All about tokenization

The key factor to optimize the value chain

As part of the digital transformation process facing the energy sector, blockchain technology will increasingly become a key factor in optimizing the value chain and driving sustainable solutions. Thanks to the use of this disruptive technology, companies will be able, for example, to connect the power plants where electricity is generated with the consumption points and trace its origin, which increases transparency and ultimately favors the use of renewable energies.

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What is tokenization?

Tokenization makes it possible to digitally record and identify any real-world asset, whether it be physical, such as a product, or intangible, such as the effort made by a person to perform a task. The asset’s digital value is represented through transferable tokens that can be managed in a blockchain network.

Blockchain is a technology for recording blocks of data and digital transactions that is managed in a decentralized, transparent, and secure way. This system works as a blockchain, in which all nodes are connected to each other and digitally signed by a cryptographic system that obtains a token (unique identification character string) from each one, which guarantees the traceability of any process by creating a unique registration network that reduces risks and costs. It's generally applied in a digitized workflow to create shared, transparent, and more secure processes.

One of the most successful applications of blockchain technology is the tokenization of assets. The asset’s digital value is represented through transferable tokens that can be managed (created, issued or transferred) in a blockchain network, maintaining absolute control of ownership and information integrity at all times.

How tokenization works

Tokens represents an immeasurable part of an asset’s value to be evaluated and audited. Let's imagine, for example, that you want to tokenize the amount of renewable energy generated by a producer to make it possible to incentivize production and exchange of the asset for consumption.

Firstly, it would be necessary to value the asset to decide how many kilowatts of energy correspond to a single token. Once it has been tokenized, it's now available to anyone who wishes to invest, and it's possible to manage its value through a blockchain network. For instance, an energy producer/user with solar panels at home could transfer renewable energy tokens that they don't consume in a simple and reliable way and obtain the corresponding economic compensation in return.

Benefits of asset tokenization

Asset tokenization is a process that offers multiple benefits, especially in an increasingly interconnected world, where cybersecurity is particularly important:

Financial sphere

Tokenization speeds up transactions. Once we have digitized an asset, we can sell it easily. As it's a decentralized network, it democratizes access for all social actors, and low-cost financial transactions can be carried out.

Streamlining processes

Blockchain technology enables the use of native tools to streamline processes that increase efficiency related to audits, transactions, or purchasing and selling assets.

Confidentiality

It offers a high degree of transparency, security, and privacy by allowing access and tracking of all transactions through encrypted information, while ensuring confidentiality.

Tokenization in the energy sector

The European Green Deal and the REPowerEU plan are committed to a profound transformation of our energy system, which must incorporate disruptive technologies (such as big data, blockchain, or artificial intelligence) to help consumers reap the benefits of the green transition.

In particular, incorporating tokenization can mitigate the current problems of accessing capital for renewable energy producers and getting investment for large projects. In general, accelerating the transition towards a decarbonized economy and boosting the renewables industry means improving global access to capital, investment, and trade in energy from sustainable sources.

The tokenization of assets such as energy, electricity, savings, energy efficiency, or carbon emissions, with the help of blockchain technology, makes it possible to align financing and transactions with the specifics of renewable energy systems. In this way, tokenization platforms open up a new way of financing renewable electricity systems based on decentralized, transparent, and secure digital exchange transactions.

Benefits of renewable energy tokenization

In addition to its financial application, tokenization brings multiple benefits to the energy sector.

Smart contracts

The use of tokens through blockchain technology allows for the creation of smart contracts (i.e., written with a virtual computer code or protocol) with the main advantage of being able to be executed and enforced automatically based on a series of programmed parameters.

By self-executing when certain conditions are met, the smart contract guarantees the timely compliance of the parties, avoiding any misunderstandings, falsifications, or alterations. In addition, as it's formalized without intermediaries, times are reduced and exchange operations are more agile.

Self-generation and distributed generation

The fundamental pillar of distributed generation is renewable energies and advanced automation and control systems. It consists of the generation of electric power through many small generation sources installed close to the consumer, which are hooked up to the general grid. With the help of blockchain technology, users who have, for example, solar panels, in addition to self-supply, will be able to sell excess energy to the grid through the use of tokens, and the amount of energy fed into the grid will be recorded and visible.

Sustainable mobility

The use of blockchain technology and tokens in the electric vehicle industry makes it possible, for example, to automate toll payments, record journeys, keep track of vehicle breakdowns, or share information with other infrastructure equipment. Furthermore, electricity from distributed renewable generation can be used at charging points and hydrogenerators, and paid for quickly and securely in real time.

Certifying products

Products from the refining and petrochemical industry are subject to a series of quality and safety certifications by regulatory bodies.

It's common for incidents to occur in this type of procedure due to incorrect labeling and loss or lack of information. The Repsol Technology Lab Research Center (Tech Lab) and the startup Finboot have developed BlockLabs, an application that uses digital equivalents or tokens of the samples to be approved, avoiding the costs associated with labeling errors. This technology’s consistency lies in the recording of the characteristics of the digital asset and its transfer between the network members, which follow protocols that ensure the information’s integrity.

"Our commitment to tokenization is clear. We are exploring its opportunities and maintain an active role in consortia such as Alastria or INATBA."

Oscar Campillo

Expert in digital technologies