The Tokenization Tech Stack — Outlier Ventures (Part 3)

3 min readMar 3, 2024

The architecture of blockchain technology is rapidly evolving. Initially, it had a specific-purpose infrastructure that was monolithic. However, there is a growing trend towards a more modular infrastructure for tokenization. Tokenization is expected to become more widely used shortly, which may change how it is defined and built. With the constantly evolving technology landscape, it is crucial for founders involved in building infrastructure and applications to remain flexible and agile. Some components of the current stack may become more preferred or effective than others.

Tokenization is expected to become more widely used soon. As a result, there may be changes in how it is defined and built. With the constantly evolving technology landscape, it is important for founders involved in building infrastructure and applications to remain flexible and agile. Some components of the current stack may become more preferred or effective than others.

There are generally three layers in the tokenization technology stack.

Standards: Define how assets and ownership are represented
Infrastructure: Enable tokenization and provide surrounding infrastructure rails.
Applications: Provide utility to the holders of tokenized assets

Standards

Standards play a critical role in directing the programmability of tokens. Tokenization standards can be divided into two equal importance categories, both essential for a thriving #RWA tokenization ecosystem.

Ownership & Regulation

Tokens have embedded rules that need to be enforced for their use. Regulation surrounding the ownership of assets is crucial for these rules to become enforceable by law. Bearer asset regulation, a framework governing the ownership of an asset, assumes the holder is also the legal owner. This regulation was used in the past for financial assets like bonds and equity but became irrelevant when financial markets adopted a custodianship structure. Today, with Web3 wallets, bearer asset regulation becomes essential again.

Infrastructure & SDK

Tokenization infrastructure is crucial for digitalizing and integrating RWAs onto blockchains. High-integrity infrastructure is essential for applications to represent assets on-chain. Currently, tokenization infrastructure is general-purpose, but it is expected to shift towards application-agnostic design, allowing for the construction of applications across various industries and application types. This shift is expected to be evident in financial markets, demonstrating the potential of blockchain technology for transforming applications.

“As tokenization of assets becomes more prevalent, applications will likely become more specialised, necessitating a more robust and tailored infrastructure to support specific applications.”

Applications & Marketplaces

The application layer is where the process of tokenizing #RWAs comes in handy. These applications utilize one or more critical benefits of tokenization in their business models, making the value proposition real and allowing users to reap the rewards. The tokenization trend is shifting, with applications focusing more on highlighting benefits than technology. This shift is expected to occur in the next cycle, with end-users not requiring in-depth knowledge of blockchain technology to understand an application's value proposition. As a result, tokenization will become more abstract, leading to adoption driven by tangible benefits.

Conclusion

Tokenization is transforming digital assets. Blockchain-based tokens connect traditional and digital assets, changing the tech stack. This modular architecture fosters a seamless ecosystem, enhancing interoperability, innovation, and customization. Blockchain technology enables the digital representation of all types of assets on decentralized ledgers. The fusion of historical tokens with blockchain capabilities streamlines operations and challenges traditional notions of asset ownership and exchange, transforming how we manage assets.

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RWA tokenization and fractionalization protocol focused on bringing green and renewable energy assets on-chain.

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Written by: https://medium.com/@rjkesavchandar