Definition ∞ Off-chain assets are tangible or intangible assets that exist outside of a blockchain network but can be referenced or represented by digital tokens on a blockchain. These assets include real estate, commodities, fiat currencies, or traditional financial instruments. The value and legal ownership of off-chain assets are typically governed by traditional legal systems, with their blockchain representation serving as a digital claim or record. Their integration with blockchain often involves mechanisms to link the digital token to its physical counterpart.
Context ∞ The tokenization of off-chain assets is a significant area of development, aiming to bring greater liquidity and programmability to traditional asset classes. Discussions often address the challenges of legal enforceability, custodial arrangements for the underlying assets, and ensuring a reliable connection between the digital token and its physical backing. Regulatory frameworks are evolving to provide clear guidelines for the legal recognition and transfer of these tokenized real-world assets.
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