There is nothing new in a token serving as a representation of an asset with certain value. We can take subway tokens or casino chips for example. In this case, tokens represent money we pay for using public transport or put at stake while gambling. But the money is a kind of token too as its face value exceeds the cost of production. Taking this into account, the tokenization is by no means a new phenomenon, but the blockchain technology does give a new impulse to the process.
People buy many different assets, like stocks or gold, in order to invest their money rather than to use the assets day-to-day. They don’t need to get gold bars stored in the living room, they just want to own a certain amount of gold and have an ability to trade it anytime they want. Similarly, when buying Facebook or FedEx shares, you don’t want to obtain some tables or chairs from the company’s office. All you need is a paper confirming you are the owner of the shares that are likely to increase in value and thus bring you some profit. Physically, you buy paper instead of goods. Furthermore, all the paperwork is usually replaced by electronic transactions.
The blockchain-based tokenization is the next step in this evolution. While traditional electronic transactions rely on a trusted third party, assets on blockchain are managed directly by the owner, with no middlemen needed. Data in the distributed ledger is secured by the technology instead of any people or companies. That’s the way to make the transactions cheaper, faster, and safer than ever before.
The improved commodity and security management is the most obvious benefit of the tokenization, but not the only one. The blockchain can secure any kind of data, so the possibilities it offers are almost limitless. While many blockchain platforms issue tokens mainly to attract investment, other platforms do offer new solutions to old problems of different industries. For instance, the Loci project tries to