Asset tokenization service and solutions - outsourcing company Boosty Labs
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Asset tokenization service & solutions

Today’s digital economy is based on tokenization, which is used by billions of people every day. Tokenization is the process of replacing valuables (such as money, stocks, credit card numbers and medical records) with tokens that reflect those values, making them easier and more secure to trade with. It may seem a distant idea, but tokenization is having a profound impact on our lives and can revolutionize many industries.
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Purposes of tokenization – examples of tokenization solutions

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Payments

Payment transactions totaling nearly $110 trillion are processed globally each year with tokenization by payment providers such as Visa, which reports roughly $2 trillion in payments each year. Two major problems dramatically increase the cost of payments for customers around the world: incredibly high fees for micropayments ($5 to $10) and the high costs associated with converting the currencies for international payments.
Tokenization significantly reduces all these costs and prevents any losses, so many blockchain-related companies have started providing services in these areas.

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Hedge funds, venture capitals and asset managers

The top 400 asset management firms collectively manage about $74 trillion. Hedge funds manage more than $3 trillion, while venture capital funds manage about $500 billion. But this money is often frozen for long periods of time, sometimes for up to seven years. Investors have to pay high fees if they want to withdraw their funds before this period ends. 
Tokenization of stocks in a hedge fund or a venture capital fund provides investors with a faster and cheaper way to redeem their money from the hedge fund. They have the opportunity to benefit from the token value whenever they feel it is reasonable to do so. In addition, tokenization services allow investors to increase the liquidity of their assets. They can sell them or buy more small stocks from numerous hedge funds or venture capital funds.

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Antiques and collectibles

Tokenization provides a compelling solution for owning antiques and collectibles, paving the way for mass ownership of valuable collectibles. For example, the right of ownership of a Michelangelo’s work can be divided among tens of thousands of people who can own shares in the painting and receive dividends from exhibition fees, while being able to sell their shares at any time on a secondary exchange. Contemporary artists also can use a tokenization service to raise funds for new works.

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Bonds

Investors seeking to balance their portfolios often buy fixed income bonds sold by governments and corporations to finance operating activities. Many small investors do not have access to the lucrative institutional debt market and often have to settle for lower-yielding mutual funds. Banks, underwriters and other intermediaries increase the cost of buying highly secured debt.
Bond tokenization allows small investors to participate in the purchase of issued debt, which increases the general investor pool and helps issuers meet their funding targets. A large enough investor pool will create pressure to lower interest rates and allow issuers to secure financing at cheaper rates.

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Health care and data

Blockchain technology can solve several healthcare industry challenges: stringent laws on patient privacy protection, difficulties in sharing patient data between different healthcare institutions, complicated funding cycles for drug and biotechnology researches, and confusing payment processes arising from insurance lawsuits.

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Insurance

Blockchain ledgers help detect insurance fraud by reducing the cost of exchanging data between insurance companies, enabling insurers to save up to $40 billion. Smart contracts significantly can speed up claims processing and reduce the cost of these processes, which can help insurers save up to $200 billion.

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Tokenization of asset management (commercial real estate, debt)

Real estate tokenization involves dividing the value of property into a certain number of tokens that can be purchased by investors through a decentralized platform and for which they make a profit. Tokenization of operations with commercial real estate reduces transaction costs, lowers the entry barrier for investors and reduces the time of transactions.
Investors looking to balance their portfolio often buy fixed income bonds sold by governments and corporations to fund operations. Many small investors do not have access to the lucrative institutional debt market and are often forced to settle for less profitable mutual funds. Debt tokenization allows small investors to participate in the purchase of issued debt, which increases the overall pool of investors and helps issuers meet their funding targets.

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Asset management

Asset tokenization allows assets to be divided into smaller fractions, giving potential investors the opportunity to purchase a fraction of a single stock.

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Contracts

Tokenization of the terms and conditions traditionally inherent in contracts allows information to be tracked and stored and shared online.

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Apps and games

Gamers can tangibly experience their progress toward a goal with tokenization, while receiving rewards for their achievements in the form of real assets.

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Receivables

Automation of processes for working with receivables allows you to make the process of information exchange safer, as well as reduce the amount of manual work with documentation.

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Securities

Tokenization allows you to optimize the processing of transactions with securities: reduce time, increase transparency and reduce costs.

Classification of asset tokens

Service tokens represent a potential future right to a product or service provided by the token issuer. It should be noted that this is not an investment, but rather a coupon for a product under development. An example of such a token is Filecoin. The project raised $257 million on the sale of its tokens, which will later provide its owners with access to a cloud storage platform.

Investment tokens represent the right to some external asset or cash and are therefore used as an investment. This type of token is regulated by federal laws, and if federal laws aren’t followed, the entire project can be shut down. However, if all regulations are complied with, investment tokens have the potential to be used in a variety of applications.

+ Token holders receive dividends from the company. Every time it reports a profit, investors receive additional coins.
+ Some investors even can influence the development of the company through features offered by blockchain technology.

The concept of asset tokenization is not new as it has been used for centuries in the form of stocks and bonds. At the household level, we encounter tokenization when, for example, we pay with a card: banks do not receive the card data themselves, but their digital format in the form of a token. Thus, confidential information does not fall into the wrong hands.

However, with the advent of blockchain technology, asset tokenization has become much more accessible and efficient. In simple terms, tokenization is the process of replacing physical or legal assets with tokens on the blockchain. Almost everything can be tokenized: from the rights to a work of art and an apartment to contracts for the supply of oil.

Many financial intermediaries and professionals are interested in the issue of transferring real assets to the blockchain in order to take advantage of the technology while maintaining the distinctive features of the asset. Thus, tokenization is something that many organizations are trying to achieve.

The tokenization process involves breaking down an asset into smaller digital units called tokens. These tokens are part of the underlying asset and can be traded. Each token can be unique, and a record of its owners and transaction history is stored on the blockchain, which makes the entire process of transferring ownership safe and transparent.

The tokenization of assets in the real world has the potential to change a wide range of industries. For example, in real estate, tokenization can enable the creation of fractional ownership, making it easier for investors to participate in real estate investing. In the art world, tokenization can enable the creation of fractional ownership, making it easier for collectors to invest in valuable works.

Real asset tokenization is gaining popularity as companies and investors explore new ways to sell real assets. There are various ways to implement real asset tokenization depending on regulatory requirements, business needs, and desired outcomes.

There are three main types of tokens:

  • Utility Tokens – give access to assets.
  • Security Tokens – give ownership of the asset.
  • Payment Tokens – for buying and exchanging assets.

From a business point of view, the most valuable is the security token. The digital analogue of a stock is not subject to the volatility of cryptocurrency rates – it is tied to tangible assets.
Such a token also makes it possible to make a profit through dividends, and when trading on the exchange, tokenized shares can be split. At the same time, on traditional exchanges, the number of shares to buy often has a strictly defined number.

Types of savings for transfer to the blockchain:

  • Intangible savings. Their existence is possible due to the law where physical objects are absent. Intangible savings include: patents, carbon credits, brands, copyright, and so on. They are easier to combine with platforms that are based on the blockchain. It is easier to tokenize intangible assets than physical objects, since in this case there are fewer problems with storage and sending.
  • Fungible assets. Lawyers can often distinguish between fungible and non-fungible savings. In the first case, it is an asset that can be easily replaced by any other similar object. It can be wheat, gold or water. These assets are somewhat easier to convert into tokens, since they can be divided into several smaller units, which are similar to bitcoin. To tokenize fungible assets, there is no need to use an abstract layer.
  • In the case of tokenization of non-fungible assets, there is a need for such a layer. For example, a company that groups assets and offers them as a package. This method can be used in mortgage securitization or in the collection of loans with unique characteristics that are combined into one category with approximately similar characteristics. It is worth noting that in general it is sometimes somewhat easier to tokenize fungible assets, since a common set of tokens is tied to a common set of fungible asset components.

Ownership enumeration vs. limited rights enumeration. To date, various methods of transferring assets and a huge number of varieties of rights to various objects, including savings, are common. There are situations when restrictions (encumbrances) of rights to tangible or intangible objects are registered. For example, leasing a land plot for a limited period, instead of acquiring ownership

Blockchain projects can be divided into those that have in mind the tokenization of rights partially, for example, music licensing, and those that involve the tokenization of all property rights. For example, registering the sale of real estate. The transfer of tangible and intangible assets to the blockchain is a big step towards progress.

Interaction of tokens

An electronic system similar to Bitcoin is always provided with interaction. Transfer operations are regulated by the software product, there are no exceptions. Gold bars can be easily stolen, houses are prone to fire, music may not always be licensed, and there are many such examples. Not all people and not always obey the regulations. It is for this reason that one of the key problems of any system that involves the tokenization of fiat savings is to provide dependence of electronic tokens on fiat savings.

Transfer of physical assets to the blockchain 

It is worth introducing a token that grants a share of ownership of a set of gold bars in a vault. If gold is removed from storage, how can this affect the electronic token? Who can ensure that the price of the tokens will continue to depend on the gold bars that must be stored in the vault? Who takes responsibility and is responsible for the risks? When token buyers cannot be sure that the token is pegged to fiat holdings, what will become of the value of the token? Will it then decrease or become zero?

Legal Models

Registration of a license. Registration of a license for musical works will largely depend on the documentation and power of attorney. Representatives of the music industry are confident that they are provided with reliable information about the sale of their tracks. Video streaming and electronic downloads can reduce sales of physical audio tracks and are therefore among the candidates for tokenization.

In the case where the ownership of music can be represented on the blockchain, then many musicians can receive a share of the sales, which is set digitally. The ideal would be a situation where you would need to unlock and pay to play tracks. As a result, the funds received would be distributed among the owners.

Trading systems. For example, let's take an alliance of companies that wish to work together and trade in oil. Under normal circumstances, they should complete the exchange of documents and start keeping records of the tenders. If they wanted to move to a system that is based on the blockchain, they could reduce the need for paperwork and provide themselves with more secure accounting. At the moment, most of the consortiums have begun to work hard on this. In reality, they are not even trying to tokenize real life savings directly, but want to use a blockchain-based system to enable fiat savings to be traded.

Payout system. For example, let's imagine one of the reproductions of a painting by a well-known artist, which can be tokenized by redirecting the ownership of reproductions of this painting by firms that have open offers for the payment of tokens all the time. Delivery of art objects is carried out to the given address.

Buyers will be able to receive an easily transferable token, and third-party markets have the ability to complete the transfer in parts. In the above example, we consider a situation where for artists this becomes one of the sources of receiving payments for the use of their works, and for ordinary people – one of the ways to take part in the circulation in the art market. 

Such a model is created on the basis that the company is the owner of the rights to works of art and undertakes to make payments to artists – royalties for the use of reproductions of their paintings.

Gold trading. Imagine gold bars that are in the use of Goldowner Inc., and the reservoir for their storage is owned by Vault Inc., with an impeccable reputation. Goldowner Inc has the ability to offer people digital tokens that grant the right to own gold. Or people have the option, through a smart contract with Vault Inc, to start maintaining a public ledger outside of the blockchain that links ownership of gold and tokens.

And then, for any token, Goldowner Inc transfers the ownership of Vault Inc, which owns it on an equal footing with the owner of the tokens. Vault Inc provides gold payment guarantees to anyone who is able to prove their ownership with an electronic signature. 

What is the need for gold tokenization? The advantage is that buyers of tokens have the opportunity to reliably know that this token was received only by them. Now buyers of certificates do not have full confidence in this.

Benefits of real asset tokenization:

Safety. Tokens created on the blockchain are an entry in the registry in the form of a unique code. Thanks to this, the token cannot be hacked or stolen.

Efficiency. Asset tokenization makes it possible to conclude transactions much faster, removing bureaucratic hell from the chain, since all the necessary information is entered into a smart contract.

Flexibility. Another advantage of tokens is the ability to separate them. For example, when tokenizing a business, you can digitize its share for subsequent sale or exchange. It also allows investors with small capital to enter the market.

Availability. If earlier transactions often required a physical presence in a bank or on an exchange, then thanks to smart contracts, you can sell and buy assets anywhere and anytime.

Increasing liquidity. Tokenization allows partial ownership of assets, making it easier for investors to buy and sell small portions of them. This makes it easier for investors to diversify their portfolios and access assets that were previously unavailable to them.Increased transparency

Blockchain-based platforms are secure and transparent, making it easy for investors to track their investments and ensure they earn a fair return. Tokenization also makes it easier to verify ownership and reduces the risk of fraud.

New approaches in various industries. In real estate, tokenization can enable the creation of fractional ownership, making it easier for investors to participate in investing. Instead of buying shares in real estate funds or REITs, tokenization can provide an opportunity to invest in certain selected properties within a portfolio.In the art world, tokenization can enable the creation of fractional ownership, making it easier for collectors to invest in valuable works.

How do I know which type of tokenization is right for my business?

When it comes to real asset tokenization, there are various approaches that can be taken depending on the specific needs and goals of the business or investor. Choosing the right type of tokenization can be a daunting task, especially for those who are new to the technology.

The first step is to identify the assets you want to tokenize and consider the applicable regulatory requirements. For example, security tokens are subject to securities market rules, while utility tokens are a commodity.

Then consider the desired outcomes and goals of the tokenization process. Do you want to increase liquidity or gain access to a wider range of investors? Do you want to incentivize certain behaviors or actions of token holders? Do you want to create fractional ownership of certain assets?

Based on these factors, you will be able to determine which type of tokenization is best for your business. For example, if you want to create fractional ownership of real estate, fractional NFTs might be the best approach. If you want to incentivize certain behaviors among token holders, bonus tokens can be a good option.

At Boosty Labs, we specialize in helping businesses navigate the complex world of real asset tokenization. We work closely with our clients to understand their unique needs and goals, and provide customized guidance and technical solutions for the most appropriate approach to tokenization. Our team of experts has extensive experience in this area and can help companies at every stage of the technical side of the tokenization process.

Different methods of tokenization of real assets:

Tokens – analogues of securities (Security Tokens)

Such tokens are pegged to the value of assets and can bring fixed or floating income to token holders. Companies issuing security tokens undertake to pay token holders a fixed or floating income. The principle can be similar to a stablecoin: the company undertakes a legal obligation to buy any number of tokens from holders at a set price at any time, ensuring the stability of the price of the token. As the fund grows, it also issues and sells new tokens at a fixed price. Such a token can be issued on almost any blockchain.

Bonus tokens (Reward Tokens)

Bonus tokens are not tied to the price of assets and their value is determined on the free market. The company issuing the token can influence the price if it has enough tokens. In this case, ideas such as staking and DAO can be implemented. However, the token is no different from other tokens because it has no real connection to real assets.

Fractional NFT tokens

Asset tokenization with fractional NFT tokens involves separating each asset in a portfolio into sub-NFTs, where each token represents a portion of the underlying asset. This approach allows for partial ownership and trading of certain properties, making it easier for a wide range of investors to participate in the ownership of certain assets.

Thus, choosing the right type of tokenization for your business requires careful consideration of various factors such as regulatory requirements, desired outcomes, and type of asset. By working with an experienced partner like Boosty Labs, businesses can unlock the potential of this technology and achieve the results they want.

Real asset tokenization is a promising technology that offers increased liquidity, transparency, and access to a wide range of assets. Using the potential of this technology, businesses can discover new sources of value and achieve the desired results. At Boosty Labs, we provide assistance and guidance on the most appropriate tokenization approach for enterprises based on their unique needs and goals. As this technology continues to evolve, we can expect new innovations and breakthroughs across industries.

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