Energy Tokenization

Definition ∞ Energy tokenization involves converting units of energy, such as kilowatt-hours, into digital tokens on a blockchain. This process enables the fractional ownership, peer-to-peer trading, and transparent accounting of energy resources. It can apply to various energy types, including renewable energy credits or direct power output, facilitating more efficient and decentralized energy markets. Tokenization allows for automated settlement and verification, potentially democratizing access to energy investments and consumption.
Context ∞ Energy tokenization is an emerging application of blockchain technology, often featured in news regarding sustainable finance and decentralized energy grids. Discussions often focus on its potential to incentivize renewable energy production, streamline energy trading, and create more transparent carbon markets. Regulatory frameworks for tokenized energy assets are still developing, posing both opportunities and challenges for its widespread adoption.