Blog

The Basics of Asset Tokenisation

Unlock the future of investment with asset tokenisation. Explore the transformative power of blockchain technology, democratising access and enhancing liquidity in real-world asset management.

Arrow Left Icon
Back

Tokenisation is rapidly emerging as a game-changer in the world of asset management and investment. By leveraging the immutable and secure nature of blockchain technology, tokenisation offers a novel approach to representing real-world assets as digital tokens. This shift not only democratises investment opportunities but also introduces a level of liquidity and accessibility previously unattainable with traditional asset classes. In this article, we demystify the basics of asset tokenisation and explore its wide range of benefits. 

The articles in this series are extracts from the E-book: Asset Tokenisation unpacked, Now available for download.

What is asset tokenisation?

Asset tokenisation is the process of converting rights to an asset into a digital token on a blockchain. This method enables tangible and intangible assets—ranging from real estate and art to intellectual property and commodities—to be divided into shares that are sold and traded. Each token represents a proportional stake in the underlying asset, providing a bridge between the physical and digital worlds. Blockchain's inherent characteristics ensure that these tokens are secure, verifiable, and easily transferable, which brings unprecedented efficiency to the trading and ownership transfer of assets.

At the heart of asset tokenisation is blockchain technology. Blockchain acts as a decentralised registry for tokenised assets, recording each token's issuance and transaction with complete transparency. The tamper-proof and permanent record instils confidence in the validity and authenticity of asset ownership, which is paramount in a system where assets are bought, sold, or exchanged.

Benefits of asset tokenisation

But what exactly are the benefits of asset tokenisation? Some of these advantages can be summarised as follows:

  • Fractionalisation
  • Greater liquidity
  • Increased transparency
  • Lower transaction costs

Each of these benefits will be explained in more detail below.

Fractionalisation

Tokenisation allows assets to be divided into smaller portions which means that investors can buy and sell fractions of an asset, rather than having to buy the whole asset. For example, instead of buying an entire real estate property, investors can purchase a percentage of ownership in the property. This opens up investment opportunities to a wider range of investors, including those who may not have enough capital to buy an entire asset.

Another benefit of the fractionalisation is that it allows for more flexible ownership structures which can be better tailored to the investors, in turn increasing the appeal of the investment.

Lastly, the fractionalisation of assets can also be beneficial for community building, in the case of valuable art for example. Instead of having a single owner, it becomes a community-owned asset which can increase both the appeal and value of a physical asset. Who wouldn’t want to own part of the Mona Lisa?

Greater liquidity

Tokenisation makes assets more accessible and tradable on a blockchain, which can increase liquidity. In traditional markets, it can be difficult to find buyers and sellers for certain assets. However, by tokenising an asset and trading it on a blockchain, investors can quickly and easily buy and sell the tokens without needing to go through intermediaries. This can increase the speed and efficiency of transactions, making it easier for investors to enter and exit the market. And unlike traditional asset purchases transactions are instantaneous and seamless.

Furthermore, given that the asset is split up into smaller portions (represented by tokens) the asset becomes an investment opportunity to a wider range of investors, increasing liquidity even further.

It is important to note though that this is not the case for every type of asset depending on the jurisdiction in which the physical asset resides. Token transactions may still be subject to rules and regulations which can make the buying or transfer process equally inefficient as the regular process, and possibly even more cumbersome in some cases.

Increased transparency

Tokenisation can make it easier to track ownership and movement of assets, as all transactions are recorded on a blockchain. This increases transparency and reduces the risk of fraudulent activity, as ownership of the asset is easily verifiable. Additionally, since all transactions are recorded on the blockchain, it is easier to audit the history of the asset (and tokens). Thus, this can be important for compliance and regulatory purposes.

This can also be beneficial for tracking the provenance of certain assets, as the digital twin can contain the full history of the physical asset.

Lower transaction costs

Generally speaking, tokenisation can reduce the costs associated with buying, selling, and managing assets. By removing the need for intermediaries like brokers and custodians, tokenisation can significantly reduce transaction fees. Additionally, tokenisation has the potential to make it easier to manage assets. All ownership and transaction data is stored on the blockchain, reducing administrative and legal costs associated with traditional asset management.

It is important to mention however that the tokenisation process can also increase costs if the stakeholders want greater trust and transparency before, during, and after the tokenisation process.

Latest Posts

The Convergence of DePIN, RWA Tokenisation, and The Vision of Bitcoin

The Convergence of DePIN, RWA Tokenisation, and The Vision of Bitcoin

Blockchain technology has sparked a wave of innovations that are transforming finance, infrastructure, and asset ownership. This article will examine the developments and convergence of Decentralised Physical Infrastructure Networks (DePIN), Real World Asset (RWA) tokenisation, and the original vision laid out in the Bitcoin white paper. While these concepts may seem distinct at first glance, together, they can create a future where infrastructure, ownership, and financial systems are more transparent, accessible, and democratised.

October 8, 2024

Defactor

Read More
Arrow Right Icon
The Rise of Real-World Asset Tokenisation

The Rise of Real-World Asset Tokenisation

Learn about the origins of Real-World Assets and explore its expansion into diverse sectors. Discover the future of tokenisation and its impact on businesses and investors.

October 8, 2024

Defactor

Read More
Arrow Right Icon
The Importance of User Experience (UX) in RWA Tokenisation

The Importance of User Experience (UX) in RWA Tokenisation

User experience is key to the adoption of asset tokenisation, making blockchain technology accessible by focusing on simplicity, security, and market readiness.

October 4, 2024

Defactor

Read More
Arrow Right Icon
Bridging Real Estate and Crypto: Uniting Risk-Averse and Risk-Taking Investors

Bridging Real Estate and Crypto: Uniting Risk-Averse and Risk-Taking Investors

Explore how tokenisation is bridging the gap between traditional real estate stability and the high-risk, high-reward world of crypto.

September 24, 2024

Defactor

Read More
Arrow Right Icon
Real-World Asset Tokenisation & The Gun Argument

Real-World Asset Tokenisation & The Gun Argument

Real-World Asset (RWA) tokenisation can offer many benefits, But how do we mitigate the risks? Explore the complementary factors the "gun argument" could provide and its potential benefits for RWA tokenisation.

September 20, 2024

Defactor

Read More
Arrow Right Icon
Defactor & RWA.io

Defactor & RWA.io

Defactor has launched RWA.io, a new global platform aimed at simplifying and unifying the RWA ecosystem. The platform will offer transparency through verified data and aims to drive innovation in the DeFi space by bringing together projects, applications, and service providers.

September 6, 2024

Sharif Bouktila

Read More
Arrow Right Icon
Real-World Assets, Scalability & Success

Real-World Assets, Scalability & Success

Real-world asset tokenisation presents a revolutionary shift in traditional investment models. However, amidst the excitement lies a critical yet often overlooked factor: scalability.

August 6, 2024

Defactor

Read More
Arrow Right Icon
Token Standards for Real-World Assets: Why Do We Need Them?

Token Standards for Real-World Assets: Why Do We Need Them?

Explore the crucial role of token standards like ERC-3643 in asset tokenisation, ensuring security, compliance, and interoperability in decentralised finance.

July 25, 2024

Defactor

Read More
Arrow Right Icon
Why Tokenise Real-World Assets?

Why Tokenise Real-World Assets?

From real estate to fine art, tokenisation offers enhanced liquidity, breaks down investment barriers, and ensures certainty through security with smart contracts. Join the revolution reshaping how we perceive and interact with assets.

July 12, 2024

Defactor

Read More
Arrow Right Icon
Why You Should Care About Real-World Asset Tokenisation

Why You Should Care About Real-World Asset Tokenisation

Explore how asset tokenisation enhances liquidity, lowers investment barriers, and secures ownership with blockchain technology.

July 11, 2024

Defactor

Read More
Arrow Right Icon
Real-Life or Virtual Marketing?

Real-Life or Virtual Marketing?

Explore the balance between digital and in-person strategies to market your RWA project, blending traditional approaches with innovative ideas.

May 28, 2024

Defactor

Read More
Arrow Right Icon
Where to Start When Marketing a Real-World Asset Ecosystem

Where to Start When Marketing a Real-World Asset Ecosystem

Explore key strategies for marketing an RWA ecosystem, focusing on building trust, engaging communities, and balancing technical innovation.

May 17, 2024

Defactor

Read More
Arrow Right Icon
Can I Tokenise My House?: The Answer Is Yes

Can I Tokenise My House?: The Answer Is Yes

Explore the transformative ability of real estate tokenisation, breaking barriers, unlocking liquidity, and fostering community engagement.

April 5, 2024

Defactor

Read More
Arrow Right Icon
The Challenges of Gold Tokenisation

The Challenges of Gold Tokenisation

Uncover challenges and opportunities in gold tokenisation, navigating trust, liquidity, and innovation in the dynamic digital economy.

March 22, 2024

Defactor

Read More
Arrow Right Icon
Defactor's Prediction: Asset Classes That Will Be Most Disrupted By Tokenisation

Defactor's Prediction: Asset Classes That Will Be Most Disrupted By Tokenisation

The experts at Defactor have spoken, providing their predictions on which asset classes could be most disrupted by tokenisation.

March 8, 2024

Defactor

Read More
Arrow Right Icon
Does Crypto Regulation Stifle DeFi Innovation?

Does Crypto Regulation Stifle DeFi Innovation?

Explore the complex interplay of DeFi innovation and regulatory frameworks, navigating challenges and opportunities for balanced growth.

March 1, 2024

Defactor

Read More
Arrow Right Icon
How to Bring Your Tokenisation Proof of Concept to Life

How to Bring Your Tokenisation Proof of Concept to Life

Unlock the potential of DeFi with our guide on bringing your tokenisation proof of concept to life. Define, research, architect, and begin your transformative journey.

March 1, 2024

Defactor

Read More
Arrow Right Icon
The Process and Challenges of Asset Tokenisation

The Process and Challenges of Asset Tokenisation

Explore the intricate world of asset tokenisation in this insightful article. Uncover the unique opportunities, challenges, and risks inherent in this ground-breaking concept.

February 23, 2024

Defactor

Read More
Arrow Right Icon
Key Aspects of Tokenisation

Key Aspects of Tokenisation

Discover the game-changing potential of asset tokenisation. Unveil the key factors - from technology to legal aspects - crucial for a successful tokenisation journey in the world of blockchain and investment.

February 9, 2024

Defactor

Read More
Arrow Right Icon
The Basics of Asset Tokenisation

The Basics of Asset Tokenisation

Unlock the future of investment with asset tokenisation. Explore the transformative power of blockchain technology, democratising access and enhancing liquidity in real-world asset management.

January 26, 2024

Defactor

Read More
Arrow Right Icon
How Defactor Uses The ERC-3643 Token Standard

How Defactor Uses The ERC-3643 Token Standard

Learn more about how Defactor uses the ERC-3643 token standard for asset tokenisation

January 24, 2024

Defactor

Read More
Arrow Right Icon
Defactor's Lending Pools Glossary

Defactor's Lending Pools Glossary

Gain comprehensive insight into the world of blockchain and decentralised finance (DeFi) with this educational glossary.

January 12, 2024

Defactor

Read More
Arrow Right Icon
Aspects of Projects that Benefit Most from Lending Pools

Aspects of Projects that Benefit Most from Lending Pools

Explore attributes for optimal DeFi lending pool integration, empowering projects to expand, engage communities, and navigate challenges.

December 29, 2023

Defactor

Read More
Arrow Right Icon
Real-World Assets and Lending Pools: A Perfect Match

Real-World Assets and Lending Pools: A Perfect Match

Explore tokenised real-world assets in DeFi lending—unlocking liquidity, expanding accessibility, and enabling diverse asset-backed loans.

December 15, 2023

Defactor

Read More
Arrow Right Icon
The Benefits of Lending Pools

The Benefits of Lending Pools

Explore DeFi lending pools—swift access to funds, passive income opportunities, and diverse pool types reshaping finance.

December 1, 2023

Defactor

Read More
Arrow Right Icon
Understanding Lending Pools and Their Role in DeFi Loans

Understanding Lending Pools and Their Role in DeFi Loans

Discover DeFi lending pools: reshaping finance through dynamic funds, global collaboration, and key elements like APY, collateral, and more.

November 17, 2023

Defactor

Read More
Arrow Right Icon
Engage | Staking & Governance

Engage | Staking & Governance

Defactor's Engage platform offers easy staking, governance participation, and attractive rewards for cryptocurrency users.

November 14, 2023

Defactor

Read More
Arrow Right Icon
SAP Digital Currency Hub

SAP Digital Currency Hub

This week we tested SAP’s newly announced Digital Currency Hub. We issued an invoice which was immediately approved and paid by our customer and settled and reconciled by our system all in one transaction using a public blockchain and a stable crypto currency.

July 6, 2023

Sharif Bouktila

Read More
Arrow Right Icon
The Basics of Factoring

The Basics of Factoring

Factoring provides cash flow by selling invoices, benefiting SMEs, but higher fees and credit risk exist. Defactor offers decentralised finance solutions.

May 24, 2023

Defactor

Read More
Arrow Right Icon
Why are real-world assets important to DeFi?

Why are real-world assets important to DeFi?

DeFi's growth faces hurdles due to volatility. Real-world assets (RWAs) can bridge the gap and drive mass adoption. Defactor simplifies RWA integration, accelerating traditional business adoption of DeFi.

May 24, 2023

Defactor

Read More
Arrow Right Icon
Previous slide
Next slide