Tokenization

Tokenization in Web3 means representing ownership of a real-world or digital asset as a token on a blockchain. Real estate, company equity, art, commodities, intellectual property, and carbon credits can all be tokenized if they have value and an owner. Once tokenized, the claim can be traded, split into fractions, and transferred with on-chain settlement.

BlackRock, JPMorgan, and other large financial firms have launched tokenized funds and bonds on-chain. Settlement that takes days in traditional finance can finish in minutes on-chain. Fractional ownership is then a contract feature, so smaller buyers can hold a slice of an asset they could not buy whole.

The addressable market for asset tokenization is estimated in the hundreds of trillions of dollars. On-chain rails still hold only a fraction of that. This is not the AI meaning of tokenization, which is splitting text into tokens for a language model. Tokenization of real-world assets is one of the most major trends in blockchain.

Fractional ownership becomes trivial, enabling retail investors to hold small pieces of assets that were previously inaccessible. Blockchain infrastructure is only beginning to capture a fraction of it. ERC-20 (2015) is the common Ethereum interface for fungible tokens: transfer, approve, and balanceOf.