What is tokenization in blockchain?
Tokenization in blockchain helps to convert traditional assets into digital assets. So what is it and what benefits will it bring, let’s find out in the article below.
Tokenization in blockchain definition
The process of transforming something of value into a digital token that can be used on a blockchain application is known as tokenization. On the blockchain, assets can be tokenized in two ways: tangible assets (such as gold, real estate, art, etc) and intangible assets (such as voting rights, ownership rights, or content licensing).
How types of tokens work
Security tokens: This sort of token symbolizes a specific investment, such as corporate shares, voting rights, or a real or digital asset of value.
Tokenized securities: Tokenized securities exist primarily to increase the commercial viability or liquidity of the security being tokenized without adding unique programmed or cryptographic properties like security tokens do.
Utility tokens: Utility tokens can be used to power a blockchain network’s consensus mechanism, provide decentralized market activities, pay transaction fees, or provide holders the ability to submit and vote on new developments inside a decentralized autonomous organization (DAO) or other decentralized networks.
Currency tokens: These tokens are designed to be traded and spent. Some, including asset-backed stable coins like MarketDAO’s DAI, are based on underlying assets. Many others, on the other hand, are immediately related to their distribution mechanism and underlying blockchain network, and their value is directly linked to their distribution mechanism and underlying blockchain network.
Benefits of tokenization
What solutions does Tokenization bring to businesses?
- The automated operation process
- 24/7 operation and trading
- Faster performing time
- Convertible asset types
- Possible fractional ownership
- Increasing liquidity
- Including smart contracts for automation
- Minimizing negatives
- Optimized costs
When applying tokenization into operation, businesses can track the sale and ownership of goods and services, and closely manage the transportation process.
Moreover, tokenization is a solution to convert traditional assets into digital assets. It helps to bridge the geographical and religious that open investment and ownership opportunities for any person in the world.
It is also a solution that major credit and financial institutions in the world apply when issuing payment cards to customers. When tokenization is used, users can make cross-border payments at the lowest possible cost and in the shortest amount of time. Furthermore, it is far safer and more secure than the previous method.
We can see the tokenization application in the creative industry. Creating a token-based economy where value is derived from an artist’s work. When an artist tokenizes, they’re turning their intellectual property (IP) into a financial asset, so an artist’s token reflects the value of their creative output. Those who buy into an artist’s tokens buy into owning a share of the artist’s creations and its revenue flows. The more people who consume the artist’s creation, the higher the value of the token.
And of course, you can see many examples in different industries.
Businesses that implement tokenization as soon as possible will gain a competitive advantage. If you require instant assistance from a blockchain professional regarding the implementation of tokenization, please contact Arcanic Tech.
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