# Phase 3: Define the Tokenization Model

This phase is one of the most critical in the entire tokenization journey.

In this phase, you will select a tokenization model that best aligns with your objectives, the characteristics of the asset or project, and your capital-raising strategy.

The tokenization model defines **how your tokenized asset delivers value to investors**. The model you choose will determine **how ownership is structured**, **how capital flows between parties**, **what rights your token holders receive, and how your offering aligns with legal and investor expectations**.

Each model represents a distinct approach, such as asset sale, growth funding, revenue sharing, or collateralization. This choice determines how investor rights are structured, how value is delivered, and which legal and financial frameworks must be followed.

Choosing the right model is crucial for ensuring regulatory compliance, providing clarity to investors, and achieving long-term success in both primary issuance and secondary market trading.

Defining the tokenization model is the main requirement in this phase.

{% hint style="warning" %}
**Note:** **The decision you make in this phase forms the foundation of your security token offering**, including smart contract logic, investor disclosures, and legal structuring. Take your time and explore each option thoroughly.
{% endhint %}

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