Updated: August 2, 2025

Key Points

• Tokenization can be viewed as the fractionalization of objects and is a necessary condition for their digitalization and integration into the blockchain.

• Fractionalization is linked to the economic models of unbundling, which allow for market expansion through addressing consumer segments with differentiated willingness-to-pay, price discrimination, and an increase in transactional commissions as a result of increased liquidity.

• The success of tokenization is dependent on the demand for the unbundled fractions of the objects, and not all objects can be successfully tokenized without implicating additional challenges related to communal ownership, such as governance and value maintenance.

Intro

This is one of the first articles in a thread of contemplations about the tokenization. Let me preface the multi-post discussion by saying that I am actively thinking about the proper theoretical conceptualization of the tokenization phenomenon. There are two competing ideas that I try to explore - the un/bundling of goods and securitization. In this post, I will mostly talk about the tokenization as unbundling of goods and fractionalization of value. In future posts, I will build on this idea and explore value bundling and securitization.

Tokenization as Unbundling: A Reframing of Market Design

Tokenization can be meaningfully understood through the lens of unbundling. At its core, tokenization fractionalizes objects and their attributes. For example, when the United Arab Emirates tokenizes a property such as a house, it produces a digital representation of that asset measured in discrete units. Note that the transformation into multiple discrete units is intrinsic to digitization. Digital systems require the assignment of discrete units to represent any entity. Thus, a single indivisible object becomes a bundle of many units, or fractions, each represented by a token. In this sense, tokenization amounts to unbundling: the economic disaggregation of a whole into fractional components.

Economic Implications of Unbundling

The reframing of tokenization as unbundling offers several meaningful economic insights. First, unbundled units can be reassembled into smaller packages that are less than a whole but large enough to become new market offerings. This facilitates market expansion by lowering the entry threshold. Since a fraction costs less than the whole, tokenized units enable greater accessibility, enhance trading volume, and improve liquidity. Liquidity, in turn, contributes to more efficient price discovery and draws in greater pools of capital.

Second, unbundling supports price discrimination, a strategy long recognized in economics for its profitability. Consider the example of cake: a full cake sold at a grocery store may generate less total revenue than individually priced slices sold in a restaurant. The same applies to wine - bottles versus glasses of drinks in the menu. By segmenting consumption into smaller units, producers capture more consumer surplus and optimize revenue across different willingness-to-pay segments.

Third, tokenization not only fractionalizes existing assets but also enables the recombination of disparate fractions into entirely new asset bundles. This parallels financial engineering strategies seen in collateralized debt obligations (CDOs) and collateralized mortgage obligations (CMOs), where fractional claims on different underlying assets with varying risk profiles are pooled and restructured into new products. These are examples of financial recombination made possible by the foundational act of unbundling the credit claims into shares, or fractions.

Caveats and Limitations of Tokenization as Unbundling

The conceptual likeness of tokenization and unbundling does not guarantee universal applicability. In many domains, tokenization encounters significant practical and theoretical constraints. For example, in fine art markets, the ownership of a fraction of a Picasso painting may lack the utility or symbolic value of owning the entire piece. Fractionalization in such cases may not generate sufficient demand to sustain secondary markets.

Moreover, new markets require both supply and demand. Tokenized offerings without corresponding consumer or investor interest are bound to fail. This is evident in the struggles of many real-world asset (RWA) tokenization startups, which, despite successful technical implementation, could not stimulate investor appetite. VC William Quigley noted this challenge in his presentation at the Business of Blockchain Technology Conference in Miami, observing that many ventures tokenizing RWA collapse due to the lack of market pull.

Additionally, not all assets are practically divisible. Houses, for instance, entail indivisible decisions - renovations, leasing, maintenance - where ownership involves governance, not just capital rights. Tokenization that ignores such operational complexities reduces the economic utility of the tokenization of the underlying asset. Legal ambiguity around ownership rights, control, and liability further compounds this issue.

While tokenization mimics the success of past unbundling strategies (e.g., software modularization, retail product packaging), it also inherits their limitations. Eppen et al. (1991) provide a detailed analysis of where unbundling is most effective. Their conclusions suggest that not all markets benefit from disaggregation - especially when consumer utility relies on holistic value or when transaction costs undermine liquidity gains.

Conclusion

Tokenization is often associated with benefits such as higher liquidity, greater transparency, and broader access to markets. These advantages are particularly evident when tokenization replaces fragmented electronic systems - such as the patchwork of proprietary software and databases used by clearinghouses - with a unified, traceable, and potentially permissionless blockchain infrastructure. (Though it remains an open question whether such systems will remain permissionless, as suggested by the U.S. "Project Crypto" initiative under Paul Atkins.)

However, when we turn to RWA tokenization, such as recent experiments in the UAE’s housing market, tokenization primarily entails the creation of digital representations and the fractionalization of ownership. Eppen et al. (1991) offer a detailed examination of the economic rationale for unbundling strategies, emphasizing that they are not universally applicable.

References:

1. Cointelegraph. (2024, June 18). Dubai launches first licensed tokenized real estate project in MENA region. https://cointelegraph.com/news/dubai-launches-first-licensed-tokenized-real-estate-project-in-mena-region

2. Eppen, G. D., Hanson, W. A., & Martin, R. K. (1991). Bundling—New products, new markets, low risk. Sloan Management Review, 32(4), 14–26.

3. Prypco. (n.d.). Mint real estate. https://mint.prypco.com/

Please cite this article as: 

Petryk, M. (2025, August 2). Thoughts on Tokenization: Unbundling of Economic Value. MariiaPetryk.com. https://www.mariiapetryk.com/blog/post‑17