Asset Tokenization on #blockchain n Network - Part 1
I will write more than 3 pieces of content about Tokenization.
This is the first one.
Tokenization:
This is an area that the world will move towards in the future in terms of financial transactions, buying and selling assets, by converting physical assets into digital, online, and on-chain forms.
How does it work?
When we say Tokenization, it means converting something that exists physically into its representation on a blockchain network, where the value remains the same.
That is, the physical asset and the on-chain (online) asset both have the same value.
You create tokens that can be exchanged for money in place of the house you put up for sale.
That means you have tokenized the house, from the word token.
Example:
You own a house in your hometown.
You built it for ₦100,000,000 and now you want to sell it because you urgently need money.
But finding someone who can come and pay ₦100 million at once to buy the house is difficult.
It will take time, cost money, and waste effort before the house is finally sold.
How Tokenization Solves This:
With tokenization:
You tokenize the house
You put it on the blockchain
You assign a price to it
For example:
If the house is worth ₦100 million,
you create 100 million tokens,
each token priced at ₦1.
₦1 × 100 million tokens = ₦100 million.
One person can buy 1 million tokens,
another can buy 10 million tokens,
and so on, until the house is fully sold.
This way:
The house is sold within a short time
You get your money faster
Shared Ownership:
In the end, you’ll notice that:
Many people own the house
Not just one person
They don’t have to be from your country.
They can even be from very far parts of the world.
So, The house becomes tradable
It becomes easy to sell
If someone doesn’t buy it fully, they only have a claim on the property
The house now behaves like a stock or company shares, held by different people.
This system is what we call Tokenization.
Important Clarification:
If we understand this well, we will realize that:
Tokenization is not the creation of a new asset.
It is simply converting the value of an existing physical asset into an on-chain form.
Fiat Currency Example:
If you look at the U.S. Dollar (fiat currency):
It has been tokenized in different ways:
$USDC (United States Dollar circle)
$USDT (United States Dollar Tether)
There are physical dollars stored in banks.
Every dollar that is minted as a token is backed by real dollars.
USDT and USDC are tokenized versions of the dollar.
Other Assets That Can Be Tokenized:
Tokenization can be applied to:
Real World Assets (RWA)
Fine Arts
Bonds
Gold
Diamonds
Legal tenders
Historical and valuable items
Any asset that has demand but is difficult to access globally
Institutional Example:
The largest asset management company in the world is BlackRock,
with over $40 trillion under management.
They want to expand access to investors across the world.
One of the easiest ways they’ve started doing this is by tokenizing their assets on the Ethereum network.
Benefits of Tokenization:
If you observe closely, tokenization brings the following:
Assets that one person used to buy alone can now be owned by thousands of people
It creates financial interaction between people
It reduces paperwork
No lawyers
No office visits
No printing and photocopying
Smart contracts handle everything and store it on a public ledger that cannot be altered
It provides ease and liquidity
You can start getting money even before the asset is fully sold
Cross-border transfers
With blockchain interoperability, assets or funds can move from one blockchain to another within minutes or seconds
Common Questions:
Someone may ask:
- If I sell my house online and get my money, what happens to the physical house?
Don’t worry, we will explain that later.
Others may ask:
Are tokenized assets fungible tokens or #NFTs ?
What about regulations, compliance, and laws?
We will address all of these.
This is just the beginning.
Just follow me and turn notifications on for the remaining parts.
