In the world of Blockchain there are multiple technical terms such as smart contracts, decentralisation, dApps, DeFi and many more. In this article we're going to explore the term tokenization, we'll see what is tokenization and how it works.
Traditional asset management is laborious, it requires involvement of multiple middlemen and government regulators which increases it's cost and difficulty. Traditional assets such as stocks, bonds and even land can often prohibitively expensive and time consuming to manage and putting them beyond the vast majority of world population. And another big drawback of traditional way is that it's difficult to transfer the ownership of asset which requires hundreds of papers, permissions of multiple bodies and regulators, which makes it inefficient.
Here comes the Tokenization, it offers a new way to thinking about asset management - a reimagining of what financial and technological can do together.
What Is Token ?
“A token is something representing something else, [and] can be rendered in any sort of form,” according to Joseph Lubin, co-founder of Ethereum and founder of ConsenSys.
“It can be a piece of paper. It can be an idea. It’s a symbol representing something, Your driver’s license, for instance, is a token that’s indexed into a ledger that the state maintains of who’s legal to drive.”
In 2009, there's rise of Bitcoin, which introduced a system which transfers peer-to-peer value across internet. And the new generation of entrepreneurs found the Ethereum in 2015 , which introduced the programmable Blockchain to the FinTech.
Currently there are thousands of tokens are developed on Ethereum network (you might be familiar with term ERC-20). Unlike cryptocurriencies like Bitcoin or other tokens can be used for various reasons like managing property, assets, shares or even powering decentralised applications and games too !!
Types Of Tokens
Generally there two types of tokens : utility tokens and security tokens.
Utility Tokens : We can guess the uses of this type of tokens from it's naming. The utility token holders get access to the products or services offered by the company. As the name itself implies that the token should be used for some reason other than hold or trade. Ex. BAT Token provided by Brave browser.
Security Tokens : This type of tokens are the digital assets which provides some sort of ownership of company like shares or the power to vote or putting simply they're the value sharing tokens. Security tokens can also represents the real world assets such as gold, diamond or royalties of your favourite song !!
Future Of Tokenization
Tokenization provides the idea about every product or service or anything can be stored and represent in blockchain technology. There are endless opportunities to reach the whole world to provide your products and services.
Well it's just a newborn technology, it's in early days and we're still analysing the spread of this technology and it's utilisation. As Tokenization is leading all of us towards the tokenized world where every asset or services can be accessible to worldwide with the help of their tokens. Its changing the way we think about the value of an asset in real world. It's transforming the world !!