Over the last year, there has been considerable discussion over the tokenization of physical assets. That is, having something tangible, like a bar of gold, represented by a token on a blockchain, like Ethereum or Bytom, so that there is an immutable record of ownership of the asset. This asset can then be traded or sold without the need for a middleman to keep a record of the transaction – and take a commission for his troubles – thus making the transaction safer, faster, and less expensive.

It’s not only gold that’s being tokenized. Other precious metals are also up for trade via blockchain technology. Stocks, bonds, and shares are all said to be next, and security token offerings are one incarnation of this move. In fact, STOs are hotly tipped to be the next big thing.

It seems anything worth anything is ripe for tokenization.

So, Everything Is Tokenizable?

Any blockchain that is capable of executing a smart contract (like Ethereum and Bytom that I mentioned earlier) offers the ability to have part-ownership of an asset. Recently, Andy Warhol’s famous painting, ’14 Small Electric Chairs,’ was tokenized and sold at auction. Over 800 bidders bought a 31.5% stake in the painting, which had a reserve price of US$4,000,000.

But who gets to hang it in their dining room and for how long?

I don’t think anyone is actually going to get the opportunity to have this piece hanging up on a wall in their home anytime soon, but what if this was not a painting but a luxury yacht. Not many of us can just go out and buy a luxury yacht, but what if twenty people wanted to and decided to buy one together?

It is possible to execute this type of transaction via smart contract on a blockchain. Twenty YCHT tokens could be issued, and each owner would receive one. They would have an immutable record of ownership that they could trade or sell to another party at any time. But the token would also show how much time that person would be able to have on the yacht. In fact, in an IoT kind of way, access to the boat could be restricted simply by not having the right blockchain-based digital ID credentials with you when you go to start the yacht’s engine. There’s plenty more that can be achieved with a smart contract, but you get the idea.

The same functionality can be used for cars, vacation homes, rental agreements, the list goes on, and there are plenty of companies out there trying to make these things happen right now, but I won’t go into those here.

Do We Want This?

Since most blockchains are decentralized and, therefore, have no central governing bodies to mess with the record as it suits them to, smart contracts that allow people to share ownership of an asset between them is an ideal solution. However, disputes could prove an issue.

Let’s say Owner 5’s three-year-old spilled apple juice all over the back seat of the shared car. Owner 7, the next car user, spots the damage and requests Owner 5 pay for cleaning. Owner 5 says that the spill had occurred before they got the car. What then?

One idea would be to have CCTV in the car so that the other owners can check back through the footage to see what really happened and to decide who should pay for what. But this is veering towards an Orwellian 1984-style totalitarian, panoptic mess that society should be aiming to avoid.

Smart contracts run on Ethereum, Bytom, Stellar, or any other capable blockchain certainly stand to make our lives simpler. However, smart contracts are still in their early days, and much work needs to be done with them before they can be deployed in fully mainstream applications.