This is a chapter from the book Token Economy (Third Edition) by Shermin Voshmgir. Paper & audio formats are available on Amazon and other bookstores. Find copyright information at the end of the page.
The tokenization of real-economy assets has the potential to replace entire back-office operations in asset management through the use of smart contracts. The ability to tokenize any asset—from the physical or digital economy—simplifies the implementation of fractional ownership and opens new investment opportunities for certain asset classes. This financialization of the real world, however, not only comes with opportunities but can also create unintended market dynamics.
Asset tokenization refers to the creation of a Web3-native digital certificate that represents any physical object, financial asset, or digital file. The token embodies the rights associated with its physical or digital counterpart and is collectively managed on a blockchain infrastructure. The publicly verifiable nature of blockchain networks creates a frictionless settlement environment that significantly reduces the transaction costs of managing these rights—such as ownership rights, management rights, or voting rights—compared to traditional systems.
By enabling fractional ownership and lowering price discovery costs, tokenization enhances divisibility, increases market liquidity, and reduces market fragmentation. This is particularly beneficial for real-world assets that require high capital commitments, such as art or real estate. Tokenization allows ownership rights and management rights to be divided into smaller, tradable fractions, making investment accessible to a broader pool of investors. Greater divisibility improves transferability, attracting participants with smaller financial means and increasing overall market liquidity. As a result, asset tokenization could pave the way for entirely new use cases, business models, and asset types that were previously unfeasible.
The tokenization of real-world assets requires several prerequisites: (i) a well-defined regulatory framework for various asset token classes, (ii) online exchanges tailored to trading these asset tokens, and (iii) trusted custodians to manage the physical assets, particularly in cases of co-ownership. The terms asset token, real-world asset, security token, and non-fungible token have overlapping definitions and are sometimes used interchangeably, but distinguishing between them is important:
- Asset token is an economic term that refers to any type of asset—whether digital or physical.
- Real-world asset (RWA) is a term used to describe only physical assets (such as commodities, physical art, real estate, or securities).
- Security token, on the other hand, is a legal term that specifically refers to a type of asset token that is classified as a security according to financial market regulations. The interpretation of what constitutes a security, however, is subject to national legislation.
Non-fungible token (NFT) is a term that emerged in the Web3 community to describe a token that represents any type of unique asset (digital or physical) or identity-based digital certificate. NFTs typically represent assets that have more complex properties than fungible assets. They include metadata that describe the unique properties of the asset and have a more sophisticated rights management logic built into the token contract.
Use Case 1: Security Tokens
Security tokens are the digital representation of traditional securities that enable embedded automated rights management, which can streamline the settlement process between buyers and sellers, potentially reducing brokerage fees. In the current financial system, the settlement of securities and other financial products remains slow and fragmented. While 24-hour markets exist, they are rarely peer-to-peer, and settlements require coordination across multiple institutions, each maintaining its own private ledger. Despite technological advancements, real-time settlement is still uncommon. Security transactions often rely on a complex, document-heavy process where data is siloed within the servers of various stakeholders. This fragmented approach results in inefficiencies, delays, and high costs, with settlements typically taking at least two business days. These delays are not always technically necessary but are often a relic of old practices.
Web3 infrastructure mitigates existing issues as it allows for real-time and peer-to-peer settlement without compromising legal protections, as compliance rules are encoded directly into the token contract. Settlement updates are executed via the consensus mechanism of the underlying blockchain network, ensuring transactions occur strictly according to the rules embedded in the smart contract. The self-enforcing nature of smart contracts provides an efficient solution to the complexities of securities trading, where regulatory requirements can vary depending on asset class, investor type, and jurisdiction. Dividend payouts, for example, can be automated, offering real-time distribution—an enhancement over many conventional financial settlement systems.
The programmable nature of security tokens also allows for greater customization, making it more cost-effective to implement asset structures that were previously impractical due to economic constraints. However, trading security tokens still requires integrating a complex set of legal frameworks. Their adoption is both a technological and regulatory challenge, often influenced by network effects.
From a regulator’s point of view, security tokens are traditional securities that are simply represented by a new substrate (Web3 token) and managed by a new technological infrastructure (blockchain network). They are not a new product or economic phenomenon and therefore are fairly easy to understand and regulate. However, there is no common global understanding of what constitutes a security, as regulation differs from country to country. In some jurisdictions, the term “security token” applies to any token that represents a recognized asset or investment concept. Other jurisdictions have a more narrow definition.
To facilitate compliant issuance and trading of security tokens, third-party service providers have introduced standardized token frameworks. These standards incorporate transparent issuance mechanisms for asset and security tokens while addressing critical regulatory requirements such as Know-Your-Customer (KYC) and Anti-Money Laundering (AML) compliance.
Use Case 2: Real Estate NFTs & Fractional Ownership
Real estate tokenization refers to the process of creating unique, tokenized digital ownership certificates—real estate NFTs—that represent the deeds for physical properties such as apartments, office buildings, or land. Beyond ownership, these tokens can be programmed to include additional rights, such as voting rights in property governance, management privileges, and revenue-sharing mechanisms. Each token is unique, containing information about key property details, including size, location, price, ownership history, and other relevant data. By registering this information on a blockchain, the ownership status, property status, and embedded rights are notarized on a collectively managed and globally accessible public infrastructure.
The tokenization of the real estate market facilitates (i) rights management, (ii) fractional ownership and new forms of real estate funding, (iii) automated fractional rent collection, and (iv) tokenized real estate credit. For example, the property rights to a real estate asset can be divided into parts and sold to several co-owners. Even if a token represents a physical asset that is not divisible, as in the case of an apartment, the NFT representing the property rights is divisible. This means that investors can become fractional owners of a property without needing to buy the entire building. Depending on the regulatory environment and how the smart contract is set up, these fractionalized tokens may become eligible for global trading. This opens up the traditionally exclusive property market to a broader audience by allowing smaller investments. These fractions can be traded on decentralized or centralized exchanges, thus providing more liquidity to a historically illiquid asset class. An investor in France could easily buy fractional tokens in an office building in Canada with a few clicks on a real estate token exchange, without having to travel to Canada or hire an attorney there to handle legal matters. Similarly, an investor in Mexico could fund a private apartment building in India.
Several challenges need to be resolved before such use cases become feasible on a large scale. Legal frameworks for digital assets, especially those tied to physical properties, are still developing. Different jurisdictions may treat real estate tokenization differently, which can complicate cross-border investments. In the case of co-ownership, ensuring that token holders have a say in major property decisions is complex, particularly when thousands of token holders need to be consulted. Respective business and governance structures need to be in place to protect both investors and property users. Furthermore, fractional ownership tokens can add a layer of complexity that may amplify volatility in uncertain markets.
The potential interaction of tokenized real estate assets with decentralized finance (DeFi)—in combination with decentralized credit and lending tools—can create complex market dynamics and lead to adverse market effects. When many people do not understand the complexities of what they are buying into, fractional ownership of real estate can become a risky investment and result in the same "magical thinking" that contributed to the housing market collapse in the United States, which culminated in the global financial crisis of 2008. Improved financial literacy and dedicated regulatory oversight can help mitigate such risks.
Use Case 3: Art NFTs & Creator NFTs
The client-server architecture upon which the current Internet operates does not allow us to distinguish original files from their copies. A data packet is a data packet, whether original or copied. In Web2 systems, one can only use digital rights management tools to limit access to copyrighted content, as well as the legal system to sanction pirating copyright-protected content after a potential breach of copyright occurs.
Web3 tokens come with digital-native copyright features that are enforced in real time. Artists and other content creators can use blockchain networks to notarize an existing digital file with their private key, thereby creating a unique autographed version of that file, which can be easily traded over Web3 infrastructure. Using a blockchain wallet, any content creator or artist can create a hash of an original digital file, which is verifiable on a public and permissionless infrastructure that everyone can access.
In this process, a variety of rights can be embedded into the token contract that represents a physical or digital artwork: (i) Ownership rights give the NFT holder the ability to claim the artwork, either digitally or physically. (ii) Reproduction rights or distribution rights determine whether the buyer has the authority to make copies or distribute the artwork. (iii) Display rights give a buyer permission to display the artwork in digital or physical galleries. (iv) Royalty rights ensure that artists and creators continue to benefit from the appreciation of their work in secondary markets. The ability to include royalty mechanisms through smart contracts gives artists and content creators a percentage of future sales whenever the NFT is resold. This is an improvement over how traditional art markets work, where artists typically only profit from the initial sale of their work. It also introduces more downstream transparency.
NFTs ensure provable ownership and authenticity. This is particularly important in the art market, where issues related to provenance and authenticity have historically been difficult to resolve. Fractional ownership of high-value physical artworks, allowing multiple individuals to co-own a painting or sculpture, democratizes access to fine art and increases liquidity in the market, as fractional shares can be easily traded on digital platforms. However, as with tokenizing real estate, several challenges must be addressed before such applications see greater adoption. For example, the integration of intellectual property rights is complex, as it often varies between jurisdictions and may not be fully enforceable through smart contracts alone. Artists and buyers must navigate complex and fragmented legal frameworks to ensure that the embedded rights in the NFT align with relevant copyright laws.
Crypto collectibles gained prominence within the Web3 community with the launch of CryptoKitties in 2017, which allowed the buying, selling, and breeding of unique virtual cats on the Ethereum network. Its popularity surged rapidly, leading to significant congestion on the Ethereum network at the time. The mainstream attention to art NFTs intensified in late 2020 and early 2021, catalyzed by notable events where prominent artists transformed their digital content into unique NFTs. Beeple, a digital artist with over 2 million followers on Instagram, used Web3 infrastructure to tokenize selected Instagram pictures and sign them with his unique blockchain signature. He subsequently sold his tokenized art collection for over 3.5 million USD. One of the NFTs from this collection was later resold at Christie’s for 69 million USD. Twitter co-founder Jack Dorsey minted his first tweet into an NFT via a decentralized application that allowed him to register the Twitter URL under which his first tweet is retrievable over Web2. He signed it with his Ethereum wallet, thereby creating a unique token that could be traded over the Ethereum network. His cryptographically signed tweet then sold for 1,630.5 ETH, which, at the time of the sale, was worth an equivalent of 2.5 million USD. This series of events set in motion a craze of issuing and buying art NFTs, sometimes for an inconceivable amount of money. As a consequence, NFTs were criticized for being overhyped, which—at that particular time—was certainly true. However, hype cycles are neither unusual for new technologies in general nor for the art world in particular. In fact, the whole art world thrives on overhyping artists and driving FOMO (fear of missing out) regarding the prices of an artist's work.
The uniqueness of digital art and the fact that files can be copied for free do not necessarily conflict with each other. An Instagram picture could be publicly accessible to anyone over Web2, but a collector could buy the autographed version, gain access to the original file in high resolution, as well as acquire other rights the artist might attach to their NFT. Creating a unique digital autographed version (Web3 token) of a publicly available digital file (Web2 file) can create interesting new dynamics in the content creation and art world. Whether or not it makes sense to create artificial scarcity for a digital file is probably subject to specific use cases and personal preferences. Artists and online content creators might decide to make only paid copies available, or they might issue a freemium and premium version of their work.
Use Case 4: Energy Tokens
Similar to the traditional financial industry, the energy sector relies on a complex reconciliation process to settle transactions across a network of stakeholders, including energy producers, consumers, and infrastructure providers. Many participants still operate on outdated, non-interoperable private systems, requiring third-party intermediaries—such as brokers and financial institutions—to draft contracts and facilitate secure transactions. This reliance on intermediaries adds bureaucratic overhead, ultimately increasing energy costs. Blockchain networks offer a publicly accessible and globally available infrastructure for energy market coordination in a more decentralized setup. Beyond the technical capabilities of blockchain networks, the European Union and several other jurisdictions have introduced legal mandates to decentralize energy production. This government-mandated market structure will be harder to coordinate with existing systems designed for centralized energy exchange and could incentivize energy service providers to embrace Web3-based applications.
Tokenization of kilowatt hours (kWh) of energy: The transaction logic of a kilowatt hour (kWh) can be embedded in a token contract, which acts as a "digital twin" directly linked to the underlying kWh and can be settled on a public blockchain network. This can reduce operational costs and reshape energy distribution dynamics. However, widespread adoption requires industry-wide integration with Web3-based systems. Every industrial machine along the energy supply chain must (i) be connected to the Internet, (ii) have a unique blockchain identity, and (iii) incorporate a so-called “trust anchor” composed of three elements: a hardware wallet, a data logger, and an energy meter. This setup bridges blockchain networks with real-world energy infrastructure, making machine data Web3-compatible.
P2P energy trading: Although peer-to-peer energy trading exists today, production and consumption devices do not interact autonomously; an intermediary—typically an energy provider—facilitates transactions between producers and consumers. In a Web3 framework, kWh generated by individual households could be tokenized and exchanged via blockchain networks. Each unit of energy produced could be represented as an NFT, carrying property rights and metadata such as energy source and location. This would enable households to sell excess solar power generated on their rooftops directly to other consumers via tokenized trading systems. To support this model, smart meters would need to be equipped with hardware wallets. These wallets would assign a unique blockchain address to each production and consumption unit, ensuring seamless tracking and settlement of transactions. Addressability is a prerequisite for smart meters to autonomously execute energy trades and process payments. Additionally, blockchain-based infrastructure could automate accounting and tax-related reporting for energy transactions.
KWh provenance & green purchase agreements: Today, energy providers source electricity from a mix of fossil fuels, renewables, and nuclear power, ensuring supply stability even during peak demand. Consumers may opt for renewable energy plans, but the actual kWh they receive is not necessarily from a renewable source. The current system merely certifies that a portion of the provider’s total energy mix comes from renewables, without offering granular traceability. Tokenizing kWh through a network of smart meters could solve this issue by attaching provenance data to each energy token. This would allow consumers to verify the actual source of the energy they consume, ensuring that a kWh purchased as "green" indeed originates from a renewable power plant. In decentralized grids, such as citizen-operated renewable power plants, sustainability verification would be automatic. Tokenized kWh could carry unique metadata detailing production methods and sources, making them less fungible than traditional kWh but providing greater transparency.
Incentivize the reduction of energy consumption: Tokenization could also support programs aimed at reducing overall energy consumption. Consumption patterns—analyzed at the household or device level—could help users monitor and adjust their behavior. Based on this data, tokenized incentives similar to loyalty programs could be introduced. Households that reduce energy consumption might earn voucher tokens redeemable for network services. Alternatively, these tokens could be converted into governance rights, allowing energy-efficient consumers to participate in decision-making within an energy production network.
Micro-investments, micro-loans & citizen power plants: Energy tokenization enables individual households to invest in alternative power plants operated by third-party providers from which they purchase energy, effectively making them “prosumers.” This opens the door to fractional investments in tokenized "citizen power plants," allowing individuals to participate based on their financial capacity. These power plants could be managed by specialized energy providers, with investment tokens carrying governance rights for co-decision-making. Tokenization can also support alternative financing models, where an investor could fund the solar panel on another individual’s property through tokenized micro-loans. In return, they could receive automated interest payments via smart contracts. Such mechanisms can democratize access to energy infrastructure investments while creating new financial incentives for sustainability.
Use Case 5: Collective Ownership & Micro-Investments
Fractional collective ownership is a viable strategy across various markets, extending beyond art, real estate, and energy. The specific business model and structure of micro-investments depend on the use case.
For example, an investor in France could easily buy tokenized shares in a restaurant in Canada through a token exchange specializing in micro-investments in small and medium-sized enterprises (SMEs). Tokenization over globally accessible Web3 infrastructure can improve liquidity and open new opportunities for both entrepreneurs and investors who currently find it difficult to engage in such types of cross-border investments. This could enable a more peer-to-peer approach to microfinancing, reducing reliance on intermediaries such as the International Monetary Fund or the World Bank. However, integrating SME financing into global markets presents regulatory and operational challenges, including ensuring that tokenized SME shares represent legitimate businesses and that investors’ rights are upheld in the real world.
In real estate, similar micro-investment and co-ownership structures are possible. An investor in Mexico could fund an apartment building in India through a token exchange specializing in real estate non-fungible tokens (NFTs), facilitating fractional ownership of individual properties. Alternatively, a co-working space could be collectively purchased and managed by its members. In this case, the tokens would represent property rights, granting holders voting, management, and access rights. Usage rights could define access privileges for different parts of the property, while voting rights could be used for shared governance. Management rights and responsibilities could be assigned to specific members for operational tasks.
Fractional collective ownership could also benefit non-governmental organizations (NGOs) and grassroots initiatives. A community could co-finance and operate a renewable energy-powered microgrid, making it more feasible for a group of neighbors to cover costs than for a single individual. Smart contracts could automatically distribute revenue from excess energy sales among members in proportion to their shares. This model could also be applied to taxi drivers, many of whom lack the funds to buy their own vehicles and must either work for a company or rent a car, reducing their earnings. Fractional ownership tokens, in this case, would allow multiple drivers to collectively purchase a vehicle, share operating costs, and distribute revenue from fares. A smart contract could automatically allocate a portion of each driver’s earnings to cover expenses such as maintenance, insurance, and fuel.
Collective fractional ownership could further be used to manage community-owned assets. Norway, for instance, distributes profits from its oil sales to residents through sovereign wealth funds. Such a model could be tokenized to improve transparency, reduce settlement costs, and automate revenue distribution. If the Norwegian Central Bank were to introduce a tokenized version of the Norwegian krone in the future, dividends from oil sales could be directly issued as fiat-backed tokens without the need for intermediary banks.
However, all these applications face significant regulatory hurdles across different jurisdictions, as well as business logic challenges that must be resolved in the design of their respective token systems before they can achieve large-scale feasibility.
Use Case 6: CO2 Tokens
Carbon offsetting systems aim to fund projects that reduce greenhouse gas emissions, promote renewable energy production, lower energy consumption, and mitigate industrial pollutants. These systems rely on certification authorities to select projects, issue CO₂ certificates, and facilitate their sale to individuals and institutions seeking to offset their carbon footprint—either voluntarily or due to regulatory mandates. At the time of writing, no global public accounting system accurately tracks carbon emissions and sequestration. While national inventories and corporate environmental reports attempt to quantify emission reductions and carbon offsetting practices, these systems remain limited in accuracy and reliability. International treaties like the Paris Agreement have laid the groundwork for standardized carbon accounting, but comprehensive and verifiable global data collection remains an unresolved challenge. Many individuals and communities that naturally contribute to carbon sequestration are not yet recognized or rewarded.
Despite CO₂ certificates emerging as a new asset class, the market faces significant transparency issues. Information asymmetries, delayed revenue distribution, and opaque pricing contribute to the illiquidity of CO₂ markets. Most transactions involving CO₂ certificates and the carbon offsetting practices they fund occur over the counter, managed by intermediaries, while private individuals remain excluded from direct market participation. Quality control is inconsistent. Emission reductions are frequently overestimated, and the legitimacy of carbon offsets is often questionable. Problems such as "zombie credits"—where projects receive payments despite already being accounted for—further undermine trust. Additionally, voluntary carbon markets, driven by corporate reputation management, frequently result in "greenwashing" rather than genuine impact.
Tokenizing CO₂ certificates introduces a publicly verifiable and transparent approach to carbon markets, enhancing institutional accountability. By linking a specific amount of carbon reduction to a digital token, CO₂ tokens can be traded on decentralized marketplaces, improving access and traceability. CO₂ tokens can also be designed to create personalized incentives for individuals and organizations to reduce their carbon footprint—rewarding sustainable practices such as cycling, walking, using public transport, or achieving measurable reductions in energy consumption.
However, while CO₂ tokens can resolve existing issues in carbon markets, they primarily address emissions reduction without tackling broader sustainability challenges such as biodiversity loss or wildlife crime. The incentivization of biodiversity protection will be analyzed in a later chapter of this book, focusing on the use case of Rebalance Earth.
Use Case 7: Data Tokens
With the emergence of the Internet—especially Web2-based applications—data has become a valuable asset class, fueling an economy centered around personal data and user behavior. However, this data-driven economy faces significant challenges, particularly regarding the potential misuse of private data and restrictions on its availability for science and AI. Many valuable AI models require access to private data, but due to widespread concerns over data misuse, an increasing number of individuals and institutions are reluctant to share their data. Additionally, growing data privacy regulations legally restrict access to such information, further limiting its use in research and development.
Ocean Protocol was designed to address these challenges by creating a tokenized data exchange that enables the secure sharing and monetization of data while preserving privacy. The protocol uses smart contracts and privacy-preserving mechanisms to facilitate the publication and consumption of data services using two types of tokens: data NFTs and data tokens. Data owners can tokenize their datasets by creating unique data NFTs, which can then be monetized. Publishers may either sell ownership rights to a dataset, provided they comply with local regulations, or grant access rights by issuing data tokens. All tokenized assets (data NFTs) and access rights (data tokens) are recorded and managed on a blockchain, ensuring a tamper-proof audit trail of data transactions.
On both the buyer and seller side, access rights are managed by a blockchain network, and users control data access with their wallets in a privacy-preserving manner. Private datasets remain stored on devices owned or controlled by data providers, while third parties can access them for computation without direct exposure to the raw data. This setup allows data scientists and AI practitioners to process encrypted private datasets that were previously inaccessible. A more detailed analysis of this use case is explored in a later chapter of this book dedicated to Ocean Protocol.
Use Case 8: Attention Tokens
Beyond private data, user attention has also become a valuable commodity. Social media networks and advertising companies monetize attention by tracking user behavior and selling targeted ads. From browsing history to location data, vast amounts of personal information are collected, analyzed, and resold to data brokers. Machine-learning algorithms enable advertisers to personalize ads with unprecedented precision because user profiles can be built across devices and accounts using pseudonymous identifiers such as email addresses, phone numbers, and session cookies.
Despite generating immense value for advertisers and the platforms selling user data, users themselves rarely benefit directly from the monetization of their attention. Centralized data collection also creates significant privacy risks. Scandals like the Cambridge Analytica controversy exposed how personal data can be misused to influence political events. Additionally, the advertising industry suffers from opaque practices, where advertisers often lack visibility into how their campaigns are managed and whether their ads effectively reach their intended audiences.
The Basic Attention Token (BAT), integrated with the Brave browser, is an example of a tokenized solution that offers an alternative approach to digital advertising by tokenizing user attention. The Brave browser includes a built-in crypto wallet that manages BAT transactions and all user data. Advertisers can purchase ad placements using BAT, which are shown to users who opt into the system. Users who choose to view ads receive 70 percent of the ad revenue in BAT, while the Brave network retains 30 percent as a service fee. If an ad appears on a verified publisher's website or platform, the publisher receives a share of the BAT rewards based on ad impressions, engagement, and user contributions.
Although the browser continuously tracks user attention, this data never leaves the user’s device. On-device machine-learning algorithms analyze attention patterns to determine relevant content for personalized advertising. The "attention value" of each ad is calculated based on factors such as viewing duration and the proportion of ad pixels visible relative to surrounding content. Since all data analysis occurs locally, targeted advertising is possible without exposing raw data to advertisers. Advertisers gain direct access to reliable performance metrics without relying on third-party tracking tools, improving data security and ad effectiveness compared to traditional Web2-based systems that depend on trusting intermediaries.
Smart contracts manage payments and ad delivery, ensuring transparency and verifiability. BAT earned by users can be tipped to content creators, used for subscriptions, or spent on digital services. While BAT and Brave present a promising alternative for digital advertising and content monetization, adoption remains a challenge due to the dominance of traditional advertising platforms. However, with increasing concerns over privacy and data ownership, tokenized attention systems like BAT are well-positioned to play a significant role in the future of micropayments, content curation, and advertising transparency across the web.
Footnotes
[1] While there seems to be at least broad consensus on the applicability of regulatory regimes among the regulators, the situation is different with regard to many countries’ civil law and thus the token holders “protection.” The qualification in regulatory law seems easier, because it aims to address certain risks (protection of markets and investors) and therefore allows for a “substance over form” approach. In civil law, legal protection of securities (such as bona fide acquisition) is typically connected to either paper certificates or book entries by regulated intermediaries. Legislative amendments will be necessary to achieve legal certainty (see consultations in Liechtenstein, Switzerland, Germany).
[2] In a shareholders’ agreement, a "drag along” clause requires minority shareholders to sell their shares, while the “tag along” clause requires majority shareholders to allow the minority to join in on a sale.
[3] In a Dutch auction, investors call the amount they are willing to bid for a token. The token price is determined after all bids have been conducted, to determine the highest price at which the total offering can be sold.
[4] The term was introduced by Alvin Toffler in 1980 and describes an individual who both consumes and produces. It became widely adopted with the rise of Web2 services, where consumers of products increasingly interacted as producers on the same e-commerce platform.
[5] “In cryptographic systems with hierarchical structure, a trust anchor is an authoritative entity for which trust is assumed and not derived [...] The trust anchor must be in the possession of the trusting party beforehand to make any further certificate path validation possible. Most operating systems provide a built-in list of self-signed root certificates to act as trust anchors for applications [...] The end-user of an operating system or web browser is implicitly trusting in the correct operation of that software, and the software manufacturer in turn is delegating trust for certain cryptographic operations to the certificate authorities responsible for the root certificates.” (https://en.wikipedia.org/wiki/Trust_anchor)
[6] Due to the General Data Protection Regulation (GDPR) that was passed by the European Union, previous practices are becoming problematic in certain jurisdictions. A recent treatment on the consequences of the GDPR on data analytics can be found in: Wieringa, J., Kannan, P.K., Ma, X., Reutterer, T., Risselada, H., and B. Skiera (2019): Data Analytics in a Privacy-Concerned World. Journal of Business Research (forthcoming).
[7] Carbon sequestration refers to the process of capturing carbon dioxide (CO2) from the atmosphere through geological or biological means. It is one of many methods for reducing the amount of carbon dioxide in the atmosphere. The biological process can be induced by – for example – changes in land use or agricultural practices. Crop land, especially monocultures that are converted to land for non-crop growth, or a variety of fast growing plants, can contribute to the restoration of the natural carbon capture process that was previously destroyed. The rates of photosynthesis via land-use practices can also be increased with reforestation and sustainable forest management. Dense forests with a strong biodiversity, including kelp beds and other forms of plant life, can absorb CO2 from the air as they grow, and bind it into biomass. However, it is important to keep in mind that such biological carbon stores represent a volatile form of so called “carbon sinks.” Long-term sequestration can only be guaranteed with continued carbon capture activities by plant life and will be disturbed by events such as wildfires or diseases in wildlife and plant life, which release the sequestered carbon back into the atmosphere.
[8] The Sustainable Development Goals (SDGs) – defined for the first time at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012 – represent a set of universal goals that meet global challenges and cover social, environmental and economic aspects. Carbon offsetting is only one of many targets in the global attempt to achieve environmental sustainability by fighting biodiversity loss, climate change, soil erosion, etc.
[9] ESG (Environmental, Social and Corporate Governance) is a method to evaluate the extent to which a company works on behalf of social goals that go beyond the role of a corporation to maximize profits on behalf of the corporation's shareholders. ESG is inspired by the Sustainable Development Goals (SDGs) ratified by the United Nations in 2015. The term ESG was introduced in 2004 by a joint initiative of financial institutions at the invitation of the UN. Over the years the reliance on ESG ratings agencies to assess, measure and compare companies' ESG performance has increased.
[10] “Greenwashing” is when a company purports to be environmentally conscious for marketing purposes, but isn’t carrying out the necessary actions to reduce its carbon footprint and meet other sustainability goals. For example, instead of investing in transforming their processes to hit net zero targets, they prefer to do carbon offsets via voluntary markets, because it is usually a cheaper means to reduce the carbon footprint.
[11] Ecosystem services is a term that became popular with the Millennium Ecosystem Assessment by the United Nations in the early 2000s. It refers to the maintenance of balanced ecological systems – both the organisms and the physical environment with which they interact. When the biological balance of agroecosystems, aquatic ecosystems, grassland ecosystems, or forest ecosystems changes – often starting with biodiversity loss – this has negative effects on the conditions and quality of life of human beings, by impacting the provision of clean air, water, waste decomposition, climate stability, and food quality. Scientists and environmentalists have discussed this interrelation for decades if not centuries, but its fallout is only now becoming evident to a general public. Ecosystem services also encompasses the ability of CO2 to be captured by plantlife and animal life and in geological formations, but CO2 is only one of many factors, next to soil quality, water retention, water quality, biodiversity maintenance and many others.
References & Further Reading
This link leads you to a page that contains all the references to the source materials used for the research of the chapters and should also provide a reading list for those who are interested in a deeper dive into the topics presented in this chapter. Where possible, the links will be updated on a regular basis to prevent the issue of broken links.