Tokenization is the method of modifying something of value into a digital token that’s usable on a blockchain application.
Tokenization makes it possible to value and materialize real assets in the digital world. By registering an asset and its rights on a token, tokenization fosters management and exchange with a counterpart, immediately and securely.
What is a Token?
A token is a crypto asset that runs on another cryptocurrency’s blockchain.
In other words, the token is a digital asset issued and switchable on a blockchain. Its price is uncertain and is subject to the law of supply and demand.
Characteristics of the Token
- It can be transferred between counterparts without replication and intervention or approval from a third party
- It is programmable, meaning it can be created by any Internet user
- Any individual or entity can access crypto tokens without special authorization.
- It is very liquid because it can be sold or bought at any time on an exchange platform.
- It is built on a trustless framework, indicating the blockchain they’re built on isn’t possessed or controlled by any authority or regulator.
- It is transparent. Decentralized blockchains enable crypto tokens and transactions to be transparent.
The main types of tokens
- Currency tokens (the means of payment): Currency tokens are formulated to be traded and spent. Like other cryptocurrencies, the token can be utilized as an exchange currency during transactions.
- Security tokens: the security token embody a specific investment, such as a share in a company, or some tangible or digital thing of value. This use of the share token enables a company to increase its capital by freeing itself from the many restrictions and regulations exacted by the stock exchange and more formal means of financing.
- Utility token: Utility tokens represent access to an assigned product or service, usually on a particular blockchain network. It enables a company to pre-sell its products or services. By keeping some of the tokens originally issued, the company will get richer if its products or services are increasingly used.
Tokenization as an Investment Model
When it comes to investments, tokenization is a significant area.
Tokenization is proposed as an investment model available to all, particularly to all partakers who cannot dispose of traditional financing means.
To generate funds, a company can issue Utility tokens and accordingly acquire financing in return for access to the product or service when it is set up. This makes it possible to federate a group of partakers around a project when raising funds.
This model has some benefits for an investor as he/she will be given rights on a good or service while keeping the independence to resell his tokens at the market price.
This system is a substantial advantage for entrepreneurs. Utility tokens will not only enable him/her to raise funds in an entirely secure way but also benefit from a considerable number of committed users even before the product or service is initiated.
The Tokenization frameworks of use
Tokenization opens up numerous new possibilities for businesses and individuals.
Because a token is an asset with various forms at the same time, it is possible to imagine many applications to this system.
- Assets Divisibility and More Liquidity: one significant advantage of tokenization in the blockchain is that it opens up the underlying assets to a wide audience. Tokenization also provides a broader geographic reach as blockchain is naturally global in nature. Asset divisibility also comes with the advantage of shared ownership.
- Tokenization in enterprise systems: Intangible assets like copyright and patents can be tokenized to boost shareholding. Tokenization will also help to comprehend the real value of the assets. Also, some asset-backed tokens can be used for transactions, which reduces the dependency of businesses on banks and other intermediates.
- Transmit a company: Tokenization can also be considered when divesting a material asset or goodwill.
Tokenization can be very beneficial for both individuals and enterprises. And with increased security, clearness, and efficiency, tokens can be the future of modern businesses and investments.
Diving into the crypto investment world is not a difficult process, all you need is the right firm by your side.
Contact your Damalion expert now to launch your Luxembourg investment fund and use tokenization for the success of your crypto fund.
