In our previous blog post, we discussed ‘What is tokenization’ and what is needed to ensure that it is trustworthy. In this post, we will look more closely at the tokenization of assets and rights, the difference between the two, and why they must be tokenized together in order to make tokenization applicable in real-world trade and commerce.At Sweetbridge, we take a holistic view of tokenization. We know that tokenization will not work in commercial transactions unless both assets and rights are tokenized together. Our platform has been designed to record and connect tokenized rights with the tokenized asset (or assets) with which they are associated.The benefit of tokenizing assets and goods is mostly just an efficiency gain on existing processes. However, the tokenization of rights can result in completely new value creation. When we look at history, we can see how the creation of rights on assets has created entirely new markets. For example, the creation of the right to future revenue (stock in a company) resulted in the creation of the stock exchange. When the tokenization of rights is paired with the tokenization of assets, new value can be released and new markets created.In order for tokenization to be trusted and the new value to be unlocked, there must be a foundation that ensures standardization and compliance. The Sweetbridge Synchronized Accounting platform provides a complete solution for tokenization of real-world assets with built in controls that allow auditing to be done in real time. It is built to address the issues lawyers, accountants, governmental regulators and others must address to tokenize real world assets in a way which works with current legal frameworks. GRC requirements (Governance, Risk, and Compliance) are built directly into the foundation of the system to give continuous assurance that agreements, regulations, and workflows are followed.Tokenization of assetsTo tokenize assets we must understand that not all assets are the same. Assets can be both tangible and intangible and there are further variations even within these categories. For example, tangible assets can be distinct assets, which can be identified uniquely from others of the same class, model, type, etc., or they can be fungible assets, which have no distinct identity between instances — such as commodities like rice or oil. These different types of assets will have different sets of requirements in order for trustworthy tokenization to occur.The Sweetbridge platform breaks assets down into various types and forms. It provides different features to support the unique issues that arise with the tokenization of different assets. The platform deals with:Both fungible and non-fungible assets,How to prove control of an asset and the use of registries,Provenance of assets,Temporal or perishable goodsTo see more detailed information about the different types of assets supported within the Sweetbridge platform and how each are handled within the system, read our paper Trusted Tokenization of Assets.Tokenization of rightsThe tokenization of rights can be used to create value where none is perceived to exist today. In most cases, this value can be created without diminishing any value in the underlying asset, good, or service. The idea of creating new value where none existed previously may sound like a trick, but you can think of it as being similar to discovering a property you own has a container of gold buried on it — you knew the property had one value and now you discover it has additional value as well that you previously hadn’t realized until finding the gold.Let’s step back a second to discuss what we mean by a right so we can further understand how the tokenization of rights unlocks unrealized value. A right is simply an agreement that gives one or more parties an entitlement to have or do something. When we talk about tokenizing assets we are really talking about tokenizing the right to ownership of an asset, but for the purpose of clarity when we refer to rights at Sweetbridge we are typically making a distinction between the ownership of the real-world asset or good and a right related to an underlying asset, good, or service created by a contract.To help you understand what we mean by rights, let’s look at some examples. These examples are simple and not necessarily very valuable, but they will give you a basic understanding of rights and will allow you to see the potential.As an example of some simple rights:Gucci could auction the right to buy the first Gucci bag in every new line released over the next ten years — or perhaps the millionth bag. This does not cost Gucci anything and can be sold separately to the bags themselves.An airline could sell the right to fly first class for a 50% discount for five years.A hotel could sell the right to sell underutilized capacity in its hotels.Anyone could sell the right to 10% cashback on future purchases.Airlines could give away a right to an upgrade on a future flight as a reward for loyalty.A retailer could create the right to buy a product or service a year from now at today’s price and either sell it or give it in exchange for loyalty.Many of these things exist today in some form, but the point of tokenization is that these rights become fungible and tradable — they become “assets.” This means any entity that receives the right can give or sell the right to someone else, which makes it possible to monetize the right.The examples become much more interesting (although also more complex) when you start to move beyond consumer-oriented use cases and into commercial situations. When dealing with elaborate systems, such as those involved in large commercial endeavors, the tokenization of rights can be used to:solve multifaceted supply chain problems,enable the separation of different types of value even within a single asset,ensure long-term loyalty,and produce network effect.There are two intricate examples of tokenized rights which are built directly into the Sweetbridge platform — the right to lower cost and the right to low-risk value. We believe these two rights will provide unprecedented opportunity and value, especially to early adopters of the system. To learn more about the nuances of tokenizing rights in general, and the tokenization of lower-cost and low-risk value specifically, read our paper Trusted Tokenized Rights.The foundation for tokenizing both assets and rightsAll of the above is only possible through a platform that can ensure that information about assets, and the rights on each asset, can be trusted and audited in real time. That platform is our Synchronized Accounting Platform. It builds on the ideas of triple entry accounting first articulated by Ian Grigg. However, the protocol goes far beyond an immutable shared accounting state. Its design comes from decades of real world experience building automated audit systems. It offers a holistic model for continuous assurance in transactions by addressing legal, identity, accounting treatment, asset ownership and rights — as well as payment.The system ensures that all counterparties share the same legal documents, have compatible accounting treatments, and have digitally signed the transactions. It provides controls that enable real-time auditing with full transparency of legal, regulatory, and accounting treatments that support these rights. In short, the system can automatically enforce and verify tokenized rights, making them trustworthy and reliable.The continuous assurance features found at the core of the Sweetbridge Synchronized Accounting platform make the tokenization of anything not only possible, but practical. The technology that supports the Sweetbridge Synchronized Accounting System is not designed to be difficult to understand or implement. It is built in a way that allows for gradual implementation and designed in such a way that accountants, lawyers, and auditors can use it easily without knowing a complicated coding language.To learn more about our platform and what it could do for you, send us an email at [email protected]. We’d love to set up a meeting to discuss how you could implement the Synchronized Accounting Platform and the benefits of tokenization to move your business forward.Tokenization of assets and rights was originally published in Sweetbridge on Medium, where people are continuing the conversation by highlighting and responding to this story.