Asset-backed tokens are digital tokens on a blockchain that represent ownership or a claim on real-world assets. These assets can include commodities like gold or oil, real estate properties, company shares, bonds, or even artworks. The main purpose of asset-backed tokens is to combine the stability and intrinsic value of tangible assets with the efficiency, transparency, and accessibility of blockchain technology.

Each token is typically backed by a specific quantity or value of an underlying asset. For example, a gold-backed token may represent one gram of physical gold stored in a secure vault. This backing helps reduce volatility compared to purely speculative cryptocurrencies, as the token’s value is linked to the real asset’s market price.

Asset-backed tokens can increase liquidity by allowing fractional ownership. Investors who may not be able to afford an entire property or gold bar can buy small portions through tokens. Additionally, blockchain records provide transparency, making it easier to track ownership and transfers.

However, these tokens also carry risks. Their reliability depends on proper asset custody, regulatory compliance, and trust in the issuing entity. Audits and legal frameworks are crucial to ensure the assets truly exist and are securely held.

Overall, asset-backed tokens bridge traditional finance and decentralized technology, offering a more accessible and efficient way to invest in real-world assets.