Definition ∞ Asset transformation refers to the process of converting one type of asset into another, often to alter its risk profile, liquidity, or utility. In digital finance, this can involve converting a real-world asset into a tokenized digital representation, or exchanging one cryptocurrency for another. This operation allows for a change in the fundamental characteristics or ownership structure of an asset. It is a core function in various financial ecosystems, enabling new forms of value exchange.
Context ∞ Within digital assets, asset transformation is a central theme in the tokenization of real-world assets (RWAs), such as real estate or commodities, into blockchain-based tokens. This process allows for fractional ownership and increased liquidity for previously illiquid assets. A critical development involves the establishment of robust legal and technical frameworks to ensure secure and compliant transitions between physical and digital forms, and across different blockchain networks.
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