Published on Nov 26, 2021

Asset-Backed Tokens

icon-alt1 Min

Asset-backed tokens are digital claims on real-world assets that are backed up by the asset itself. Tokenization and conversion of gold, crude oil, real estate, stocks, soybeans, and nearly any other actual, physical object into an asset-backed token are possible.

Asset-backed tokens are a blockchain-enabled development. In truth, Bitcoin was the first token, but it is not backed by anything solid. Since Bitcoin, a lot has changed, and there are now dozens of different cryptocurrencies available, ranging from new digital ones to stablecoins tied to fiat money.

However, the cryptocurrency revolution and its volatility have fostered innovation for more stable tokenized assets designed to maintain value and be transferred between peers without the need for a financial institution to function as a middleman.

The next wave of cryptocurrency advancements takes this interface into the realms of the practical and realistic with asset-backed tokens that mirror real-world assets. The value of an asset-backed token is directly influenced by the value of its underlying asset, therefore is frequently classified as a security by financial regulators.

Ownership of the token frequently represents a claim to the asset and, depending on the asset, may come with the prospect of future benefits as the asset's value grows. The value of the token grows in unison with the value of the asset. The development of these tokens also indicates that a person, corporation, or other entity can seek investment in return for the token and generate funds using a blockchain-based system, which is accomplished by issuing asset-backed tokens as new equity instruments in accordance with financial regulations.

The value of official digital tokens is being linked by governments to the price of crude oil, and the real estate market is rapidly transitioning toward tokenized fractional ownership. Asset-backed tokens promote security and transparency while enhancing liquidity in previously illiquid markets and enabling cost-effective transactions that do not rely on a central party. This is having a big impact on how we all do business and think about ownership and wealth creation in the future.

Share this blog on

Subscribe to our Newsletter

Get the best updates from the Web3 ecosystem & The Dapp List in your inbox every week 👇