Tokenization: The Key to Coordination
What are ‘tokens’ in the context of Web3?
‘Tokenization’ and ‘Tokens’
Tokenization is the activity of standardized abstraction.
A token is a standardized abstraction that represents something, either in part or full.
Many fields like computer science, machine learning, marketing, economics, and cryptography have very specific definitions of ‘tokenization’ and a ‘token’; but they are all related to standardized abstractions. For example, in the context of machine learning, tokens are abstracted units of meaning used for analysis and processing.
On the blockchain
The term ‘token’ in the context of Web3, or more specifically blockchain, takes its meaning from the combination of the contexts of economics and cryptography.
In the context of economics, tokenization is the activity of abstracting the ownership of something using standardized units. These tokens are then used for indication or exchange.
In the context of cryptography, tokenization is the process of converting sensitive data into abstract data tokens that represent that data. These tokens are used to encrypt data to make it secure.
In the context of blockchain, tokenization is the abstraction of ownership of something (like with economics), but in an immutable (cryptographically secured) fashion.
In Web3
Tokens in Web3 are digital assets or digital representations of value that are secured and stored on a blockchain network. They operate as a unit of account, a medium of exchange, and a store of value, allowing users to trade and exchange digital assets securely and easily.
Tokens in Web3 are revolutionary because (1) they enable the ownership of digital things — digital property rights — and (2) they enable decentralized value exchange.
Some things that are being tokenized with web3:
- Digital assets
- Digital collectibles
- Proof of Attendance
- Voting rights
- Identity information
- Supply chain data
- Cryptocurrency
- Medical records
- Intellectual property rights
- Energy credits
- Real estate ownership records
- Investment Funds
- Degrees or Achievements
- Company Ownership
- Financial transactions
- Loyalty or Rewards programs
- Access keys or permissions for services or resources
- Artwork
- Game Items
- Work and Compensation
This unnecessarily long list is just ‘the abstract’ to our cryptographically secure, decentralized future.
So What?
Ok, but what is the point of tokenization?
Why should we be tokenizing things on a decentralized blockchain?
The answer is coordination.
Common source of truth + digital ownership + programmability + interoperability = increased coordination for humanity.
This is ‘the metaverse’.
It is not about living in a ‘digital world’, but rather, leveraging the power of decentralized coordination to improve the physical world.
