How does tokenization power sustainable and social development?

Tokenization is the future, but is it also the future of sustainable and social development? That’s what we’re going to find out.

The tokenization of assets is today the guarantee of a transparent economy where the exchanges of value are done in peer to peer while being no longer decorrelated from their social and environmental dimensions. Consequently, the tokenization of certain sustainable development indicators could contribute to accelerating their deployment, in areas such as responsible commerce or new social economy for example. In this article, we are going to focus on some of the different advantages of tokenization for sustainable and sociale development.

0. What is tokenization?

The term tokenization refers to the process through which an asset and its associated rights are divided into fractions. It’s represented in the digital form of a token, which can be track or exchange without intermediary or under private governance, at the initiative of an intermediary.

Thus, tokenization refers to the digitization of real-world assets or financial instruments using blockchains to ensure the registry and tracking of exchanges in order to increase their liquidity, reduce transaction costs by dispensing with intermediaries and ensure transparency of transactions. Advantages of tokenization are the following:

• Tokenization allows to simplify the access to the property.
• Tokenization allows to turn fungible assets into non-fungible ones.
• Tokenization allows to build new social-based economic systems.

We will discuss these advantages deeper in the following article.

1. Tokenization allows to turn fungible assets into non-fungible ones.

Tokenization could turn assets that were fungible until now into non-fungible assets. This would allow to better link the activities of the real economy with the values exchanged on the financial markets.

For example, the tokenization of food production chains would open the black box of international trade and its intermediaries in order to have an explicit knowledge of the modes of production, of their transport and of the offer to the consumer. When a fish is fished, tracking it along a supply chain and displaying information corresponding to its journey would be relevant to control the temperature, check third party actors in the chain, etc.

Another example is the energy sector, where tokenization presents a real interest. A wind farm, solar panels or hydroelectric installations equipped with blockchain boxes could certify, at the source, the production of green energy, each kilowatt-hour produced corresponding to a token. The tokenization of electricity would then be a certified asset that is fully traced from its place of production to its place of consumption, possibly promoting short circuits between the places of production and consumption.

The representation of assets in the form of tokens thus makes it possible to follow their trajectory, their exchange value, and to measure their impact on societies and the environment with greater precision and accuracy.

2. Tokenization allows to simplify the access to the property.

Tokenization, in the field of real estate, is the process of creating a virtual token that would represent ownership of a type of real estate asset.

Because tokenization is flexible in its use, the token can represent ownership of real estate in many ways. Since physical assets would support the tokens, the value of the tokens would fluctuate based on the performance of the asset, similar to traditional real estate investing, but with the ease of transfer provided by the use of blockchain technology. Tokenization would also limit third-party intervention on investors.

The first tokenization in Europe of a property took place in June 2019 in Boulogne-Billancourt (France). This real estate first followed a classic sale process: a notarized deed validated the value of the property and marked the transfer of the property. Then, Equisafe, an investment platform operating via blockchain technology, registered this company as an issuer in its system, before dividing it into around 100 tokens. These tokens were then purchased by two real estate developers who now exercise their ownership rights over the building via a blockchain. The difference between a traditional transaction and this real estate transaction is that the ownership rights of the company that owns this building are now fully encoded in the blockchain. Each token is encoded to contain the conditions of purchase, sale and exchange of shares, as well as the rights to which it gives access (dividends, voting…).

This value proposition is particularly needed in real estate as the market for real estate is more valuable than any other asset class in the world, yet it remains highly illiquid.

3. Tokenization allows to build new social-based economic systems

Over time, as the Internet gained mainstream adoption, some companies and corporations established themselves as dominant players in this emergent ecosystem. New platforms are emerging to provide creators the tools to build new social economic systems fueled by community, rather than ads.

Through community-owned, open-source tools, the ultimate goal is to ensure a censorship-resistant and inclusive Web 3.0 in which creative people can fully reclaim ownership of their creations. To do this, content creators issue their own social token on an open blockchain and platforms provide tools to build social economies with autonomy, peace of mind, and an incentive structure that supports their livelihoods and community.

Creators would have the ability to interact directly with their communities and reward engagement with social tokens that community members can “cash in ‘’ for things that continue to fuel and foster connections. This is a self-building gratitude wheel, with the creators, not third parties, determining the value of each community creation and action.

For example, the $Afrofuture social token is led by a community of technologists and innovators in the African technology industry. It’s aim to create new funding and distribution opportunities for artists in Africa, while catalyzing conversations about Africa’s rich and cultured history.

Conclusion

The tokenization of financial securities, real estate, electricity, international trade, or community are all examples that show, not a new world, but a world in which value is exchanged in new, more distributed, ecologically and socially responsible forms of organization, and in which the role played by traditional central bodies will evolve, be renewed, or even become obsolete