Asset tokenization is the process by which an issuer creates and issue digital tokens (and other types of tokenized assets) on a blockchain or other form of distributed ledger (DL) to represent certain types of digital assets or real world assets. Thanks to blockchain technology, tokens that are created and issued- and then traded- as a digital representation of an asset, and due to its non-centralized, immutable distribution, no single authority can manipulate or destroy ownership.

Fungible asset tokenization is a specific category (of tokenization) which involves the creation of fungible tokens (fungible token assets). Through fungible asset tokenization, digital assets can obtain the fungibility feature if two main characteristics are secured: 1) interchangeability, where each unit of the tokenized asset has the same issue value/ market value and validity — for example, all units of bitcoin have exactly the same value and 2) being divisible, that is, a fungible digital asset can be divided into as many decimal places as were defined during the tokenization process. Each unit will have carry the same value and validity.

A digital asset is created, or minted, when new information is added, through an entry, to a particular blockchain. Blockchain entries allow users to exchange existing digital assets and/ or create or mint new ones according to the established process of mining or minting. Digital assets represent a broad category that encompasses anything minted and exchanged on a blockchain.

To the contrary, non-fungible asset tokenization involves the creation of non-fungible tokens (NFTs) that are non-interchangeable (each with a unique value) and can’t be replaced with tokens belong to the same type, and are also non-divisible into standard units, although fractional NFTs (F-NFTs) do offer fractional ownership of NFTs, such as in the case of expensive real world assets or high value tokens. These tokens are unique, as each token differs from another token of the same type in terms of attributes and distinct features.