As change is the only constant, the world economy always undergoes metamorphosis towards progression. Tokenization is one such prominent change. It has advantages across several verticals. Before we have a deeper insight into the benefits of tokenization, it is imperative to know what it means.
Tokenization is broadly known as the process of transforming the storage and management of an asset by assigning each asset with a digital counterpart.
Today credit card giants like Visa and Mastercard have adopted tokenization for safe electronic payments. Likewise, UTRUST which is a payment platform has brought about a revolution by accepting payments in cryptocurrencies for an enhanced purchase protection mechanism. The American Express offers a token service in order to ensure that the chances of fraudulence are diminished and digital growth is promoted. ATLANT, a real estate platform has enabled tokenization of the ownership of real estate. Thus, examples of tokenization driven ventures are many.
In order to delve into the popularity quotient of tokenization, let me walk you through the range of benefits it offers:
Benefits of Tokenization
The concept of tokenization would not have gained popularity in the global economy without the benefits it offers. It can be vividly foreseen that the future of the economy will be governed by tokenization.
Democratization of Wealth Creation:
Tokenization has made wealth creation democratic by making it available to everyone. Now people can access investments that they could have not thought of otherwise with the help of tokenized real assets. It largely involves the miraculous effects of fractionalization and liquidity.
The quintessential aim of tokenization is to fortify the usage of sensitive data by replacing them with tokens which can be incorporated in transactions. It helps in maintaining absolute confidentiality as there is no third party involved. Tokenization involves a distributed ledger known as blockchain which is highly secure. The data remain in a pre-defined ecosystem and turn useless outside the environment. Hence, tokenization nullifies the possibility of data theft and fraudulence.
Cost-Effectiveness And Better Speed:
Through tokenization, businesses can be managed in a cost-effective manner. Traditional asset management incurs a huge cost which can be curbed through tokenization. Tokenization has also made investments cheaper. Furthermore, transactions of tokenized assets can be carried out way faster than that of traditional assets adding up to the pace of trades.
The geographic and financial restrictions have fallen by the wayside due to tokenization. Earlier people could not invest in real-world assets because of the geographic and financial restrictions. However, tokenization has facilitated the investment in real-world assets and cryptocurrencies which are potential alternatives to traditional investments.
In a nutshell, tokenization is the driving force of the futuristic economy of the world. Tokens will result in the augmented ease of divisibility and reduction of cost in the global transfer of ownership by removing middlemen and embedding legality and execution within a smart contract code. Consequently, the magnitude of trade will spike and the currently illiquid real-world assets will liquidate to a great extent.
However, I don’t totally disregard the fact that establishing a legal bridge between blockchains and real-world assets will involve surmounting the hurdles of cross-jurisdictional law which will certainly take some time. On the other hand, I am bullish about the fact that the cumbersome and age-old method of maintaining the transactions of physical assets will soon give way to the simplest, fastest, cheapest and the most secure solution called tokenization.