Asset-backed tokens, also known as security tokens, are digital assets designed and issued on a blockchain network and backed by real-world, physical assets. They are digitized representations of real-world assets on the blockchain.
Asset-backed tokens could help tokenize any asset from the physical and offline world, including commodities such as gold and crude oil, real estate, equities, and more. It is the enabler of digital transformation in the world of financial transactions, revolutionizing this space with the power of blockchain technology.
Security tokens take the concept of cryptocurrencies further, empowering them with real-world use cases beyond payment methods. They can be regulated by financial authorities globally but enjoy the benefit of decentralization and immutability via the blockchain, bringing higher efficiency to capital markets.
The price of asset-backed tokens would be pegged to the real-world assets they represent, and creating such tokens is called 'asset tokenization'. To distinguish them from regular cryptocurrencies, asset-backed tokens are also called securities.