How Do Businesses Make Money from Tokenization?

Tokenization has emerged as one of the most transformative technologies in recent years, offering businesses innovative ways to unlock value, enhance liquidity, and streamline operations. While it’s often associated with cryptocurrencies, tokenization is far more expensive than that. Today, businesses across various industries—from real estate to art, commodities, and finance—are exploring tokenization to generate new revenue streams, improve transparency, and increase their financial flexibility.

In this blog, we’ll dive deep into how businesses make money from tokenization, discussing the various ways this technology benefits companies, and how it creates new opportunities for monetization.

What is Tokenization?

At its core, tokenization refers to the process of converting ownership of real-world assets—such as property, commodities, intellectual property, or even equity—into digital tokens. These tokens are then traded on blockchain networks, offering fractional ownership and enhanced liquidity.

The benefits of tokenization are clear: it allows assets to be divided into smaller, tradable pieces, broadening access to new markets and reducing barriers to entry. It can also make transactions faster, cheaper, and more transparent by utilizing blockchain technology.

Now that we have a clearer understanding of tokenization, let’s explore how businesses generate revenue from it.

1. Unlocking Liquidity for Illiquid Assets

One of the primary ways businesses make money from tokenization is by unlocking liquidity in previously illiquid assets. Historically, assets like real estate, fine art, and private equity were difficult to trade and typically required a large upfront investment. Tokenization breaks these assets into smaller pieces, allowing businesses to raise capital more easily.

For example, a real estate company could tokenize a high-value commercial property, selling fractional ownership in the form of digital tokens. By offering smaller units of ownership, businesses can attract a broader pool of investors, allowing them to raise capital that would have otherwise been inaccessible.

Example: Tokenizing Real Estate

Tokenized real estate is one of the most exciting applications of blockchain. A real estate company might own several properties, but rather than selling the entire property at once, they could tokenize it and sell fractional shares to individual investors. This offers businesses a chance to raise capital from a larger number of investors, while also providing investors with the ability to participate in high-value assets with smaller investments.

2. Fractional Ownership and Accessibility

Tokenization enables fractional ownership, allowing businesses to sell a portion of their assets, reducing the barrier to entry for investors. By dividing the value of an asset into smaller, tradeable units, tokenization makes it easier for businesses to offer products and services to a much wider audience, creating new opportunities for both businesses and investors.

Take the example of art: before tokenization, high-value art pieces were reserved for a select group of wealthy collectors. However, by tokenizing these art pieces, businesses can offer fractional shares, allowing regular investors to participate. This process not only democratizes access to high-value assets but also provides businesses with a constant stream of revenue from the sale of tokens.

Example: Art Tokenization

An art gallery or artist could tokenize a painting, and each token could represent a fraction of the artwork’s value. When investors purchase these tokens, the gallery or artist earns revenue from the sale. These tokens can then be resold on the secondary market, allowing businesses to earn a share of subsequent transactions as well. This creates a continuous income stream for the original business, with both primary and secondary sales contributing to their revenue.

3. New Revenue Streams from Secondary Market Sales

Another way businesses can make money from tokenization is by capitalizing on secondary market sales. After tokens are issued, they can be traded on decentralized exchanges or other trading platforms. If the business holds a percentage of the tokens, they can generate income from any future sales or resales of these tokens.

This is particularly valuable for businesses that deal in assets with appreciating values, such as real estate or collectibles. The rise in token trading also opens up opportunities for businesses to earn a percentage of each transaction, creating an ongoing revenue stream.

Example: Tokenizing Commodities

For businesses involved in commodities like gold or oil, tokenization can bring liquidity and facilitate trade. Companies can tokenize their commodities, allowing investors to purchase fractional shares. As these tokens are traded on various platforms, the business can earn a commission or fee from each transaction. This means that businesses don’t just benefit from the initial token sale—they also profit from ongoing trades of the tokens in the secondary market.

4. Capital Raising and Crowdfunding

Tokenization also allows businesses to raise capital through a new form of fundraising, such as Initial Token Offerings (ITOs) or Security Token Offerings (STOs). These fundraising methods are similar to Initial Coin Offerings (ICOs) but focus on offering tokenized assets (equity, debt, or assets themselves) instead of traditional shares or bonds.

By offering tokens representing real-world assets or equity in a company, businesses can tap into a much larger pool of investors—especially those who may not have access to traditional investment avenues like venture capital or private equity. Tokenization eliminates geographical barriers and simplifies the fundraising process, enabling businesses to raise capital efficiently and cost-effectively.

Example: Tokenized Equity in Startups

A startup looking to raise capital could issue security tokens that represent equity in the company. These tokens are then sold to investors, allowing the startup to raise funds without going through traditional venture capital channels. Additionally, since the tokens can be traded on a secondary market, investors may find it easier to liquidate their positions, which could make the investment more attractive.

5. Smart Contract Automation and Reduced Costs

Tokenization can also reduce operational costs for businesses by enabling the use of smart contracts—self-executing contracts with the terms directly written into code. Smart contracts automate many processes, such as payments, transfers of ownership, and dividend distributions, reducing the need for intermediaries and administrative overhead.

By lowering transaction costs and eliminating the need for middlemen, businesses can streamline their operations and pass the savings onto customers or investors. This can be especially important in industries like finance, real estate, and supply chain management, where administrative costs can be substantial.

Example: Tokenized Real Estate Transactions

In a traditional real estate transaction, multiple parties, including agents, lawyers, and banks, are involved in verifying ownership, transferring funds, and completing documentation. However, with tokenization and smart contracts, these processes can be automated, reducing the need for intermediaries and speeding up the transaction. By cutting down on the time and fees associated with these steps, businesses can increase efficiency and generate cost savings.

6. Royalties and Ongoing Revenue from Tokenized IP

Businesses that deal in intellectual property (IP) can use tokenization to monetize their creations and generate ongoing royalty payments. For instance, tokenizing a song or patent allows creators to sell fractional rights, enabling them to receive continuous revenue streams from the ongoing use of their intellectual property. As tokens are sold or used in licensing agreements, businesses earn royalties or other forms of payment, making it easier to capitalize on their creations.

Example: Music and Entertainment

In the entertainment industry, a musician could tokenize a song, allowing fans or investors to purchase a share of the song’s future earnings (e.g., from streaming royalties). Every time the song generates revenue, token holders receive a share, and the musician or record label earns from the initial token sale as well as any ongoing royalties generated.

Final Thoughts: Tokenization as a Game-Changer for Businesses

Tokenization is revolutionizing the way businesses approach finance, investment, and asset management. By unlocking liquidity, offering fractional ownership, and enabling secondary market sales, businesses can create new revenue streams and improve their operational efficiency. Whether in real estate, commodities, art, or intellectual property, tokenization provides companies with an innovative way to raise capital, expand their reach, and generate ongoing income.

For businesses looking to stay ahead of the curve, adopting tokenization strategies can provide a significant competitive advantage in an increasingly digital and decentralized economy. The possibilities are endless, and the future of tokenization holds exciting potential for those willing to explore its power.