Tokenization, in the Web3 context, is the process of representing ownership of a real-world or digital asset as a token on a blockchain. Any asset that has value and can be owned can be tokenized: real estate, equity in a company, fine art, commodities, intellectual property, or carbon credits. Once tokenized, the asset can be traded, fractionalized, and transferred with the speed and transparency of blockchain transactions. Tokenization of real-world assets is one of the most significant trends in blockchain. BlackRock, JPMorgan, and other major financial institutions have launched tokenized funds and bonds on-chain. Settlement that takes days in traditional finance can happen in minutes on-chain. Fractional ownership becomes trivial, enabling retail investors to hold small pieces of assets that were previously inaccessible. The total addressable market for asset tokenization is estimated in the hundreds of trillions of dollars. Blockchain infrastructure is only beginning to capture a fraction of it. This is distinct from the AI/NLP use of tokenization, which refers to breaking text into tokens for language model processing.
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