How to Do Asset Tokenization Using NFTs?
Non-fungible tokens (NFTs) are digital tokens that represent unique and scarce assets on a blockchain. They can be used to tokenize anything from art and music to real estate and collectibles. In this article, we will explore how asset tokenization using NFTs works and what are the benefits and challenges of this process.
What Is Asset Tokenization?
Asset tokenization refers to the process of creating digital tokens that represent ownership of a real-life asset. The token creation process uses blockchain technology, allowing you to store and trade the tokens freely and securely as you would with other cryptocurrencies and blockchain-based assets.
After generating a non-fungible token of an asset, you can list it on an NFT marketplace (if you wish to sell ownership of it). It is possible to tokenize assets directly with well-understood market value, like artwork or digital trading cards. However, tokenizing real estate or artwork will require assessment and auditing by a bank, accountant, or law firm.
Why Tokenize Assets Using NFTs?
There are many benefits of asset tokenization using NFTs, such as:
Liquidity: Tokenizing assets can increase their liquidity by making them accessible to a global market of buyers and sellers. You can also fractionalize your assets into smaller units and sell them to multiple investors.
Efficiency: Tokenizing assets can reduce transaction costs and intermediaries by using smart contracts that automate the transfer of ownership and payments. You can also avoid legal hassles and paperwork by using blockchain as a source of truth.
Transparency: Tokenizing assets can enhance their transparency by providing verifiable provenance and authenticity records on the blockchain. You can also track the performance and value of your assets in real-time.
Innovation: Tokenizing assets can unlock new possibilities for creativity and experimentation by enabling new forms of expression and interaction with digital media. You can also create new business models and revenue streams by leveraging the features of NFTs.
How to Tokenize Assets Using NFTs?
The following steps will help you understand how you can tokenize your personal assets or skills using NFTs:
Selecting the Asset: You can tokenize anything that you own or can create, but it's worth choosing something that might hold its value (which is why the current NFT market features so much "art"). The following are some examples of popular things that individuals tokenize:
Precious metals, gems, coins, certificates, etc., whose value will only increase over time.
Luxury cars, aircrafts, yachts, houses, etc., whose value depends on their condition and demand.
Artworks, music collections, graphic designs, images of pets, sports collectibles, antiques etc. whose value depends on their uniqueness and popularity.
Intangible assets like patents, trademarks, copyrights, carbon credits etc., whose value depends on their utility and impact.
Identifying the Revenue Model: If you’re tokenizing your paintings, graphic designs, or any other form of visuals, then you may want to list them in NFT marketplaces like OpenSea, CryptxNFT, Crypto.com, or Orica. When someone purchases these tokens, you’ll get funds to fund any development projects that add value to your assets. Alternatively, you may want to retain some ownership rights over your tokens so that you can receive royalties every time they are sold or used by others. This way, you an create a passive income stream for yourself while also incentivizing buyers to support your work.
Choosing the Platform: There are many platforms that allow you to create and mint NFTs on different blockchains such as Ethereum, Binance Smart Chain, Polygon, etc. Some platforms are more specialized for certain types of assets or markets such as Rarible, SuperRare, Foundation, etc. You should choose a platform that suits your needs and preferences in terms of fees, features, community, etc.