Blockchain-based tokenisation: Status and implications of early design decisions

Abstract

Blockchain-based tokenisation is increasingly getting attention with more assets and asset classes being tokenised. Ownership rights in the assets are represented on the blockchain where they can be traded without direct intermediaries, which is seen as one of the main blockchain promises. In this paper, we describe the still emerging adoption of blockchain technology that shows persistently positive indicators of growth, despite frequent doubts of its usefulness. More precisely, we explore recent developments in the tokenisation space, with particular focus on the stage and scale of current products and services, and the degree to which these deliver on the blockchain promises. We further provide a perspective on how banks could approach tokenisation and deliver related services. With blockchain, trust in intermediaries is replaced by trust in the consensus of validating nodes of the used blockchain platform. This has substantial consequences for banks planning to offer new services, since they care about the cost of transaction, its confirmation time, privacy, liability, and even the carbon footprint of underlying processes. In order to support decision making, we provide an analysis of how these parameters differ depending on the blockchain platform type and its consensus protocol.