Why Bother about Physical assets on Blockchain?
The blockchain is really good for registering, controlling, and transferring assets. Its decentralized ledger means anyone can transact in a trusted network while being certain the assets they own are secure. However, so far blockchain has largely been limited to digital assets. Recently, new companies have proposed that we put physical assets on the blockchain as well.
That can be a tough idea to wrap your mind around. Right now, owning a physical asset like a car, oil, or land is a matter of trading legal documents. These documents can get confusing, and it can be difficult to determine the real owner of an asset. Putting physical assets on the blockchain would mean tokenizing them so they can become part of smart contracts. Selling a boat or an ounce of gold could be as simple as transferring the digital token to the new owner.
Tokenization and its Trend !’
The key to understanding this trend is to look at it from a legal perspective. The actual physical objects don’t change just because they’re on the blockchain. However, tokenizing physical assets on the blockchain does make it more transparent who owns what. It creates a central source of truth for things like commodities trading, auctions, or property development.
Few points about Tokenization:
- Fungible Vs Unique :
In a legal and technical sense, assets and their tokens can either be fungible or unique. Fungibility is the characteristic of tokens and assets that can easily replace one another. A pound of silver is equal to another pound of silver (as long as it’s the same quality), and they can be subdivided and traded accordingly. Read more
- Ownership Vs Limited Rights: Another way blockchain could simplify rights management is by clarifying ownership versus limited rights. For instance, a landlord could own a piece of property but lease it to a tenant. That tenant doesn’t have the same rights or responsibilities as they would if they owned the property. It’s possible that limited rights could be built into a smart contract… Read more
Physical assets on the blockchain could simplify a lot of the issues of the supply chain, logistics, and contract management. However, the technology has drawbacks that could prove to be challenging to usability. Before such a system can work, we need reliable ways for transactions to verify identity, avoid mistakes, and adjudicate disputes.