> For the complete documentation index, see [llms.txt](https://docs.wagon.network/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.wagon.network/products/wagon-asset-tokenization/how-it-works.md).

# How It Works

Wagon Network converts real trucks and logistics assets into tokenized investment opportunities.\
Here’s how the full cycle works:

<figure><img src="/files/aARseYwpFfNpKQoLbR5U" alt=""><figcaption></figcaption></figure>

### How Wagon Works:

1. **Rental Request**\
   A logistics operator submits a request for productive assets (e.g., trucks).
2. **Asset Acquisition by SPV**\
   A Special Purpose Vehicle (SPV) purchases and holds ownership of the real asset to fulfill the rent request.
3. **Rental Agreement**\
   The asset is rented to the logistics operator under a rental contract.
4. **Rental Payments**\
   The operator pays usage fees (rental payments) according to the contract, and payments are collected by the SPV.
5. **Tokenization of Asset Benefits**\
   Wagon issues tokens backed by the economic benefits of the real asset — namely, rental income.
6. **Investor Participation**\
   Investors deposit Stablecoin into wagon's smart contract and receive asset-benefit tokens as proof of participation.
7. **Use of Tokenization Proceeds**\
   Proceeds from token sales are allocated to Wagon for operations and related activities.
8. **Net Rental Income to Wagon**\
   The SPV remits net rental income to Wagon, after deducting operational costs and applicable taxes.
9. **Distribution to Smart Contract**

   Wagon channels the net rental income into the smart contract.

   * A portion is set aside as a **principal provision** to secure repayment at pool maturity.
10. **Investor Yield Distribution**\
    The smart contract automatically and transparently distributes rental income to token holders.
11. **Pool Maturity**
    * Asset-benefit tokens are redeemed from investors and **burned**.
    * Investors receive back their **principal** from the principal provision.
    * Optionally, the logistic asset may be sold, with the **net proceeds** (after disposal costs and taxes) distributed to investors in proportion to their token ownership.

### 🛡️ Risk Mitigation

* SPV holds asset ownership separate from Wagon’s operations.
* Assets are insured (vehicle, theft, accident, fire).
* Smart contracts ensure fair token issuance, distribution, and redemption.
* Token burning maintains supply integrity at the end of term.