Transforming real-world assets onto a blockchain: The power of digitizing real-world assets for supply chain visibility

Blockchain capabilities continue to transform how businesses look at their supply chain and operations activities. By applying (DeFi) and tokenization, the potential of these blockchain capabilities on supply chain operations can be fully realized. In the same way that DeFi is disrupting traditional finance, decentralized operations will disrupt traditional operations and ultimately transform the way organizations run their business.

Through decentralized operations, an organization can reap several benefits that might have not otherwise been available to them, including:

• The ability to access new markets and invest in assets that would otherwise be beyond financial limitations
• Digitally manage inventory and track the transfer and trading storage without the need for an intermediary
• Gaining supply chain visibility of end-to-end processes

Digitizing RWAs can be complex. It’s important to understand exactly what digitizing RWAs is, how it can be executed and some of the value it can have on an organization, particularly through its supply chain.

Digitizing assets through tokenization

The principle of digitizing assets is known as tokenization, which is the process of turning an asset, either real or virtual, into a token that represents the entirety of an asset that can be manipulated on a blockchain. Digitizing assets creates a bridge between RWAs and their transfer and trading storage in a digital world without the need for an intermediary.

While RWAs can be represented by a token, they can be further divided to offer fractional ownership to investors. Through this process, tokenization can provide liquidity to otherwise illiquid and non-fractional markets.

There’s a wide variety of tokens. However, for the purposes of this topic we will discuss three key types:

1) Fungible tokens: Fungible tokens are uniform like cash, as each token holds the same market value and is interchangeable. Fungible tokens can also be divided into smaller units that still possess equal value. Examples of fungible tokens include cash, gold and bitcoin.

2) Non-fungible tokens: Non-fungible tokens are non-interchangeable, as each token represents a unique value with an associated unique ID. As a result, these tokens are non-divisible but can instead offer fractional ownership to investors. Non-fungible tokens also provide a level of granularity through storing metadata such as the provenance, certifications and transaction history of an asset. Examples of non-fungible tokens include real estate, art and CryptoKitties.

3) Semi-fungible tokens: Semi-fungible tokens can be both fungible and non-fungible throughout their lifecycle. In the beginning, these tokens act like fungible tokens that can be traded with other identical semi-fungible tokens. However, once a semi-fungible token is redeemed, the fungible token loses its face value and thus is now considered non-fungible. As the token’s fungibility changes throughout its journey, for example when it’s used or redeemed, this is what deems the token as semi-fungible. Examples of semi-fungible tokens include concert tickets or vouchers.

For tokens to operate on a blockchain, there must be a set of rules to govern how and when units are delivered. Every participant on a blockchain will have access to a record of all the transactions alongside a set of rules on how the tokens will operate. Tokens can also be applied in smart contracts, which are self-executing contracts that have built-in terms between the buyer and seller, typically represented by lines of code outlining various process conditions.

The below graphic provides an overview of the process for digitizing an RWA, including an overview of how tokens are exchanged or updated to reflect the manufacturing of the physical product: