Two Types of Asset Tokenization on Ethereum — micobo

Tokenization of assets has undoubtedly been a subject of high interest in the last few years. Its rise is bringing not only more investors into the game but also requires a lot of new regulations and classifications. The common classification framework for crypto-assets is lacking and as a result the market and all of the participants defining tokenization and its elements in many, at times even conflicting ways.

Tokenized assets are often confused for native digital assets such as bitcoin or CBDC (central bank digital currencies), while the issuance of tokenized securities is identified by some as the next generation of ICOs. This article aims to give a broader explanation of the differences between these two types of asset tokenization — tokens representing a pre-existing real asset and tokens “native” to the blockchain.

Tokens representing a pre-existing real asset

There is an important distinction between the “native” tokens and tokenized assets that exist off the chain. Issued tokens exist on the chain and then carry the rights of the assets they represent. Therefore, acting as a store of value. The real assets backing the tokens that are issued. Hence, they continue to exist in the “off-chain” reality and. In these cases (physical real assets), the assets would usually…