Tokenization

Tokenization is defined as the process of substituting a sensitive data element with a non-sensitive equivalent, such as a token.

Of note, tokens carry no extrinsic or exploitable meaning or value.

The rights to the ownership of an asset are converted into a digital token. Tokenization can be used to own an entire unit of an asset.

For example, one token that represents the ownership of a piece of real estate or to split ownership of a single unity of an asset such as 200,000 tokens, each one representing 0.05% of a piece of real estate.

Tokenization is a relatively new concept that has been floated as the future of ownership.

Tokenized systems do carry inherent advantages and could in theory ultimately replace paper certification-based ownership systems.

For the time being, blockchain-based ownership records do face obstacles and are not currently recognized as legally valid in most places in the world.

What Can Asset Tokenization Accomplish?

In the most basic sense, Tokenization combined with blockchain is a powerful combination. This includes useful innovations in terms of PCI data security.

When a token is issued on a blockchain, the blockchain records the issuance and maintains a ledger of every single movement of that token.

A key feature of blockchain with regards to tokens is that it controls for the double-spend issue.

This is an important development for security purposes. Prior to the implementation of blockchain, any digital asset such as an image, or document, could be copied an infinite number of times by anyone with access to it.

By overcoming the double-spend problem, blockchain can help facilitate the use of tokens that can be used in a similar way to casino chips or banknotes.

This has opened up tokens as a vehicle for investment in multiple projects.

Asset tokenization reflects the next evolution in tokenization. Tokenizing an asset involves issuing a digital token on a blockchain.