How to Tokenized Real-World Assets
In this video, we look at the process for tokenizing real-world assets.
While the technical process for tokenizing real-world assets is very detailed, we’ve broken it down into these six high-level steps to give you a better picture of the tokenization of RWAs.
Let’s say a company wants to tokenize a real-world asset.
Step 1: Selecting the asset to be tokenized
First, they have to figure out what you want to tokenize. While it can be anything, it shouldn’t be anything. The company finds a real-world asset that has value and could benefit from tokenization and exposure on the blockchain. This could vary from a tangible asset like real estate or oil to intangible assets like intellectual property or music rights. The possibilities for tokenization are endless—as long as the asset holds value.
They’ll need to have their RWA undergo a thorough process to vet the asset properly. This process will consider factors like:
Ownership
Clear title
Valuations
Existing partnerships
Once they find the right RWA, the company can move on to Step 2.
Step 2: Defining the type of token
There are several different types of tokens to consider.
They’ll also need to consider the number of tokens to be created for your asset, the mechanism governing minting tokens, as well as other custom parameters and rulesets.
Step 3: Legal compliance & regulatory approval
To ensure regulatory compliance, the tokenization process must adhere to legal frameworks governing the asset class and jurisdiction. So before the company can tokenize its asset and make the tokens available for ownership, it needs to undergo compliance procedures and get the relevant regulatory approval.
This step helps establish a transparent and secure foundation for the digital representation of the real-world asset and ensures that the tokens are legally recognized and enforced. This also helps the company avoid situations where token buyers incorrectly assume ownership of an asset without legal standing.
Step 4: Choosing a blockchain
Once they’ve got the legalities squared away, the company needs to find the right blockchain network best suited for their tokenized RWA. They’ll want to make sure that the blockchain they choose has smart contract capabilities.
Smart contracts, self-executing contracts with the terms of the agreement written into code, play a key role in RWA tokenization. These contracts automate processes such as dividend distributions, governance, and ownership transfers, reducing the need for intermediaries.
Additionally, the company will need to consider whether the tokens should be issued on a public or permissioned blockchain.
Step 5: Token creation
Now the company has to actually create their tokens. Digital tokens representing ownership or shares of the real-world asset need to be programmed by developers to be turned into blockchain representations of a specific fraction or unit of the RWA.
Decisions will need to be made about the total supply of tokens for their asset, and distribution models, like fractional or whole ownership units.
Step 6: Distribution
The tokens are then distributed to investors or participants who hold a stake in the tokenized real-world asset. This enables fractional ownership and broadens access to a wider range of investors.
Do you have any questions, tips, or ideas about private credit? Let us know in the comments section below!
About Us:
Securitize is making private equity, venture capital, and other exclusive, real-world, private market assets accessible to a broader range of investors. We are the world's leading platform for tokenized real-world assets. Learn more about Securitize at securitize.io.
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