Glossary
Tokenization
Tokenization is the process of transforming an asset into tokens or using a token to represent an asset. Such an asset can be represented by a single non-fungible token or several fungible tokens. Tokenization is one of the most promising areas in the blockchain and decentralized finance environment.
There are several use cases for tokenization. Let’s see some. Imagine a real estate company that decides to tokenize a property. Now, instead of selling each property to just one buyer, it is possible to sell shares of the property in the form of tokens. For example, a buyer can purchase tokens equivalent to 10% of the property. In a future sale of the property, the holder of such tokens will receive the equivalent of 10% of the sale.
The same thought goes for any asset. Imagine a club membership certificate. Such certificate can be represented by a non-fungible token (NFT) sold on an NFT marketplace. This also ensures the buyer’s security, as the blockchain automatically guarantees the certificate’s authenticity. Such idea can be used for event tickets in general.
Tokenization makes it possible to give to illiquid assets. High-value works of art are an example. Due to its cost, it is not easy to find a buyer, but tokenization makes it possible to transform this scenario. Imagine having a quota on artwork by Picasso or Cézanne?
The possibilities of tokenization are countless. Virtually any asset can be tokenized and traded freely by centralized or decentralized exchanges. Tokenization is not just limited to physical assets but it can also be done with financial assets.
Tokens can even be used to represent tokens on other networks. Bitcoin as a currency, for example, which only exists on the Bitcoin network, can be represented by a token in Ethereum or Neo through wrapped tokens. Thus, they can be traded within multiple networks.
More and more investors and regular people are putting part of their investments and savings into tokens. This will likely become more common in the future.
