Conventional asset administration is a laborious course of. It usually requires the involvement of quite a few middlemen, together with numerous state our bodies and regulators.
Belongings corresponding to shares, bonds, property, and even land can usually be prohibitively costly and time-consuming to handle, placing them past the attain of the overwhelming majority of the world’s inhabitants.
What’s extra, conventional asset administration usually entails complicated authorized agreements and many paperwork, which makes all of it very troublesome to trace and switch possession. It’s a sluggish and cumbersome system—and one that always lacks enough transparency to forestall fraud and different types of corruption.
Tokenization, whereas not with out its personal faults and regulatory hurdles, gives a radical new mind-set about asset administration—a reimagining of what’s potential within the monetary and technological world. We discover this new concept beneath.
What’s a token?
Merely put: “A token is one thing representing one thing else, [and] will be rendered in any form of kind,” in response to Joseph Lubin, co-founder of Ethereum and founding father of blockchain enterprise studio ConsenSys. “It may be a bit of paper. It may be an concept. It’s an emblem representing one thing,” he mentioned. “Your driver’s license, as an illustration, is a token that’s listed right into a ledger that the state maintains of who’s authorized to drive.”
You may consider a blockchain-based token as a kind of digital receipt for a slice of an asset. However in contrast to the receipts of outdated, these tokens are immutably logged on an auditable blockchain.
Do you know?
Blockchain expertise and tokens have their origins in cryptocurrencies corresponding to Bitcoin.
In 2009, Bitcoin launched a peer-to-peer system for transferring worth throughout the Web. The Bitcoin blockchain is what makes it potential for transactions to be made in a decentralized, trustless, and immutable manner—all whereas avoiding the so-called double-spend downside, stopping transactions from being fraudulently copied and duplicated digitally.
The innovation led entrepreneurs to examine new use circumstances for Bitcoin’s underlying expertise. In 2015, Ethereum launched the fintech world to a programmable blockchain—a breakthrough made potential by Ethereum’s sensible contract expertise.
Ethereum took the identical expertise that Bitcoin is constructed on and made it about extra than simply cryptocurrency and shops of worth.
Earlier than lengthy, hundreds of tokens had been developed on the Ethereum community, every with its personal distinct attributes and advantages. Not like cryptocurrencies, tokens have numerous potential use circumstances—something from managing property, shares, and contracts to powering decentralized functions and video games.
Token use circumstances
Normally, there are two varieties of tokens: Utility tokens and safety tokens.
Utility tokens are digital belongings that give their house owners entry to services or products produced by an organization. Because the label implies, these tokens are supposed to be used for one thing, moderately than held or traded. For instance, a utility token can present entry to a future service, corresponding to renting computing energy, inserting a wager at a sports activities recreation or casting a legally binding vote.
Courageous Software program, the makers of the privacy-focused Courageous internet browser, created the Fundamental Consideration Token, or BAT—a utility token designed for the promoting business that monetizes the eye of internet customers.
Safety tokens, then again, are digital belongings that signify an funding of some kind, corresponding to a share in an organization, a voting proper in how the corporate operates, a unit of worth, or some mixture of the three. These tokens may signify components of real-world belongings, corresponding to gold, basic automobiles or royalties out of your favourite pop-song.
As such, safety tokens should adjust to the prevailing regulatory frameworks that govern conventional securities, corresponding to shares. Consequently, a complete business has developed to assist tokenization entrepreneurs adjust to relevant laws.
Securitize, a crypto startup backed by main US cryptocurrency change Coinbase, is one such firm that focuses on the issuance and administration of digital securities, with the specific goal of serving to token issuers stay compliant.
Other than utility and safety tokens, there are additionally particular non-fungible tokens, often called NFTs. These tokens signify distinctive digital gadgets, starting from profile image collections corresponding to CryptoPunks and Bored Ape Yacht Membership, to particular person artworks which have bought for tens of tens of millions of {dollars}.
To tokenize or to not tokenize…
The promise of tokenization rests in its potential to democratize entry to digital belongings, in addition to its skill to offer accountability, safety, and provenance for these belongings.
“Creating tokens that signify real-world belongings that may be traded and supply accountability is enormously helpful,” Paul Snow, founder, and CEO of Factom, informed Decrypt.
Folks imagine they personal inventory however they actually don’t; they personal a receipt for a inventory and it’s type of a ‘belief us’ course of.
A blockchain-based system eliminates the necessity to belief in a intermediary. Nevertheless it additionally supplies a greater degree of accounting, Snow defined, which will be notably useful for companies that deal in fraud prevention.
That’s in a perfect world, at the very least.
In late June 2025, the favored buying and selling app Robinhood unveiled that over 200 shares can be tokenized and tradable on the Ethereum layer-2 community Arbitrum for EU clients. Two of those shares embrace OpenAI and SpaceX, personal firms that Robinhood mentioned gave “oblique publicity to personal markets.” OpenAI disagreed and issued a public assertion stating that they disapproved of the providing.
Regardless of the backlash, Vladimir Tenev, co-founder and CEO of Robinhood, mentioned in a July 2025 interview with Bloomberg that the personal firm listings weren’t going to cease there.
“We’d prefer to have hundreds of personal firms on the platform, accessible to retail,” Tenev informed Bloomberg. “And, truly, since our announcement, I’ve had a deluge of inquiries [from] personal firms that really need entry to retail, to have their shares tokenized, to be a part of this revolution.”
Kurt Watkins, founding father of U.S.-based agency Watkins Authorized, informed Decrypt that the providing was possible “commercially unviable” within the U.S. as a result of its lack of transparency and authorized ambiguity.
Regulators all over the world, and in the USA specifically, are actually paying very shut consideration to the cryptocurrency business, with a detailed eye on the best way tokens have been purchased, bought, and distributed so far.
And the foundations over the sale, distribution, and administration of tokenized belongings will fluctuate from nation to nation, crypto startups that goal to construct international, borderless techniques should now take care of regulatory and compliance measures in every of the jurisdictions that they count on to do enterprise.
This, too, has now turn out to be a laborious and costly course of in its personal proper, particularly in the USA, with many token-based firms opting to as an alternative take their corporations abroad the place the foundations are much less stringent.
Nonetheless, U.S. regulators have proven latest indicators of warming to tokenized belongings, and blockchain entrepreneurs proceed to develop modern makes use of for tokenization, in addition to options to enhance the scalability of their respective networks.
The longer term
Tokenization guarantees a world the place virtually any asset or service will be represented and saved on a blockchain. The probabilities are theoretically countless. However very like the early days of the Web, we’re simply beginning to perceive which concepts are finest suited to this expertise.
It’s nonetheless early days, however the transition towards a tokenized world might change the best way we take into consideration every part that holds actual worth.
This text was revealed in July 2023 and up to date in July 2025.
