Asset tokenization
- is an area of explosive growth for the blockchain industry. Since Bitcoin’s earliest days, attempts have been made to use bitcoins as “tokens” to represent assets.
Early on, this was done by leveraging a bitcoin’s metadata field to attach meaning to a bitcoin transaction (thereby creating a “colored coin”) and recognize the ownership of that coin as the ownership of some other asset.
The bitcoin blockchain could then track ownership of a represented asset and enable secure and direct transfer of ownership. Since then, there has been a veritable Cambrian Explosion of protocols and blockchains that have been purpose-built for the representation and transfer of many types of assets.
Today, blockchain’s application to securities issuance and trading is well underway,
and the benefits of its application to many types of securities are becoming better understood.
As we set out on this Article, we came to find an application that was not well understood:
- How will tokenization impact securities that have reference to real, physical assets?
- How can blockchain address, if at all, unique challenges that come with investing in those asset classes?