Tokenization Definition
Tokenization is a process in blockchain technology where a piece of digital value, also known as a ‘token,’ is created to represent a real, tangible asset. It involves creating a digital counterpart for assets that can be traded and stored on a blockchain.
Tokenization Key Points
- Tokenization involves converting rights to an asset into a digital token.
- Tokenized assets remain on the blockchain and are tradeable, saleable and transferable, leading to greater liquidity.
- Tokenization provides enhanced security against data breaches and fraudulent transactions.
- It has the potential to democratize investment and ownership.
What is Tokenization?
Tokenization is a way of converting rights to a physical or digital asset into a digital token. These tokens are assigned to the assets and stored on a blockchain. Once on the blockchain, these tokens can be bought, sold, or traded on any digital platform that supports their underlying blockchain. Tokenization allows for assets not traditionally considered liquid to be turned into a form that can be easily traded electronically, meaning the value is released more quickly and efficiently.
Why is Tokenization Important?
Tokenization is particularly important because it has the potential to revolutionize investment. It allows previously illiquid assets to be traded quickly and easily. This not only potentially increases their value but also democratizes ownership, as more people have access to buying a ‘share’ of the tokenized asset.
When and Where is Tokenization Used?
Tokenization is used to provide liquidity to a wide range of assets such as real estate, art, and even a person’s time. It can be used on any digital platform that supports the underlying blockchain of the tokenized asset.
Who Uses Tokenization?
Tokenization can be used by anyone who has rights to an asset and wants to convert those rights into a token for increased liquidity. Not only does it provide a position of security for large corporations, but it also allows small investors to invest in fractionized high value assets, making it a widespread system.
How is Tokenization Performed?
The process of tokenization involves representing the right to a tangible or intangible object by issuing a blockchain token. This token is then bought, sold, or traded on a digital platform. Most importantly, the ownership information is stored securely on a blockchain, providing a layer of security, transparency and traceability.
