Tokenization — Digital World

What is Tokenization?

Tokenization can secure sensitive data by replacing the original data with an unrelated value of the same length and format. These replacements are known as ‘Tokens,’ In the blockchain world, they exist to represent sensitive data in a non-sensitive form.

What are Tokens?

These entities represent sensitive assets or data points in another form (usually digital). To conceptualize this, we can look at an example of tokens in a material form, such as casino chips. These chips are used to tokenize the real cash behind them, enabling comfort when playing casino games.

The combination of tokenization and blockchain technology

Much like when casinos issue chips as tokens, blockchains can also allow tickets to be given and stored within the network. As the blockchain is an open distributed ledger, whenever a token is published on the web, all blockchain users can watch the token and monitor its movements — but they won’t see the exact asset that underlies.

Primary benefits of tokenization

The perk of tokenizing assets is endless, although implementing fractional ownership is one of the most prominent. This concept opens many investment options that are separate from traditional asset classes. Furthermore, tokenizing physical-world assets increases the level of accessibility for certain investments — especially for newcomers to the market.

What is Asset Tokenization?

Asset tokenization takes a real-world asset and tokenizes it onto a blockchain network.

Imagine you owned a house — the documents of your ownership of that house would be in the form of many physical documents, such as title deeds. The method of transferring home ownership if you sold that house is a logistical headache; with all of the records and paperwork handled by various parties during the sale process, there’s a higher risk of manual error.

Instead, you could describe your house as a ‘token’ on a blockchain network — with all currently required information attached to the token itself. As a result, transferring ownership would be far more accessible and seamless as there would be no need for an intermediary to simplify the transaction. Moreover, as the transfer of ownership would be publicly available data to all users on that specific blockchain, the whole process would be open and easy to refer to in the future.

Fungible vs. Non-Fungible Assets

Theoretically, any real asset could be represented by a token within a blockchain network. However, there are two exact types of tokens to be aware of — fungible and non-fungible.

• Fungible — A fungible token means an item that can be exchanged for another object of the exact value.
• Non-fungible — Non-fungible things are those that are not compatible. Essentially, these items are unique, and there is only one thing in the world.

Benefits of Asset Tokenization

There are many reasons that asset tokenization is becoming so famous. For example, a valuable and physically inseparable resource such as fine art or real estate could be represented by various tokens, enabling fractional ownership.

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This is a post in our Medium blog, ‘Blockchain for Everyone.’

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