> ## Documentation Index
> Fetch the complete documentation index at: https://docs.theblockchainlibrary.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Asset Tokenization

> The process of representing ownership, claims, or economic rights in an asset using blockchain-based tokens.

# Asset Tokenization

The process of representing ownership, claims, or economic rights in an asset using blockchain-based tokens.

## Definition

The process of representing ownership, claims, or economic rights in an asset using blockchain-based tokens.

## Why it matters

Tokenization concepts connect blockchain infrastructure with legal or economic rights in real-world assets.

## How it works

The process begins by auditing and valuing the asset, which is then held in a legal structure like a Special Purpose Vehicle. Smart contracts are developed to define token utility and ownership rights. Finally, tokens are minted on a blockchain, verified by auditors, and distributed to investors through regulated platforms.

## Real-world example

Franklin Templeton uses the Stellar blockchain to tokenize its OnChain U.S. Government Money Fund, allowing shareholders to track their holdings on a public ledger.

## Advantages

* Increased market liquidity for illiquid assets
* Lower transaction costs through automation
* Global 24/7 market access
* Greater transparency and auditability

## Limitations

* Complex legal and regulatory compliance requirements
* Interoperability issues between different blockchains
* Dependency on off-chain asset custodians

## Common misconceptions

* People often think tokenization is just for digital-native assets, but it actually bridges physical assets to the blockchain. Another misconception is that tokens are always decentralized, but most RWA tokens are highly centralized by design for compliance.

## Related knowledge

* [Blockchain](/categories/blockchain) — term
* [Cryptography](/categories/cryptography) — term
* [Web3](/categories/web3) — term

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**Canonical knowledge ID:** `glossary:asset-tokenization`