Hey guys been looking a lot into tokenization of assets wondering how this is possible with ERC20 (Seeing a lot of people use it and keen to understand) how would you represent an asset with each token representing a % of equity if you had multiple assets? How would the blockchain know what asset you are invested in with multiple assets if you are using the ERC20 Token?


I think there are two parts to this.

One is the actual distribution of X tokens simply by issuing a fixed quantity of a new ERC20 token and trading them. This is a well known, solved problem that is beyond the scope of a stackexchange answer, though you could easily search how to realise this.

The other is much harder and depends on the type of asset. If we are talking about tokenization of a piece of art, you need to solve the problem of proving and guaranteeing both the provenance of the art work and the rights to the underlying asset. How would a token buyer be guaranteed that the work of art backing the tokens would not be sold? This is where some solution for the particular jurisdiction and type of asset needs to be devised.

A simplified example could be as follows. If parties in the provenance had a digital signature and could sign a digital version of the receipt, and if the company behind the tokenization could publicise a scanned version of the ownership contract, where it was legally verifiable that no transfer to 3rd parties can be made, and rightful ownership would be to the collective of individuals participating in the tokenization scheme, then digitally verifiable ownership rights can be provided. These mechanisms are of a legal nature and depend on the jurisdiction and type of asset.

For the case of multiple assets, you could either develop your own new smart contract, where the tokens issued carried some kind of parameter, or you could issue multiple tokens per asset backing the token.

Essentially, you need a legal mechanism of guaranteeing that the smart contract owns the asset (for example, a company constitution that is not modifiable, where it is openly declared that the assets belong to the smart contract...)

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