Tokenization
Representing a real-world asset or unit, such as a carbon credit, as a digital token on a distributed ledger.
Tokenization maps an off-chain asset to an on-chain representation. For carbon, the token stands for a specific serial-numbered unit held in a registry, and transfers on-chain are intended to correspond to transfers of the underlying asset.
The integrity of the model depends entirely on the link. If a token can exist without a corresponding registry retirement or transfer, the same tonne can be sold twice. Robust designs enforce a one-to-one binding, prevent double issuance, and handle the case where a registry record changes after minting.
Beyond accounting, tokens enable programmatic uses: fractional ownership, automated retirement on consumption, and transparent provenance. These are genuine advantages, but they amplify errors — a mistake in the binding propagates instantly and irreversibly.
Frequently asked questions
Does tokenizing a credit change its legal status?
No. The underlying registry record determines legal ownership; the token represents it.
What is the main risk?
Double counting, when the same underlying unit is represented more than once across systems.