The Tokenization of Real World Assets
What Are Real World Assets?
Real World Assets (RWAs) are physical or financial assets that have real value and are linked to existing resources, objects, or products. Examples of RWAs include real estate and various types of commodities.
What Is Tokenization of Real World Assets?
Real world assets can be tokenized, meaning they can be represented as digital tokens on a blockchain. This allows these assets to be traded easily in the digital space and can also help raise capital for energy communities (ECs).
Benefits of Tokenization
The main goal of tokenization is to simplify the digital buying and selling of real-world assets. However, the process offers many additional benefits:
Capital Raising: If a company faces liquidity issues or wants to raise capital, tokenizing its real-world assets can help. This way, even a single token can represent partial ownership in an asset, like a property, allowing small investors to participate in projects, while the company can stabilize its finances faster.
Accessibility: In the past, investing in a company was mostly limited to wealthy investors. With tokenization, the entry barrier is lower, so individuals can now also acquire ownership in a company’s assets.
Transparency: Blockchain technology ensures that transactions involving token purchases are transparent, verifiable, and fair. Ownership records can always be checked.
Security: Thanks to blockchain, the ownership of tokenized assets is highly secure. The risk of fraud or misuse is nearly zero, and ownership remains clear and verifiable at any time.
Efficiency: Smart contracts running on blockchains simplify the process of buying and selling real-world assets. Transfer times are reduced, and since no third party, like a bank, financial institution, or lawyer, is needed, additional costs are minimized.
Global Market: Tokenization makes it possible for investors from all over the world – not just local ones – to purchase tokens of a given company, widening the pool of potential investors.
Tokenizable Real World Assets in Energy Communities
ECs can tokenize a variety of real world assets to raise capital. These assets include (but are not limited to):
Energy Production Capacity: Whether from individual or collective sources, energy production represents a measurable physical resource. Since it is tied to physical infrastructure, it has value and can be tokenized.
Energy-Producing Infrastructure: These are the physical components of the EC that generate energy, such as solar panels and shared battery storage systems used to provide electricity to the community.
Carbon Credits: These are certificates representing the prevention of one metric ton of carbon dioxide (CO₂) or equivalent greenhouse gas emissions. Carbon credits can also be tokenized and traded, helping ECs attract even more funding.
Renewable Energy Certificates (RECs): These are tradable certificates that represent the environmental benefits of renewable energy production. Each REC corresponds to one megawatt-hour (MWh) of renewable electricity. Like carbon credits, RECs can be traded to raise capital.
Steps of Tokenization
Tokenizing the real world assets of ECs is a key step. It enables energy trading within the community, increases democratization, and allows capital to be raised. Thanks to tokenization, members of the community can invest together in energy generation projects and share in the benefits.
Here are the steps of the tokenization process:
1. Selecting the Asset: The first step is choosing the real world asset to tokenize. This can be a solar panel system, a battery storage unit, the generated energy itself, or practically any shared part of the infrastructure.
2. Creating a Legal Framework: It is critical to define a legal structure for the tokenization process that complies with local, national, and potentially international regulations.
3. Digitalization: The chosen real-world asset is then represented by a certain number of tokens. These tokens represent ownership or usage rights and serve as the basis for profit-sharing agreements.
4. Creating Smart Contracts: These agreements automate processes such as trading, income distribution, tracking energy production, and other transactions.
5. Trading: Once tokenized, community members can freely trade their real-world asset tokens within the EC, externally, or even on decentralized exchanges.
