Six Mechanisms That Decide Whether an Asset Can Be Tokenized

01

The counter that matters is the third one. It stays at zero under every failure you can inject, because neither leg debits on lock — the lock is an encumbrance, and only the preimage reveal converts it to a transfer. The asymmetry is doing the work: the share leg's timeout must expire strictly before the cash leg's, so the party who learns the secret first is never the party who can still walk away. Invert that ordering and you have built a free option for the counterparty rather than a settlement system. What survives from the old world is the encumbrance itself; what disappears is the two-day window in which the fund carries counterparty exposure it did not price.

02

Turn every rule on and the holder base fragments into jurisdictional islands: the token is fully compliant and almost entirely illiquid. Turn them off and you have a bearer instrument you cannot lawfully issue. The real design space is the middle, and the metric nobody quotes in a tokenization pitch is the one on the right — float = supply held by the largest eligible component / total supply. A fund can tokenize a billion dollars and produce a market of forty million if its holder set partitions. This is also why the feeder-fund wrapper dominates in private markets: one feeder per jurisdiction keeps each component internally complete, at the cost of never merging them.

03

The observed average converges on L = λW and there is nothing you can do about it except shrink one of the two terms. Latency is bounded by the chain's finality; arrival rate is bounded by your own distribution success. Which means the operational cost of a mirrored design scales with adoption — the better the token sells, the more breaks the transfer agent clears at cut-off. Push the rate up and watch the strike-time break count climb linearly. The honest read is that mirroring is a migration strategy with a running cost, not a destination: the cost only goes to zero when the mirror becomes the register and the reconciliation has nothing left to reconcile.

04

Mean absolute premium scales as σ√Δt, so quadrupling the strike frequency halves it — a cheaper lever than any amount of secondary market-making. That is the entire quantitative argument for intraday NAV in a tokenized share class, and it is why money market funds went first: at a stable NAV with sub-1% volatility, σ√Δt is small enough that a daily strike already keeps the price inside the friction band, and the token can trade at par all day without anyone arbitraging it. Push the volatility slider toward an equity fund and the band stops containing the path. At that point you are no longer distributing a fund share; you are running an ETF, and you need authorised participants, a creation unit and a basket.

05

The first-mover premium is the price of a run, and it is created by the wrapper, not the asset — the underlying loans never repriced. Turn on swing pricing and it collapses to roughly zero, because each redeemer now pays their own liquidation cost instead of socialising it onto the people behind them. That single toggle is the difference between a tokenized feeder that behaves like a fund and one that behaves like a bank without deposit insurance. The uncomfortable part for the distribution story: swing pricing is exactly the feature that removes the instant, at-par liquidity the token was sold on. You can have the 24/7 exit or you can have par, and the honest products price the difference rather than hiding it in a buffer.

06

Under any weighting that respects what institutions are actually paying for, the same four sit at the top: government money market funds, tokenized deposits, direct treasuries and repo collateral. They win on collateral reuse — the ability to post the same instrument twice in a day is worth more than any settlement saving. Private credit and private equity feeders score highly on access economics and badly on everything else, which is exactly the profile of a product that raises headlines and modest assets. Drag the cost slider up and watch the bottom half fall away: real estate equity, carbon, receivables and cat bonds all fail on vehicle size long before they fail on technology. The constraint is not whether you can tokenize them. It is whether the line is large enough to amortise a second register.