In this article, we will consider such a concept as tokenization. We will learn how it is used by various companies and how the technology of blockchain is used here.
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- The concept of “tokenization”
- The process of tokenization in the modern sense
- Tokenization in tandem with blockchain technology
Initially, tokenization technology was used to implement secure online payments. With its help, you can encrypt the data of real details and replace them with the generated hash code – a token. This is how the first concept of tokenization looked like, and the modern designation, which is now widespread in blockchain projects, has gone from there. Today the word “token” refers to a unit of an asset in a certain company.
Tokens can be compared to the labels that fill the desktop of each computer. Shortcuts are created in order not to litter drive “C” with heavy files, but at the same time to have quick access to them. Shortcuts are just the way to the program, folder, etc. If you delete a file where the shortcut leads, then the latter will not represent itself any more.
So, by analogy with the creation of shortcuts on the computer, in our time, the business is tokenized in various spheres of activity. Tokens can be created for anything (electricity, oil, gold, cattle, wheat, real estate, part of any enterprise’s funds, intellectual property, etc.). Tokenization works with both physical and virtual objects. This practice greatly simplifies and accelerates the mobility of assets, because you need logistics, a certain amount of documentation to move a real object, and the converting of the token is slightly more than nothing.
Tokenization of homogeneous objects is a fairly simple task. For example, one token is equal to 1 gram of gold, but it can be further divided into smaller parts. It is necessary to increase the liquidity of the asset. Tokenization problems arise if the items that need to be transferred to the digital space have different values (real estate, art objects, etc.). In this case, this process becomes a little more complicated, since it requires the contribution of additional variables. Platforms that offer to tokenize heterogeneous objects already exist (Artex, Atlant, etc.), but each of them is confined to its own narrow niche.
Probably, it seems strange, but in fact, the technology of blockchain is not mandatory to produce a tokenization of the project. Actually, anyone can make an issue of tokens, backing them up with any of their tangible or intangible property. To do this, you only need to run the platform, where you can transfer the rights to own the asset in the token.
Then why do the overwhelming majority of projects use blockchain technology for the tokenization of their own assets? It’s all due to the transparency that this technology provides. With its help, it is guaranteed that there is no third-party intervention in the data registry. ICO tokenization in tandem with blockchain eliminates the issue of confidence in the developers. Also, the undeniable advantage of using this technology is the absence of intermediaries between buyers and sellers of assets, which simplifies and significantly speeds up the exchange process.
The process of tokenization involves the transfer of tangible or intangible assets into the digital space (tokens). This significantly increases the liquidity and mobility of the asset. With the help of blockchain technology the process can be completely transparent and safe, and also you can remove any intermediaries from the chain.
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