Tokenizing is the process of converting an asset, such as a currency, into a digital token on a blockchain. This process allows for the secure transfer of assets between parties with no centralized control or middleman involved. Tokenization has opened up new opportunities for businesses to offer fractional ownership in their products and services, providing users with access to previously inaccessible markets.
The most common form of tokenization involves creating tokens that represent some real-world asset like stocks, bonds, commodities or other securities. These tokens are then stored securely on distributed ledgers (blockchain) where they can be easily transferred from one user to another without any need for central authority or third party intermediaries. In addition to this use case, tokenization has also been used to facilitate loyalty programs and create unique digital currencies which can be used for purchasing goods and services online.
When a company decides to tokenize their assets it will typically involve setting up an infrastructure that includes smart contracts and protocols that enable token holders to manage their holdings through open source tools built upon blockchain technology. Once these tools are set up the company will deploy its own cryptocurrency which represents its underlying asset – allowing users to buy and sell shares in it without any central regulator getting involved.
In essence, when something is ‘tokenized’ it means that it is converted into a representation of itself using cryptographic codes on top of decentralized blockchains such as Ethereum or Bitcoin Cash rather than having physical forms like paper certificates or coins etc.. This enables efficient transferability while confirming authenticity at every stage – meaning buyers can trade quickly with confidence knowing exactly who owns what tokens at all times due the immutable public ledger system maintained by each respective blockchain network protocol.
