What is Tokenization?

Introduction

The transition from Web2 to Web3 can be likened to the shift from traditional retail to e-commerce. Just as e-commerce transformed product sales by unlocking new markets, increasing speed, and personalizing customer experiences, Web3 and tokenization are redefining asset management and financial transactions.

The goal of tokenization is to establish a financial system that is programmable, interoperable, continuously available, instantaneous, and widely accessible.

According to a report by Ripple and the Boston Consulting Group, the tokenization of real-world assets (RWA) is expected to grow from about $0.6 trillion in 2025 to $18.9 trillion by 2033, representing a compound annual growth rate (CAGR) of 53% in the middle scenario. In the optimistic scenario, the figure could reach as high as $23.4 trillion, and $12.5 trillion in the conservative scenario.

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Types of Tokens and Their Practical Applications

Tokenization supports various asset types, broadly categorized as follows:

Fungible Tokens, that is, tokens that are fully exchangeable-similar to traditional currency, where one unit is always equal to another - they are useful for fast payments, cross-border transactions, and decentralized finance (DeFi). Here are examples of practical applications:

Stablecoins - tokens whose value is pegged to stable assets, such as the US dollar or the euro. Due to their price stability, stablecoins are used for fast and cheap cross-border payments (e.g. BUSD).

Utility tokens - the most common type of ERC-20 tokens. They are used as internal currency in applications, games or as loyalty points, allowing access to certain features or services.

Non-fungible tokens (NFTs) are unique digital assets recorded on a blockchain. This makes NFTs ideal for digital ownership applications. Practical uses include tokenized digital art (ensuring a provably original piece), virtual collectibles like trading cards or pets, and special gaming assets (unique in-game items that players can buy or trade).

Soulbound Tokens (SBTs), are non-exchangeable and non-transferable tokens that represent a user's identity, reputation or earned certifications. This makes them ideal for documenting educational achievements, certifying professional skills or building trust and reputation in decentralized communities.

Security Tokens are tokens that represent traditional financial instruments, such as stocks, bonds or other securities. They are subject to regulation because they have real investment value and represent a stake in a company or specific asset.

Technological Mechanisms and Key Tokenization Standards

Tokenization standards are protocols and guidelines that govern how tokens are created and managed on blockchain platforms. They ensure that tokens work seamlessly and securely with each other. They allow tokens from different projects to work smoothly with wallets, exchanges and DeFi protocols without additional modifications.

Key tokenization standards include:

• ERC-20: The most widely used standard for convertible tokens on the Ethereum blockchain and other EVM chains.
• ERC-721: Standard for non-fungible tokens (NFTs), each of which represents a unique element.
• ERC-1155: A multi-token standard that allows for the creation of both fungible and non-convertible tokens in a single smart contract.
• ERC-1400: A security token standard designed specifically for tokenized securities that includes compliance mechanisms.
• ERC-3643: A compliance-aware standard that integrates identity management and regulatory controls directly into token operations.
• CMTAT: A Swiss-compliant standard designed to tokenize financial instruments in accordance with Swiss law.
• ERC-1450 and ERC-2980: Non-adopted standards designed to comply with US and Swiss regulations, respectively.

(Research Report Tokenization Standards: The Missing Link for Institutional Adoption, Nethermind & PwC Germany, March 2025)

Each of these standards defines how tokens can be transferred, how ownership is tracked, and what metadata or information they carry. By using standard interfaces, interoperability is maximized – any platform or wallet that understands ERC-20 can work with any ERC-20 token, for instance.

Tokenization Protocols and Platforms

1. Securitize – End-to-End Digital Securities Infrastructure

Securitize is one of the most established players in the digital securities space, offering a full-stack platform for issuing, managing, and trading tokenized securities. It’s registered with the U.S. SEC and FINRA, and it provides both primary issuance and secondary market trading of tokenized assets such as:

• Real estate funds
• Private equity
• Bonds and venture capital shares

How It Works:

1. Asset Originators (like funds, real estate firms, or startups) issue digital securities via Securitize’s compliance engine.
2. These securities are tokenized on public blockchains like Ethereum, Avalanche, or Polygon, but with built-in access control (whitelisting).
3. Investors can buy and sell compliant securities through the Securitize Markets platform, a registered alternative trading system (ATS).
4. Smart contracts automate cap table management, investor onboarding (KYC/AML), and even distributions.

2. Tradable – Building the Liquidity Layer for Tokenized Markets

Tradable (often stylized as “t/Tradable”) is a fast-scaling platform focused on enabling marketplace infrastructure for tokenized real-world assets (RWAs). Instead of issuing assets itself, it acts as a liquidity layer that connects issuers, custodians, and buyers across chains.

How It Works:

1. Tradable partners with issuers (e.g. funds, real-world asset vaults) who tokenize assets on-chain.
2. It provides a shared settlement layer and liquidity pool infrastructure across multiple blockchain networks.
3. Developers and asset managers integrate Tradable’s APIs to gain access to a broad base of buyers, making tokens instantly tradeable across DeFi platforms.

Key Features:

• Multi-chain support (Ethereum, Arbitrum, Base, and more)
• Plug-and-play liquidity integration for protocols and wallets
• Focus on stablecoin-denominated yield products and tokenized credit

3. Ondo Finance – Tokenizing Treasuries & Institutional Yield

Ondo Finance is bringing institutional-grade yield to DeFi by tokenizing short-term U.S. Treasuries and investment-grade bonds. Its flagship products – OUSG (tokenized BlackRock Treasury fund) and USDY (yield-bearing stablecoin backed by T-bills) – give global users access to stable, real-world returns.

How It Works:

1. Ondo partners with trusted asset managers (like BlackRock) to allocate capital into short-duration treasuries.
2. These investments are wrapped into on-chain tokens (e.g., OUSG), which can be held, traded, or used as collateral in DeFi.
3. Tokens are fully backed, redeemable, and designed to mirror real-world yield accrual on-chain.

Key Features:

• Transparent, blockchain-based yield products
• Permissionless access to tokenized U.S. Treasuries
• Interoperable with DeFi protocols and on-chain lenders

Tokenization Use Cases

RealT (Fractional Real Estate Ownership) is a platform that allows investors worldwide to purchase fractional ownership of rental properties in the United States (for example, single-family homes in Detroit). Each property is incorporated into a legal entity, and ownership interests in that entity are represented by Ethereum tokens. This means an investor can buy, say, 1% of a house by purchasing tokens, and thereby earn 1% of that property’s rental income and 1% of any appreciation on sale. RealT leverages Ethereum to ensure all transactions are transparent and secure, and uses smart contracts to automate the distribution of rental income to token holders.

Ondo Finance provides an innovative example of tokenizing a traditionally ultra-conservative asset: short-term U.S. Ondo created a product called OUSG (Ondo Short-Term U.S. Government Bond Fund) which tokenizes shares in a fund holding U.S. Treasury bills. Qualified investors can mint and redeem OUSG tokens on-chain, essentially swapping stablecoins (digital dollars) for a token that represents a slice of a U.S. Treasuries portfolio. OUSG tokens can be traded or redeemed for stablecoin around the clock, and settlement happens within minutes on the blockchain.

ARCHIV3 (by Bank Pekao S.A. & Degen House) - artworks by famous Polish artists such as Matejko, Wyspianski, Kossak, Falat and Mehoffer in ARCHIV3 have been preserved using three innovative methods: high-resolution digital scanning, blockchain tokenization and PIQL film technology. The PIQL scanning process is characterized by precision, capturing colors with extreme accuracy and achieving very high resolution to reproduce even the smallest details of each artwork. All scans were transported to the remote Arctic World Archive, an environment extremely safe from natural and human threats. At the same time, blockchain tokenization creates unique digital certificates (tokens), securely stored online, representing the ownership and authenticity of each artwork. This comprehensive approach guarantees the preservation of artworks in both physical and digital form.

The ARCHIV3 project, developed for Bank Pekao S.A., aims to preserve Polish cultural heritage by seamlessly integrating traditional art with advanced technological solutions. Managed entirely by Degen House, the project's scope included producing videos, creating engaging designs and content, accurately scanning artworks, digital tokenization, and organizing an expedition to the Arctic World Archive (AWA). In such way we wanted to show that technological innovations can be used to create lasting and widely available values for the entire society.

Benefits of Tokenization

1. Enhanced Liquidity

Tokenization transforms traditionally illiquid assets into tradeable tokens. These can be bought or sold 24/7 globally, improving market accessibility.

2. Fractional Ownership

Assets can be split into smaller, affordable parts – lowering investment barriers and enabling diversification. This opens doors to micro-investors worldwide.

3. Automation & Efficiency

Smart contracts reduce the need for intermediaries, speeding up transactions and cutting costs. Compliance and corporate actions can be coded, streamlining asset management.

4. Transparency & Trust

Blockchain provides a transparent, tamper-proof ledger. Investors, regulators, and auditors can track ownership and verify asset authenticity in real time.

5. Ability to represent a variety of assets

Tokenization enables the creation of digital representations of various assets, such as claims, values or rights, including representations of real-world assets, on a distributed ledger (DLT). Examples include fiat-based stablecoins or tokenized stocks.

6. Global, 24/7 Market Access

Tokenized assets are accessible across borders and around the clock, breaking traditional market limitations and paving the way for a unified global financial system.

7. Cost savings

Financial products based on tokenized assets (so-called investment products) can eliminate the need to directly engage in DLT-related activities, such as maintaining a personal portfolio. This allows investors to easily incorporate these assets into traditional securities accounts.

“For businesses, this isn’t just about efficiency - it’s a strategic shift in how value moves. Those who act early will shape the standards and seize new markets. Waiting means falling behind in a financial system that’s rapidly becoming digital-first.” - Filip Pawczyński, Co-Founder of Degen House & President of the Polish Bitcoin Association

Summary

Tokenization represents a transformative shift in the global financial landscape not just as a digital upgrade, but as a fundamental rearchitecture of how assets are created, managed, and exchanged. By making assets programmable, interoperable, and accessible around the clock, tokenization holds the potential to dramatically enhance efficiency, transparency, and inclusivity across markets.

The development of robust token standards (like ERC-20, ERC-721, ERC-1155, and ERC-1400), along with compliance-ready platforms such as Securitize, Tradable, and Ondo Finance, are laying the foundation for a secure and scalable tokenized economy.

For institutions, innovators, and investors alike, now is the time to understand, explore, and prepare for a tokenized future.