The term tokenization isn’t strange in the cryptocurrency world although not so popular. It is however important for you to know that tokens are often known as coins and they power every blockchain platform. Tokens basically describe any asset that’s tradable, it could be commodities, loyalty points or other cryptocurrencies.
What is Tokenization
Tokenization refers to converting the rights to an asset into a digital token on a blockchain. There is great interest by financial intermediaries and technologists around the world in figuring out how to move real-world assets onto blockchains to gain the advantages of Bitcoin while keeping the characteristics of the asset. Let’s assume that a fish farmer wants to produce fishes worth $50,000. Tokenization can convert the fishes to 50,000 tokens or more. Therefore each token represents a share in the asset (fishes). So, when the token is issued on a platform supporting smart contracts, the tokens can be bought freely and sold on different exchanges. Buying one token gives you a percentage ownership in the asset. This means that an asset can be tokenized and a digital representation of it can be created on the blockchain. With tokenization, any business can sell anything to raise money. It creates a world where liquidation is unrestricted by physical assets or cash.
Benefit Of Tokenization
Tokenization eliminates the need for intermediaries in the execution of transactions. Businesses and individuals can successfully execute their contracts without the extra expenses of a middleman. Transactions are facilitated on a public ledger that records and validates transactions. So, there is no need for intermediaries. There is also the fact that tokenization reduces the risks of double spending and has a database that shows the complete history of ownership and transaction.
When a token is created by a company, it becomes an atomic unit of value exchange. This unit of value exchange maybe within a particular market and result in a transaction between the buyer and the seller. For instance, if a biscuit producing firm decides to tokenize their assets for whatever reason, that unit of value (token) becomes a transactional economy between buyers and sellers. A token also consists of features that allow users to earn value and to spend it on services that are internal to the inherent ecosystem. Tokens offer businesses a much lower barrier for processing end-to-end transactions within a particular market.
Other Usage of Tokens
A token could also be used on a particular blockchain infrastructure to perform a specific function, running a smart contract, paying for a security deposit, or just as usage fees. It could also be used as an incentive to reward users for joining a network or contacting others to it.
Entrepreneurs are coming up with different creative ways they can put tokens to use. But then it has an implication for every industry. From the Agricultural sector to the real estate sector. For instance, a blockchain based company Propy is using the blockchain to connect property owners and buyers across the globe.
What do you think about tokenization? Share your opinion with us in the comment section below.
Image credit: pixabay,
The Information provided on the website is designed to provide helpful information regarding cryptocurrency subjects. The content is not meant to be used, nor should it be used as a basis, foundational knowledge or prerequisite for decision making regards trading. Always do your own research and due diligence before placing a trade. We are not liable for any outcome based on any content found on the site.
Latest Episode on Inside Blockchain
Crypto News Update
Crypto Bootcamp Community Celebrates Bitcoin Pizza Day Across Africa
The advent of Bitcoin has paved the way for seamless cross-border payments. The demand for third-party intervention in financial transactions...
Explore, Build Assets, Fight and Earn in the Supernova Space
A new economy was opened in 2017 when blockchain was integrated into gaming to produce the first Web3 game: CryptoKitties....
Owl.Games: The Rise of Crypto Games in the Casino Industry
Crypto gaming used to be new a few years ago but it’s going mainstream now. However, there are some sectors...
BCAT Africa: Reducing Unemployment in Africa
One of the greatest lines spoken in the Spiderverse is “with great power comes great responsibility”, although it can be...
Gamified NFT Platform Trove Announces Launch Partners SideQuest
Trove has announced its new Launch Partnership with SideQuest, a gamified risk-to-earn NFT collection. It was announced on Twitter today. ...