The Social Mining concept, in its core principle, speaks about two cornerstones of wealth in modern times: Work and the Fair Distribution of Wealth derived from it. DAO Labs ramped up this concept thanks to Blockchain Technology to make it possible to calculate value to shared ideas, like those that anyone can post on their Social Media. Yet, in all the Added Value involved in financial ecosystems, physical items and services are the next frontier for the token economy to explore and conquer.

Real-world assets (RWAs) are digital tokens that represent physical and traditional financial assets, such as currencies, commodities, equities, and bonds. These assets are tokenized and brought onto the blockchain, enabling enhanced liquidity, transparent management, and reduced transactional friction compared to traditional assets. In essence, we are seeing a  bridge in the gap between physical and digital assets, unlocking new opportunities for both financial services and non-financial use cases.

Real-world assets encompass a diverse range of tangible and intangible items that hold intrinsic value. These assets exist beyond the digital realm,  and play a crucial role in our daily lives. From physical properties like real estate and machinery to intellectual property like patents and trademarks, real-world assets form the backbone of economies and financial systems. 

In recent years, the concept of tokenization has emerged, allowing these assets to be represented digitally on blockchain networks. This transformation bridges the gap between traditional assets and the decentralized world, unlocking new opportunities for investors, businesses, and individuals alike. 

But if you think we’re going too fast, let’s make a prior stop to talk about Assets.

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What’s an Asset, in financial terms?

In finance, an Asset refers to anything of value (any object or project) that an individual, company, or institution owns or controls. Assets can be categorized into several types:

1. Financial Assets: These include stocks, bonds, cash, and other securities. They derive their value from contractual claims or ownership rights.
   
   
2. Real Assets: These represent tangible or physical items, such as real estate, machinery, and natural resources. Real assets have intrinsic value beyond financial markets.
   
   
3. Intangible Assets: These lack physical presence but hold significant value. Examples include patents, trademarks, copyrights, and goodwill.
   
   
4. Liquid Assets: Easily convertible to cash without significant loss of value (money  or market funds, for instance).
   
   
5. Illiquid Assets: Take time to convert to cash (real estate).
   
   
6. Current Assets: Expected to be converted to cash within a year (inventory, accounts receivable).
   
   
7. Fixed Assets: Used for long-term operations (e.g., property, equipment).
   
   

As you can see, almost everything can be an Asset. Our financial systems see it this way, and the powerful differences between one or another are how much they value and who can own them. And they usually can be owned by many people at the same time.

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Is Fractional Ownership equal to Tokenization?

Maybe the best way to start this complex explanation is by talking about how it’s possible for many people to own something, even if it’s a digital asset, because that’s what Fractional Ownership is about to understand what Tokenization is.

In financial terms, Fractional ownership refers to dividing ownership of an asset into smaller, tradable units, or stakes. That action is, indeed, the first step to Tokenization.

If you can present any asset (think of a car, or any other object), dividing its value into a certain number of  fractions,  and digitally assign every part using tokens on a blockchain, you are Tokenizing that Asset and say that each token corresponds to a fraction of the asset’s value.

Think of, for instance, a luxury apartment tokenized into 1,000 tokens. Owning 10 tokens means you have a 1% stake in the apartment. Fractional ownership platforms facilitate trading and management, and every token holder will own a part of that apartment, with more rights, benefits -or obligations- derived from how many tokens he has of the total. Of course, it requires precise calculations to allow fairness and transparency.

That’s the Blood of DeFi systems. Investors can buy and sell these project tokens more easily than whole assets in search for Liquidity. Also, these investors use smaller investment amounts to enable broader participation in more projects due this easy Accessibility onboarding method, which also benefits investors with less money to try to participate and earn.

In that regard, Fractional Ownership democratizes access to valuable assets and allows easy diversification of investment.

We already used the apartment example, which talks about Real Estate properties in general and would allow high-value properties accessible to a broader investor base. 

Tokenized art and collectibles enable art enthusiasts to own shares in valuable pieces of artwork, democratizing access to cultural assets. Tokenizing commodities like gold or oil provides a convenient way to invest in physical assets while benefiting from blockchain transparency. 

But maybe what's more interesting would be to tokenize Stocks and Securities. Tokenized stocks and bonds allow for efficient trading and fractional ownership, potentially revolutionizing capital markets. Here’s where Legal walls are raised in every Country.

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If Tokenization is better, why is it not legal?

Blockchain technology provides a secure and decentralized ledger of transactions, and thanks to its unmatability of Records and Smart Contracts allows tokenization to happen seamlessly enhancing transparency in asset Fractional Ownership.

Blockchain records transactions in a tamper-proof manner. Once data is added, it cannot be altered or deleted, ensuring transparency and since no central authority controls the blockchain Ownership records are distributed across the network, reducing fraud risks. 

Smart Contracts have self-executing possibilities, allowing speed and confidence in transactions involving ownership transfers and maintaining Transparency as contract terms are visible to all parties. But security plays a key role here because an error in a Smart Contract could make many people lose money.

Tokenizing real-world assets involves several complexities due to the need for accuracy, security, and regulatory compliance with local laws and regulations. Tokenization must adhere to securities laws, anti-money laundering (AML) rules, and investor protection guidelines. Different jurisdictions have varying requirements, making cross-border tokenization complex.

Also, someone has to verify that this Asset exists to prevent frauds. Verification processes can be time-consuming and resource-intensive. Ensuring that the asset being tokenized exists, has clear ownership, and is accurately represented on the blockchain is essential.  And about securing storage of physical assets, like real estate deeds, or art, and digital keys (private keys) is vital to prevent loss or theft.

Last, but not least,  as we mentioned above Tokenization allows fractional ownership, but dividing assets into tradable tokens requires precise calculations. Determining the value of each token and ensuring it aligns with the asset’s worth is challenging.

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In the second part of this article, we’ll be talking about one big failure in Tokenization, the Venezuelan Petro and what can we learn from that and other successful tokenization stories but, most importantly: We’ll talk about how Social Mining also is a Tokenization force through Social Miners’ Work. 

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Until the next time!

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Get into Social Mining today! These are our channels for you to follow and become part of our great community:‍

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🌎 More useful Links

Website  |  DAOVERSE  |  Social Mining Basics

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