docs/content/guides/developer/digital-assets/non-fungible-tokens/asset-tokenization.mdx
Asset tokenization refers to the process of representing real-world assets, such as real estate, art, commodities, stocks, or other valuable assets, as digital tokens on the blockchain network. This involves converting the ownership or rights of an asset into digital tokens, which are then recorded and managed on the blockchain.
The concept is to divide high-value assets into smaller, more affordable units, representing ownership or a fraction of the asset.
This strategy enables wider participation from investors who might want to mitigate risk by investing in a portion of a digital asset rather than being the sole owner, thereby expanding accessibility to a broader range of investors.
This pattern is similar to the ERC1155 multi-token standard with additional functionality. This makes it a suitable choice for Solidity based use cases that one might want to implement on Sui.
Asset creation
Each asset is fractionalized into a total supply, with each fraction represented as either a non-fungible token (NFT) or fungible token (FT) type collectible. This ensures that each individual fraction maintains a balance equal to or greater than one, and when combined, all fractions collectively reach the total supply of the asset.
Besides the total supply, each asset is defined by various other fields such as name, description, and more. These fields collectively form the metadata for the asset, and they remain consistent across all fractions of the asset.
NFTs vs FTs distinction
Each time a tokenized asset is minted, the system can create it with new metadata. If new metadata is incorporated, the tokenized asset becomes unique, transforming it into an NFT. In this case, its balance is limited to 1, signifying that only a single instance of this asset exists.
If no additional metadata exists, the system categorizes the tokenized asset as an FT, allowing its balance to exceed 1, enabling multiple identical instances of the asset to exist.
FTs possess the capability to merge (join) among themselves or be split when the balance is greater than 1. This functionality allows for the aggregation or division of units of the token, offering flexibility in handling varying quantities as needed.
As previously mentioned, all the collectibles of tokenized assets, whether NFTs or FTs, when combined, can amount to the maximum total supply of the asset.
Burnability
When you create the asset, you can define whether the fractions of the asset are eligible for removal or destruction from circulation. The process of removing or destroying assets is called burning.
If a tokenized asset is burnable, then burning a fraction causes the circulating supply to decrease by the balance of the burnt item. The total supply, however, remains constant, allowing you to mint the burned fractions again if needed, thus maintaining the predetermined total supply of the asset.