In this article we discuss about tokenization, the manner of operation and developing the paths of issuance, management and trading of assets.

Management of the assets in the good old traditional way is a burdensome process. It more than often demands the participation of a number of intermediaries especially different governmental institutions and regulatory committees.

The traditional assets such as property, securities and real estate frequently cost a lot of money and probably time, so most of the people do not have access to them and even if they do, they do not understand their management.

Furthermore, this type of management must be dealt with legal regulations and many documents which additionally burden the process, especially the ownership over the assets. This definitely slows down the already slow system which is often criticized for lack of transparency.

So a new and radical notion that appeared when discussing management of assets is the process of tokenization! What do we understand under this term, will be explored in the article below.

A definition of a token

The definition of what a token is, is hard to be put in a framework as it can represent many things: a paper, a notion, a concept that represents an idea. Joseph Lubin the person who co-funded Ethereum says that a token always represents another thing and can take any form, for instance even a person’s driving license can be considered to be a token – a paper issued by the government that confirms that this person has a right to drive.

If we compare the blockchain token maybe the best comparison is to digital receipt. The big difference however is that this type of tokens can be logged immutably on auditable blockchains.

Have you heard?

The tokens together with the technology of the Blockchain originate from the cryptocurrency for which an example is the Bitcoin, which introduced system peer-to-peer in 2009. This system is used to transfer value via the net. Bitcoin enables the decentralization, stability and reliability of conduction of transactions and in this way it prevents faulty copying and digital duplicating of the transactions.

This new founding allowed for entrepreneurs to foresee and design new instances for application of the basic technology of Bitcoin. 2015 was the year when Ethereum made a breakthrough with programmable blockchain with the assistance of their technology of smart-contract.

Ethereum undertook a similar innovation that Bitcoin is based on and gave it another meaning different from  the cryptocurrency and value storing.

After a short time, a large number of tokens were created on the network of Ethereum,  and every one of them has its own particular traits and advantages. In contrast to cryptographic forms of money, tokens have different potential uses—starting from property management, stocks, and contracts for decentralized games and applications.

Possible cases for use of tokens

Generally we can classify the tokens into utility and security ones.

Utility tokens understand computerized resources that grant their proprietors access to items or services delivered by an organization. As the title infers, the tokens are intended to be utilized for some things that is, instead of being held or exchanged. For instance, this type of token can enable approach to forthcoming service, for example, leasing power of computing, betting on sports competitions, or giving a legally mandatory vote.

Brave Software, the creators of the security centered Brave browser, designed the BAT – a utility token for Basic Attention- intended for the advertisers and marketing businesses that benefit from the web clients’ attention.

Security tokens, then again, are advanced digital resources that have a value of some kind of investment that can be compared to company stocks, right to vote with decision making, and related or a mix of all above. The tokens can likewise be fragments of real assets, for example, gold, cars, or copyrights from different types of arts.

In this context, the security tokens are in accordance with the ongoing legislations that regulate the securities, for example shares. Due to this, lots of companies assisted the harmonization of the process of tokenization with the relevant and valid legislation.

Securitize, a startup company for cryptocurrency endorsed by the top American cryptocurrency market Coinbase, is an example of a company whose major activity is to issue and manage the digital securities with specific purpose of assisting the issuers of tokens to stay compliant.

The third categorization of the tokens is NFTs which means tokens that are non-fungible. These are very similar to CryptoKitties that were very popular because of the crashing of Ethereum net in the second part of the year 2017.

Pros and Cons of Tokenization

The guarantee of tokenization lays in its capability to democratize the availability of digital resources and its capacity to give responsible and secure assets.

People think that they have something in possession but what they have is a receipt of the possession and this is why the process is about trusting.

A system that is based on blockchain enhances the accounting level and eliminates the requirement to believe the middlemen. According to Snow this is advantageous for companies who work with the prevention of fraud.

On the contrary, Snow warns that tokenization is not always as simple as many formerly thought. The principles which lead blockchains may get complex, and such networks are not immune to types of bureaucracy that belongs to them.

In addition to that, regulators worldwide, and especially within the USA, are currently paying attention and details to cryptocurrency, using a close watch on how tokens are purchased, traded, and allocated.

The principles of the market, supply, and managing of tokenized resources will differ from state to state, and startups based on cryptocurrency whose goal is to develop international, systems without borders have to contend with compliance and regulatory steps in each authority they expect to conduct business with.

This, also, has become a burdensome and costly procedure, particularly in the USA, and thus a lot of firms that are token based prefer to take the companies to overseas countries in which the regulations are somewhat less strict.

Yet the American regulators have expressed some warming messages to the assets which are tokenized and the entrepreneurs who are working with blockchains proceed on with developing new applications for tokenizations and ideas that assist in the improvement of the number of uses for the corresponding nets.

What to expect?

The process of tokenization is promising a place where all assets and services can be shown and kept on blockchain.The chances are technically endless. But similar to the first days of the world wide web, we’re just beginning to know which concepts can be ideal for this particular technology.