years. This revolutionary practice reshapes how assets are owned, traded, and managed. Here, we explain tokenization, how it works, and the benefits it brings to U.S. businesses.

What is Tokenization?

Tokenization is converting real-world assets into digital tokens stored on a blockchain. These tokens represent ownership, making buying, selling, and trading assets easier and more secure through online trading platforms. In blockchain technology, tokens fall into two main categories: fungible and non-fungible tokens (NFTs).

• Fungible Tokens: Fungible tokens are identical and interchangeable digital assets. Think of them like traditional currencies. If you have one Bitcoin, it has precisely the same value as anyone else’s Bitcoin. No Bitcoin is more valuable or unique than another, making it easily tradable and practical for everyday financial transactions.
• Non-Fungible Tokens (NFTs): Unlike fungible tokens, NFTs represent unique digital items. Imagine them like rare artworks—just as a Picasso painting differs significantly from a Leonardo da Vinci masterpiece, each NFT possesses unique characteristics that set it apart from others. An NFT’s value can vary widely depending on rarity, demand, and specific attributes, making it perfect for collectibles, artwork, and exclusive assets.

Tokenization takes fungible and non-fungible assets and converts them into digital form, dividing them into smaller units represented by tokens. Each token symbolizes a fractional piece or complete representation of the original asset. For instance, a large property can be tokenized so that multiple individuals own fractions of it. The options are practically endless, from tangible assets like real estate, artwork, and precious commodities to financial instruments such as debt, stocks, bonds, and securities. Tokenization is a revolution that democratizes investment opportunities, making them accessible to every budget.

How Tokenization Works: Breaking Down the Technology

At its core, tokenization involves converting ownership rights of real-world assets into digital tokens on a blockchain. This is like breaking down a high-value asset, like a big mansion in Hollywood or an art piece by Banksy, into smaller, more manageable digital pieces. Each token represents a fraction of the asset, making it accessible to a broader range of investors. This enhances liquidity and opens up new markets previously inaccessible to investors worldwide.

Tokenization is possible thanks to blockchain. Thanks to this technology, the transparency, traceability, and transaction security of digital tokens are ensured. Here’s a simplified breakdown of how the tokenization of an asset can be done:

• A fungible or non-fungible asset is chosen for tokenization.
• Digital tokens that represent shares or units of this asset are created.
• Tokens are deployed onto a blockchain platform, ensuring each transaction is securely recorded.
• Self-executing contracts (smart contracts) are implemented with the terms of the agreement directly written into code. This method automates processes like dividend distribution or compliance checks, eliminating intermediaries.

Smart contracts simplify transaction settlement processes and reduce associated fees by eliminating specific intermediation solutions. Blockchain ensures the transparency and traceability of token transactions, thereby strengthening investor confidence.

Types of Tokenized Assets in the U.S. Market

The U.S. market offers tokenization of various asset classes, including:

• US Dollar: Stablecoins that represent the value of US dollars, like USDT, BUSD, and USDC, have been popular for a long time and are used widely for financial transactions and investments.
• Real Estate: Investors can own portions of high-value properties thanks to the tokenization of real estate.
• Art and Collectibles: Tokenized artworks and collectibles are open to shared ownership, and investment in art pieces is not only accessible to the affluent.
• Financial Instruments: Stocks, bonds, and other securities are tokenized to facilitate trading and increase market liquidity.
• Intellectual Property: Patents and trademarks can also be tokenized to monetize the IP rights of creators more effectively.

As you can see from the examples, nearly every asset and object can be tokenized! But why do it? What added value do tokenizing physical goods and traditional assets bring to businesses?

Why U.S. Businesses Are Adopting Tokenization

U.S. businesses have several compelling reasons to embrace tokenization:

• Enhanced Liquidity: Assets like real estate, vehicles, art, and collectibles are called non-liquid assets. Tokenization transforms these assets into tradable digital tokens. This provides increased liquidity for investors, who can more easily enter and exit their investments.
• Fractional Ownership: By breaking down assets into smaller units, tokenization lowers investment thresholds, attracting a wider pool of investors.
• Operational Efficiency: Automating processes through smart contracts reduces administrative burdens and associated costs.
• Transparency and Security: Blockchain’s immutable nature ensures transparent and tamper-proof records, ensuring trust among stakeholders.

Companies Leading the Tokenization Movement

The advantages are clear. Many companies have already adopted asset tokenization for various applications. Here are some examples:

• OriginTrail: OriginTrail is a decentralized network for supply chain data management. Utilizing its Decentralized Knowledge Graph (DKG), the company tracks and verifies the provenance of tangible assets, such as goods and raw materials. This system enhances transparency and trust in supply chain operations by ensuring that product information is immutable and verifiable.
• RealT: RealT offers an innovative solution to the challenges faced by small portfolios when investing in the real estate sector. This company aims to make real estate investing accessible from $50, with an estimated net annual return of between 9% and 11%. It operates through blockchain and tokenization.
• Ondo Finance: Ondo Finance focuses on tokenizing traditional assets such as real estate, commodities, and financial instruments. It aims to improve liquidity and provide democratized access to traditional financial assets through fractional ownership. The platform offers income-generating financial products such as USDY, backed by US Treasury bonds, and OUSG, backed by government bonds.

The Future of Tokenized Assets in U.S. Businesses

Tokenization is a major innovation across various industries, and the trajectory for these assets is poised for significant growth. According to a report by the Boston Consulting Group, the market for tokenized non-liquid assets could reach $16 trillion by 2030, representing 10% of global GDP.

As regulatory frameworks evolve to accommodate this new asset class, tokenization will likely become mainstream in business financial strategies. Those who adopt and integrate it early will reap the benefits and gain a competitive edge in their industries.