Asset tokenization

Polymesh enables institutions to tokenize regulated assets and stay relevant in the emerging global tokenization market, projected to reach $5 trillion USD by 2025.

What is asset tokenization?

Asset tokenization is the process of converting the ownership value (along with any associated rights) stored in tangible or intangible assets into digital tokens. This enables the digital ownership, transfer, and storage of assets without the need for a central intermediary.

Tokens may represent property interests that exist only in the blockchain (e.g. non-certificated securities) or physical or digital assets existing off-chain. Depending on their nature and regulations, they could qualify as securities, commodities, or another asset class.

When it comes to securities, tokenization can be a useful vehicle for securitization, or the refinancing of assets from low liquidity assets into higher liquidity security instruments.

Tapping into immense new market value

The tokenization of real-world assets is gaining momentum as leading financial institutions look to benefit from the efficiencies and economic possibilities enabled by blockchain. Many incumbent legacy institutions have already developed tokenization offerings.

The rapidly growing tokenization market signals that forward-looking institutions are recognizing the opportunity that asset tokenization represents to unlock market value and dramatically change the dynamic for issuers and investors. Follow their lead and get involved with Polymesh, the blockchain purpose-built for regulated tokenized assets.

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What will be tokENIZEd

Transforming the financial industry

Transparency in payment and data flows, the immutability of transaction records, increased liquidity and traceability, better efficiency with lower operational costs, more robust risk management, clear proof-of-ownership, and fractionalization fuse together to open the floodgates to fairer, less expensive, and less corrupt markets.Issuers gain access to a wider pool of investors and new asset classes are created. Meanwhile, retail investors gain access to markets previously unreachable, with the ability to make more informed investing decisions from transparent data.

Key benefits of asset tokenization

Efficiency

Blockchain brings major efficiencies to the traditionally laborious and often manual-intensive trading process, including but not limited to: instant settlement, 24-hour trading, reduced counterparty risk, improvements to profit sharing and voting rights distribution, better accounting operations, and improved asset liability management. Transparency, automation, and the elimination of central intermediaries optimize the market while making operations less expensive for participants. Meanwhile, trust and proof-of-ownership are guaranteed by narrowing informational reliance to one single point of entry: the immutable distributed ledger.

Fractional ownership

Asset tokenization eliminates obstacles currently preventing the fractionalization of real-world assets, making it possible for the majority of retail investors to acquire interest in asset classes typically restricted to a number of high net-worth individuals or institutional investors, such as real estate and fine art. Ultimately, fractionalization democratizes investments in historically illiquid asset classes and enables investors to diversify their portfolio by small sums not historically possible without heavy amounts of paperwork, money, and time. This brings about fairer markets while creating new business and social models such as shared property ownership or shared rights.

Liquidity

Trillions of dollars currently locked in assets will become accessible to a wider investor base thanks to the inherently global nature of public blockchains and the fractionalization of new and existing asset classes that expand the range of available and acceptable investments and collateral. This increased liquidity will eliminate the need to incentivize investors with illiquidity discounts and enable issuers to charge fair market prices for traditionally hard-to-liquidate assets. Overall, readily available capital can more easily flow into illiquid markets.

Mitigate risks to security and compliance with Polymesh, the blockchain purpose-built for regulated tokenized assets

Trusted entities using Polymesh

What is the process for creating tokenized assets on Polymesh?

Work with Polymesh to take advantage of its unique identity system and the most sophisticated compliance engine on the market.

Configure a security token

Configure a security token on the blockchain to represent either physical or digital assets. On Polymesh, tokens are created at the protocol layer, bypassing the need to add a smart contract on top of the chain for each security token.

Tokens can easily be configured using basic programming languages and the Polymesh SDK or with a tokenization platform for issuers who want a completely no-code approach.

Set compliance rules

Flexibly set rules around ownership and transfer with Polymesh’s compliance engine. Ensure that transfer restrictions can be enforced and that your token complies with regulatory requirements such as KYC/AML requirements, as well as securities regulations.

Distribute your token

Mint your tokens in one easy click and send them to existing shareholders, affiliates, or reserve accounts while enforcing broader compliance requirements. Set pricing based on what makes sense for your token and (if desired) assign a qualified custodian to manage the collection in a safe and secure way.

Manage corporate actions

Execute corporate actions on-chain to address concerns with benefits, reorganization, capital distributions, and voting. Issuers only need to input a few details. From there, the engine can determine entitlements, schedule record dates, distribute capital (if required), and update records.

What are fungible vs. non-fungible tokens?

Assets can be tokenized using either non-fungible or fungible tokens depending on the asset’s attributes. Most security tokens make sense to model as fungible tokens, however there are some use cases better modeled by non-fungible tokens, such as unique bonds, derivatives, or swaps.

Fungible tokens are differentiated from non-fungible tokens by the following characteristics:

Fungible tokens are interchangeable: Each unit has the same market value and validity, meaning token holders could swap assets between each other with confidence that the value is the same.
Fungible tokens are divisible: The asset can be divided into as many decimal places as configured during issuance, and each unit will have proportional value and validity.

In contrast, non-fungible assets are non-interchangeable and can’t be replaced as each unit represents a unique value and has unique information and attributes. Non-fungible tokens are also not typically divisible, although there are ways to divide the cost of investing to offer fractional ownership, such as in commercial real estate.

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Asset tokenization

What is asset tokenization?

Real estate

Fine art

Precious metals

Exotic cars and boats

Collectibles

Sports teams

Race horses

Equities and bonds

Intellectual property

Investment funds

Synthetic asset baskets

Revenue share agreements

Cash flows

Accounts receivable