Tokenization is the talk of the town since blockchain was originated. It is an essential concept of the blockchain technology. However, apart from blockchain enthusiasts, people are often not clear as to what actually is Tokenization?
In this post, we are going to discuss what is tokenization, how it is used for identity and investment and how it will be used in the future.
What Is Tokenization?
Tokenization is related with the equities, securities and real assets. The Blockchain platform is powered by tokens, which is also known by the name of the coin. Tokens originated to represent money, however, it is not mandated that it only represents money as they can be used to represent other things as well. Tokens also represent the ownership rights of the primary assets which are allotted by the blockchain. Bitcoin is one of the best examples of the tokenization.
The demand of the Blockchain product is normally depending upon the market price of its token or the main determinant of the value. This is the major reason that causes the variation in the prices in various altcoins in the Blockchain industry.
Tokenization is just a fruition of byproduct instruments and securitized assets similar to asset-backed security (ABS). Regardless of beliefs about the capacity of Securities Token Offerings (STOs) & a lot of tokenization platforms blossoming in last year with a lot of businesses keen to help in raising funds, it has made a little real progress. Despite the announcements of forthcoming issuance of tokens indicating equities or real assets, none of these have been issued for real.
Used for Identity and Investment
WishKnish, Zcash, Dash, and Steemit are some of the cryptocurrencies that also used tokenization. Tokens are used as the identity and investment of their respective Blockchains. It allows access to the services or solutions offered by their resident platforms. The blockchain can also increase as digital assets.
One of the biggest benefits of using this technique is that it provides automated dividend payments which can be implanted in the smart contacts. Governance participation mechanisms have benefited back-office work and minimized the costs of companies for 24/7 trading.
Another important benefit is fractional ownership which precisely helps democratize investing. This technique is not new, but tokenization is an advanced technology that uses fractional ownership of club-deals and real estate, which has been implemented to achieve the things that have been achieved in the past as well.
How is it different from Securitization?
There are the two essential points that show tokenization is different from Securitization. Blockchain has an issuance of the token. Second, Token liquidity and tradability on a digital secondary market.
The first blockchain was Bitcoin, which was created for peer-to-peer transfers of Bitcoin, not the tangible assets. It contains fundamental features which help to transfer funds peer-to-peer along with immutability and accuracy.
In the other words, the use of the blockchain can be easily protracted with other digital assets be it music, eBooks, digital images. These digital assets are highly gained with blockchain inherent called the immutability and accuracy.
However, under the equities or real assets, the transfer and ownership of titles are controlled by the law and regulations because each jurisdiction has its own rules and conditions which contain the power of certifying and activating such handovers. In the real estate transfers are mostly followed by the Land Registries. In the countries like the USA, public blockchain system has been considered to make known to certainty to the title ownership to diminish risk and conveyance charges. Wherein car sales have included the motor vehicle registry as well as the sales of equities in private organizations that keep a proper record of the transfers into the organization’s registry. In most of the jurisdictions, these transfers are certified with public notaries.
The Bottom Line:
It seems the implementation of blockchain has the capabilities to enhance the current corporate ownership titles of jurisdiction and public systems of real estate. However, it is yet to find out that the blockchain required any tokenizing for private equities or real assets in the current regularities.