Why the Tokenization of Physical Assets Changes the Game for Brands, Businesses, and Collectors
The tokenization of physical assets creates new ways for customers to engage with their favorite brands and businesses.
NFTs aren’t just changing the digital media landscape — they are also transforming how we purchase and engage with real-world items. It’s all thanks to innovations that let brands and businesses tokenize physical assets and establish a direct connection with customers and fans. These changes already influence collectible markets but will soon extend to all industries, from fashion to iconic guitars. Given the scope of these changes, it’s vital to understand how the tokenization of physical assets will disrupt and benefit businesses and customers alike.
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What Is the Tokenization of Physical Assets?
Tokenization is the process of issuing digital tokens to represent assets on a distributed ledger, such as on blockchain. This technique is a digital solution for owning, managing, and monetizing physical objects such as collectible cards, artwork, music memorabilia, toys and much more
The tokenization of physical assets brings several advantages to investment models that are harder to implement using traditional shares:
- Tokenization codifies ownership by maintaining records of every transaction involving tokens.
- Tokens are more liquid than high-value assets, making it easier to trade on NFT platforms, without the logistical hassles typically associated with trading physical items.
- Tokenization encourages fractionalization, dividing tokens into smaller units representing a share of each asset. This can help brands connect with customers who might not otherwise have the financial means to own an entire token themselves.
Of course, if an individual buyer still wishes to purchase a physical asset that has been tokenized, they can do so by redeeming their token. Many companies store physical assets in a secured vault; once the token has been redeemed, they typically ship the physical asset to its new owner within a few days.
For a more in-depth discussion about the benefits tokenization can provide for your particular business, reach out to the partnership team at Dibbs.
What Are the Benefits for Brands and Businesses?
For brands and businesses, the tokenization of physical assets creates new opportunities for further monetizing their collectibles . We’ve already observed this trend in markets like street fashion, where brands such as Adidas can cater directly to individuals seeking physical goods and a corresponding NFT.
Imagine that the Pokémon Company decided to engage with token markets directly by printing an extremely rare Charizard card. Instead of putting some copies into packs, it could immediately place the asset into a secured vault and sell shares as fractionalized tokens. As the card value increases in collectible card communities, so does each token’s value. This diversifies the market among a higher number of investors while increasing the value of the overall card — earning more revenue if the Pokémon Company decides to sell the asset in a public forum.
In addition, tokenization increases the lifetime value of a physical asset for the brand. NFTs are often traded multiple times over the course of their lifetime. Brands receive a fee anytime a tokenized asset is resold, providing a recurring source of revenue as that NFT flips from owner to owner.
Tokenization also has the benefit of reducing settlement times for high-value assets. Since token technology is based on smart contracts, they can complete themselves when certain conditions are met without requiring further verification from all parties. That improves the efficiency of each transaction and increases the liquidity of assets.
Finally, tokenization allows brands to enter web3 without significant investment. Progressive brands are already experimenting with the metaverse, crypto and other web3 projects. Brands can enter the space with minimal risk by leveraging what they already own — their high-value assets & collectibles — in order to launch their NFT strategy.
What Are the Benefits for Collectors?
Traditionally, collectors are a niche audience within each media market. As rare assets and memorabilia increase in value, most mainstream fans find themselves priced out of a chance at ownership.
Tokenization disrupts this process by making collectibles more accessible to a broader range of customers. While individual assets cannot be divided between fans, associated tokens can be broken down into smaller, more affordable units. That means everyday consumers can invest in their favorite media collectibles and gain proportional returns as the asset increases in total value.
In some cases, tokenization still offers a collectible to buyers even once the physical asset is vaulted. For example, brands can provide physical assets and virtual content simultaneously by including NFT copies of the item (also referred to as a “digital twin”) for metaverse platforms. That gives fans a chance to own a piece of brand history while maintaining a share of a real-world object.
Why tokenize assets? Because it makes sense. It makes business sense to companies that want to create new lines of revenue by putting assets on the token marketplace. It makes sense to collector communities that suddenly have ownership and investment options that weren’t previously available. And it makes sense for industries like real estate, where fractionalization can increase the liquidity of high-value assets.
For these reasons, Dibbs is a big believer in the shift to tokenize physical assets. That’s why we provide tools for asset holders to monetize their property and a platform for collectors to invest in them. If you want to explore the opportunities of physical-to-digital collectibles, get in touch with us today.