What is Blockchain Tokenisation

Blockchain tokenisation is the process of representing real-world assets or digital rights as tokens on a blockchain. These tokens can represent a wide range of assets, including physical assets like real estate, art, or commodities, as well as digital assets like stocks, bonds, or intellectual property.

Here's a neutral explanation of how blockchain tokenisation works:

1. Asset Representation: Tokenisation begins by selecting an asset that one wishes to represent digitally. This can be anything of value, such as a piece of property, a share in a company, or even a rare collectible item.
2. Token Creation: Next, a blockchain platform, which is essentially a distributed ledger, is used to create digital tokens that represent ownership or rights to the chosen asset. These tokens are often referred to as security tokens, utility tokens, or asset-backed tokens, depending on their purpose and the nature of the underlying asset.
3. Smart Contracts: Smart contracts, self-executing agreements with predefined rules and conditions, are often used in blockchain tokenisation. These contracts automate the processes of buying, selling, and transferring tokens. They ensure that the token holder's rights are enforced automatically and transparently.
4. Legal and Regulatory Compliance: Depending on the jurisdiction and the asset being tokenised, there may be legal and regulatory requirements to consider. Token issuers must ensure that their tokenised assets comply with relevant laws, such as securities regulations.
5. Trading and Transfer: Once tokens are created, they can be traded on blockchain-based exchanges, providing liquidity to token holders. These tokens can be transferred between users much like traditional assets, but with the added benefits of security and transparency offered by blockchain technology.
6. Fractional Ownership: Tokenisation allows for fractional ownership of assets. This means that multiple investors can collectively own a portion of an asset, making it more accessible and affordable.
7. Transparency and Security: Blockchain technology ensures transparency and security. Every transaction related to the token is recorded on the blockchain, making it immutable and tamper-proof. This transparency can help reduce fraud and increase trust.
8. Liquidity: One of the key advantages of tokenisation is increased liquidity. Traditional assets like real estate or private equity can be illiquid and have high barriers to entry. Tokenisation allows these assets to be traded more easily, potentially attracting a wider range of investors.

In summary, blockchain tokenisation is a process that transforms real-world or digital assets into digital tokens on a blockchain. It has the potential to revolutionise how we buy, sell, and invest in a wide range of assets, providing benefits such as increased liquidity, transparency, and accessibility while also introducing regulatory considerations.