From Due Diligence to On Chain Issuance
Asset tokenization is the process of turning ownership rights of a real world asset such as property debt or commodities into digital tokens that live on a blockchain. These tokens represent value ownership or cash flow and can be transferred securely using technology instead of paperwork.
Introduction
Imagine owning a small piece of a building the same way you own money in a bank account. No lawyers chasing signatures. No weeks of waiting. Just clarity trust and speed.
This is why asset tokenization matters.
But tokenization is not magic. It follows a clear process. When teams skip steps projects fail investors lose confidence and regulators step in.
This guide breaks the entire journey into four clear phases so anyone can understand how real world assets move from paperwork to the blockchain.
Phase One Due Diligence and Asset Validation
What happens in this phase
This is the foundation. Everything depends on getting this right.
Due diligence answers one simple question
Is this asset real legal and worth tokenizing
Key checks involved
1 Ownership verification to confirm who truly owns the asset
2 Legal review to ensure the asset can be tokenized under local law
3 Financial assessment to understand value risks and expected returns
4 Compliance screening including anti money laundering rules
Why this phase matters
If due diligence is weak every step after it collapses. Tokens cannot fix bad assets.
Phase Two Legal Structuring and SPV Setup
What happens in this phase
A legal wrapper is created to connect the real world asset to the digital token.
Most projects use an SPV which stands for Special Purpose Vehicle.
Role of the SPV
The SPV holds the asset
The SPV issues the rights
The token represents a claim on the SPV not the raw asset
Why this matters
This structure protects investors clarifies ownership and satisfies regulators.
Without proper legal structuring tokens become legally meaningless.
Phase Three Token Design and Smart Contract Creation
What happens in this phase
The asset rights are translated into code.
This is where economics meets technology.
Decisions made here
1 Token supply and divisibility
2 Rights such as income voting or redemption
3 Transfer rules based on compliance
4 Smart contract logic for automation
Important reminder
Smart contracts do exactly what they are told. Clear legal terms must come first.
Phase Four On Chain Issuance and Distribution
What happens in this phase
The tokens are officially created and recorded on the blockchain.
This is the moment the asset becomes digital.
Activities in this phase
1 Token minting
2 Investor onboarding and verification
3 Distribution to wallets or platforms
4 Ongoing reporting and transparency
Why this phase matters
This is where liquidity trust and accessibility are unlocked.
Case Study Centrifuge
Centrifuge is a well known real world asset platform.
They tokenize assets like invoices and receivables.
How they apply the four phases
Due diligence verifies invoice legitimacy
Legal structures connect assets to pools
Tokens are designed for lending use
Issuance happens on chain through smart contracts
This structured approach allowed Centrifuge to tokenize billions in assets while maintaining trust.
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How Real World Asset Tokenization Works Step by Step
Key Takeaways
1 Asset tokenization is a process not a shortcut
2 Legal clarity comes before technology
3 Each phase builds trust for investors and regulators
4 Skipping steps creates risk and failure
If this guide helped you understand tokenization clearly
Explore our other posts where we break down SPVs compliance and liquidity using real examples and simple language
Your learning journey continues there
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