The artist Mike Winkelmann (AKA Beeple) sold the NFT of a digital picture collage for 69 million US dollars. Sounds good right? Could you sell your assets or works of art for such a price?
Probably not, but by tokenizing your asset, you can use blockchain technology to create a digital representation of the asset. It can also be a source of crowdfunding for aspiring artists and allows more control over incoming payments.
So here’s what you need to know about asset tokenization and the steps to develop non-fungible tokens (NFT) for your assets.
What is tokenization of assets?
Asset tokenization refers to the process of creating digital tokens that represent ownership of a real asset, commonly known as NFTs. The token creation process uses blockchain technology which allows you to freely and securely store and trade the tokens just like you would with other cryptocurrencies and blockchain-based assets.
After you generate a non-fungible token of an asset, you can list it on an NFT exchange (if you want to sell ownership of it). It is possible to directly tokenize assets with a well-understood market value, such as works of art or digital trading cards. However, tokenization of real estate or works of art requires evaluation and review by a bank, accountant, or law firm.
The steps below will help you understand how to tokenize your personal wealth or skills to fund development projects that add value to your wealth.
1. Selection of the asset
You can tokenize anything you own or create, but it’s worth choosing something that could retain its value (which is why the current NFT market has so much “art” to offer).
The following are the most popular things that individuals tokenize:
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Gold, diamonds, platinum, commemorative coins, stock certificates from large companies, precious stones, etc., which will only increase in value over time.
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You can create NFTs for assets like a luxury car, airplane, yacht, or even your house. Again, you have the option to decide what percentage of the asset the token represents.
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The most popular assets for tokenization are artwork, music collections, graphic design, pet pictures, sports collectibles, and antiques.
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You can also tokenize intangible assets such as patents, trademarks, copyrights, carbon credits, etc.
If you choose to tokenize assets, you are choosing something that will remain relevant to the economy and technology for years to come.
2. Identification of the revenue model
When you tokenize your paintings, graphic designs, or any other form of visuals, you may want to list them on NFT marketplaces like OpenSea, Crypto.com, or Orica. When someone buys these tokens, they receive funds to fund development projects.
If you are a software programmer, app developer, or UI / UX designer then you will tokenize your work or hours. In addition to token purchases, you can also offer your service to token holders who will further increase the value of your tokens.
Matthew Vernon has tokenized his product design skills in the form of BOI tokens on an Ethereum blockchain. You can trade in a BOI for a one-hour expert product design service from Matthew Vernon.
3. Token Economy
The token economy partially controls the success of asset tokenization. NFTs issued for your paintings, UI / UX designs, graphics, memes, collectibles, or photos will increase in value as you continue to make progress on the project you funded.
The value of the tokens also increases if suddenly more people support your project and invest in your tokens. This unexpected surge in demand for your tokens will minimize supply and thus increase in value.
You can either proceed with one-off token sales or gradually increase the number of tokens. You need to follow the token economy of other similar tokenization projects. Keep an eye on NFT marketplaces like OpenSea or Binance to keep track of the value and transactions of equivalent tokens.
4. Create NFTs online
The most popular form of NFT is an ERC20 token on the Ethereum blockchain. There are many online platforms that you can mint your tokens on. ERC20 Token Generator, Guarda and TokenMint are the hottest.
Building an ERC20 NFT is easy and takes less than 10 minutes. However, you must have a cryptocurrency wallet and some Ether (ETH) in your wallet.
You will need to fill out an online form for the NFTs details such as name, symbol, first delivery, token type and blockchain network. Fees vary by platform and generally you pay a commission, gas fee, etc.
5. Statutory Regulations
When tokenize something that you only have for yourself, all you need to do is consider the following:
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Local laws on monetary transactions.
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Payment of all taxes necessary for online transactions. Usually the tokenization platforms take care of taxation.
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Local laws regarding cryptocurrency transactions.
In crowdfunding scenarios, you need to produce solid legal documents. This is crucial if you are transferring partial rights to patents, trademarks or real estate.
6. Custodian Agreements
If you want to keep complete control of your NFT tokens, you might not want to go through a crypto-crypto wallet. You can create crypto wallets using MetaMask or Trust Wallet, which are non-custody wallets.
However, managing your crypto wallet and tokens through a custodian platform is always a good idea. If you lose your transaction passcode, the custodian can help you recover your account.
With custody agreements, your private key remains with third-party custodians such as Binance or Guarda. They will also help you make it easier to issue and trade tokens from their platform.
7. Distribution of tokens
At this point in the process, you need to release or distribute the tokens so that buyers can buy them. Usually, events like the Initial Token Offering (ITO) are the best opportunities to release the NFTs.
These events include the technical processing of tokens, the execution of the ICO and the issuance of the current tokens. Aside from the tokens, you will need the offer documents and marketing support tools for ICO.
8. Expansion of the network
After successfully completing all of the above, you can start funding personal projects through NFT spending or keep your tokens as collectibles.
When you are ready to raise funds for development projects, you need to focus on marketing your tokens. Make sure that the news of your asset tokenization reaches the maximum number of potential project backers and investors.
You can attract a huge audience by using various digital marketing tactics such as content marketing, newsletter / email marketing, online advertising, video marketing, referral programs, and press releases.
You can also actively publish on social media platforms to spread the news among interested people.
Start by creating NFTs for your assets
This article will give you a simplified idea of the process of tokenizing assets and creating NFTs. Before entering the tokenization ecosystem, you must follow all available regulatory and safe investment guidelines.
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About the author
Tamal Das
(93 published articles)
Tamal is a freelance writer at MakeUseOf. After gaining extensive experience in the fields of technology, finance and business processes in his previous work in an IT consulting company, he started writing as a full-time profession 3 years ago. While he doesn’t write about productivity and the latest tech news, he loves playing Splinter Cell and watching Netflix / Prime Video.
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