Back in the day, in the digital world, tokenization was first used as a means of replacing sensitive data (credit card data) with a digital equivalent — token. It was accomplished by TrustCommerce in 2001 as a means of protecting the credit card information. This made payments and transactions more secure and protected them from data leakage and/or hacker attacks. Thus, tokenization has been successfully used for 2 decades already but who knows that?
The trouble is that the general public isn’t familiar with tokenization well enough and doesn’t have a clear idea of what it is, what this process is for, and so on.
BUT: Tokenization has grandiose prospects to offer. Therefore, let us get acquainted with it. At its core, tokenization is the replacement of a real asset (credit card data, real estate, commodities, fine art, classic cars, precious metals, and many others) with its digital equivalent — token through various methods.
To make it easy to understand how the concept works, let's look at casino chips that everyone is familiar with. The chips themselves have no real value unless they are exchanged for money, that is, they represent the asset behind them. This is also the case with tokens, they provide a safe way to possess assets.
The year 2001 is long gone, and tokenization has not stood still all this time but is constantly evolving. Today, together with blockchain technology, tokenization opens up staggering possibilities.
Tokenization and Blockchain
Blockchain technology is a data system owned by everyone and no one at the same time. It contains an online list of transactions. This list is continuously copied to the databases of countless computers within the so-called classified registry system. This approach makes cheating and data theft/substitution impossible. Blockchain consists of "blocks" that are continuously added to the chain. These blocks can be thought of as permanent pages of the file. Once information is added (a block is attached), no changes can be made to it without the knowledge of the other participants.
While tokenization is an incredibly valuable tool for defending payment card info, when coupled with blockchain, it converts to an even more powerful one and acquires new features. After Ethereum, Cardano, and similar were invented, it became possible to model entirely new tokens based on them. And blockchain technology, in turn, provides a record of token issuance and continuously monitors its "movements".
The tokenization market is booming at the moment while having a significant impact on the global economy as a whole. The global tokenization market is expected to grow from $1.9 billion invested in 2020 to $4.8 billion by 2025, at an average annual growth rate of 19.5% over the forecast period (Markets & Markets). There is a logical explanation for this. The fact is that the tokenization market is constantly pushed forward by the universal need to improve the quality of customer service, the provision of simple and straightforward compliance algorithms, and the widely recognized benefits of Blockchain technology (reducing the risk of fraud/theft of data to zero).
What Spheres Tokenization Is Applicable In
Tokenization has enormous potential. Here are just a few examples of the spheres in which it can be successfully applied:
The real estate market is immense and expensive; beginning investors find it difficult to get involved in serious projects because of the capital required. Asset tokenization will allow anyone who wants to acquire a certain piece (token) in a particular project to do so.
Asset tokenization allows them to be split into smaller pieces, giving interested investors the opportunity to purchase even a part of a single share if it is tokenized.
Tokenization of the contracts allows information to be tracked and stored online and shared without the risk of data leak/theft/substitution. Also, it eliminates the necessity for third-party assistance.
Benefits of Tokenization
Due to the nature of blockchain technology, when a token is created, a registry entry is designed in the form of a unique code. Thus, one is unable to hack or steal it.
Asset tokenization allows you to enter into transactions without all the hated red tape since all the necessary information is stored in a smart contract. This, in turn, affects the speed of transactions.
Another advantage of tokens is their flexibility. For example, when a picture is tokenized, it can be digitized for later fractional sale or exchange. This also allows investors with little capital to enter the market.
In the past, the vast majority of transactions required the physical presence of the parties to the agreement to complete the transaction, but with smart contracts, you can sell and buy assets anywhere and anytime.
Final Thoughts
Developing relentlessly, tokenization has come a long way since its first implementation in 2001. Today, combined with blockchain technology, it is ready to open up a new era in the evolution of the digital world’s potentialities for investment.
One thing is certain: tokenization is just beginning to gain momentum and explore the potential application ways.
Clevver is a digital platform providing relevant services for businesses. We always try to provide the most necessary and on-demand services to make your company prosper. One of our new services to come is ClevverCrypto. By dint of this service, a customer will be able to take advantage of the multiple options of tokenization assistance.
Clevver will share its experience in ways to tokenize assets and is ready to help with registering a business entity in crypto-friendly jurisdictions to issue tokens. More detailed information about the ClevverCrypro Service is given on our website. If you are an early bird and interested already, please, feel free to contact us and our Crypto-Experts will get back to you in a blink of an eye.
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