In recording the value of tangible assets digitally, tokenization is a revolutionary invention for quick transactions and capturing of data. With the emergence of the first crypto-token Bitcoin, the development of Blockchain has traversed a long way in the field of tokenizing tangible and non-tangible assets digitally. The fundamental purpose of Blockchain and distributed ledger invention has served as the granting and exchange path of tokens.
The platform of Tokenization is constantly being analyzed beyond enterprises and decentralized protocols for safety, transparency, digital currency, and easy flow of virtual transactions. Tokenization has helped the market mechanisms and transactions initiated through its transparency. It allows every person from all industries to participate in the easy flow of digital transactions. This results in the enhanced liquidity of transactions and real-time assets.
It was estimated in research done by a firm that the growth of the tokenization market will expand from US$983 million in 2018 to US$2.6 billion by 2023, showcasing a compound yearly expansion rate of 22 percent. Recently one of the leading accessible online remittance platforms, PayU, initiated the mechanism of token-based payments for all the merchants, in association with Google Pay UPI. PayU also talked about the tokenized attribute that will help the payment platform of 4.5 lakh merchants engage debit cards, credit cards, or Google Pay UPI in case of recurring payments without providing any card credentials.
The online payment and banking industry is advancing to support and initiate new remittance form methods that involve excessive security against forgery, account hacking, account mishandling, and all sort of fraud activities. Hence protection is required for a card, noncard and hybrid exchange mechanism to help reduce unauthorized handling and access of cardholder account information and avoid cross-channel fraud activities. Tokenization as a fundamental concept has made a substantial promise to serve this need of the digital world.
In the year 2001, Trust Commerce had invented the concept of Tokenization to secure sensitive and confidential payment information of their client named Classmates.com. Afterward, the actual application of Tokenization was introduced to payment card information by Shift4 Corporation. It was then laid out to the general public during an industry Security Summit in Las Vegas, Nevada, in 2005. Card tokenization has also acquired positive affirmation throughout the world with Apple Pay, Samsung Pay and Google Pay initiating all sorts of retail payments through cellphone devices, with the collaboration of card web, namely the VISA, Mastercard, American Express, Discover, JCB and a lot more.
What is Tokenization?
Tokenization refers to the mechanism of issuing blockchain tokens in exchange for real-time assets. Tokenization also generates different tokens such as equity, utility and payment tokens, depending upon the nature of the industry involved.
It is the process of converting ownership rights and real assets into digital assets, recorded on a distributed ledger. It can transform how multiple trillion dollars operate. The increasing demand for tokenization relies on public networks that support compliance, cost and performance needed to achieve mainstream adoption. Hedera Hashgraph overcomes these limitations by introducing Hedera Token Service.
Types of Tokens and their use cases:
Fungible Tokens
Based on the attributes such as decentralized mechanism, safety, and invariability; Blockchain is understood as an efficient technology for managing various digital assets. Though with the advent of such interchangeable tokens, these attributes would not have been possible. Such types of tokens are acceptable for cryptocurrency, and the truth is that the attribute of fungibility is the base of any currency.Tokens with such a feature are created so that every part of them is equivalent to the part of the next token. For example, Bitcoin is an approved cryptocurrency with the attribute of fungibility, which explains that a Bitcoin is equivalent to another Bitcoin and hence is equal to all the subsequent Bitcoins. Such kind of tokens is the ones which possess the quality of being divisible and being interchangeable.In layman terms, these tokens are the ones identical in nature with similar base components. They can be interchanged with the other similar tokens without any technical barrier. Such tokens are similar to the objects we use in everyday life, and their application can also be made to the real world and digital assets.
Non-Fungible Tokens
Non-fungible tokens are unique tokens that portray different items. They are different so that they cannot be divided or precisely changed for the other additional non-fungible tokens of a similar category. You can understand NFTs as tokens with absolutely no fungibility that serves you with various ways of using a blockchain network. Crypto Kitties is the most prominent example of non-fungible, acquirable tokens.Every CryptoKitty is different, and no two CryptoKitties can ever possess similar attributes; it is practically impossible to break a CryptoKitty into smaller parts, exchange them in the transaction, and rearrange them to make an equivalent and unique CryptoKitty, unlike fungible token Bitcoin.
Use Cases
CryptoKitties have been recorded as the first example of non-fungible tokens. The invention of crypto kitties has created a new level of standard and protocols for the Blockchain platform. Non-fungible tokens have multiple use cases across a variety of domains. Similar to crypto kitties, such tokens initiate the creation of a new and unique type of collectibles. Along with the above-mentioned use cases, these tokens also have their essential application use in KYC processes, voting & election mechanism, loyalty events, art creations, real-world assets, virtual assets, copyrights, supply chain assessment, medical information, and a lot more.
With the emergence of tokens, various use cases of the tokens are used as per the market needs. These include all the parts from decentralized governance tokens to regulated securities. This part will explain such tokens that initiate application drive for the mechanism of Hedera Token Service.
Utility Tokens serve the holder with access to a product or assistance. This can be some of the technical assistance, just like the cloud credits, or the actual world products and services like permission to a farm or estate for a holiday.
Security Tokens are those which explain the trading of the token as the trading of that same value. These tokens act for the shares held up in a company or authority/possession of an estate. Most importantly, these tokens must adhere to relevant safety and other financial protocols and fetch their value from the fundamental asset.
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