A crypto asset that is created by digitizing a tangible or intangible asset. (i.e., producing ownership shares in a digital form). A tokenized crypto asset represents a divided share in the ownership of real, financial, or digital assets that is recorded on a blockchain in the form of digital tokens/ cryptos. By means of an asset tokenization, an issuer creates shares in a crypto asset on a distributed ledger or blockchain.

The tokenization involves issuing a blockchain token (specifically, a security token) that digitally represents a tradable real/ financial asset—in a way similar to the traditional process of securitization, with a certain difference. These security tokens are created and issued by means of a specific offering known as an initial coin offering (ICO)- which is sometimes referred to as a security token offering (STO), given its specific nature compared to other types of ICOs (such types of offering are used to create different types of tokens such as equity tokens, utility tokens, or payment tokens).

An STO creates a digital representation—a security token—of an asset, which, per se, could represent a share in a business, ownership of a piece of real estate, or participation in an investment fund. The issued tokens are tradable on a secondary market.

A tokenized crypto asset retains the same value as its underlying asset, enabling interaction across various blockchain ecosystems to benefit from features like faster transactions, lower fees, and decentralized application (dApp) functionality, among others.

Tokenized crypto assets are very much similar to derivatives. In its simplest form, a derivative is an asset that derives its value from an underlying asset or financial instrument such as stocks, bonds, commodities, and so on. An example is a tokenized crypto asset that represents the real-time price of an actual stock at a 1:1 ratio.