Tokenization, as exemplified by @BuildOnLumia’s Lumia Towers, is the process of converting real-world assets (RWAs) into digital tokens on a blockchain. Here’s how it works:
1. Asset Selection: A tangible asset, like the $220M Lumia Towers real estate, is chosen for tokenization. This could be property, commodities, or art.
2. Legal Structuring: The asset is placed into a Special Purpose Vehicle (SPV), a legal entity that holds ownership. For Lumia Towers, the SPV ensures compliance with local regulations in Turkey.
3. Token Creation: The asset’s value is divided into digital tokens (e.g., ERC-20 tokens on Polygon’s blockchain). Each token represents a fractional share of the asset, enabling investments as low as $1.
4. Blockchain Integration: Tokens are issued on a secure blockchain (Polygon’s Layer 2 for Lumia). Smart contracts govern ownership, transactions, and rights like voting on property decisions.
5. Distribution and Trading: Tokens are sold to investors via platforms or exchanges, often requiring KYC/AML checks. They can be traded, enhancing liquidity.
6. Management and Returns: Investors receive benefits (e.g., rental income) proportional to their token holdings, managed transparently on-chain.
Benefits include accessibility, liquidity, and transparency, though challenges like regulatory hurdles and market volatility remain. Lumia Towers leverages Polygon’s scalability to tokenize real estate, targeting the $10T RWA market by 2030.