What is Tokenization?
We constantly hear about digital assets and tokenization. How does a digital asset become a tokenized asset, and what are the benefits? Let’s first define a digital asset or a tangible or intangible good that exists electronically (ex. Currency shown in a bank account, a stock or bond in a brokerage or retirement account, etc.). In today’s world we are very familiar with many different digital assets even though we do not reference them as such. Digital assets have enabled our globalized society with the ability to inefficiently transfer value while relying on third parties. Businesses are beginning to recognize the various issues associated to these blind transfers; from timeliness to accountability and fraud. Smart contracts allow blockchains the ability to host a series of instructions that can define an asset. These instructions can define the asset type, quantities, ownership roles, behaviors, and properties. Keeping in mind the principles and benefits of blockchain, we note that these codified instructions, which now portray a digital asset, have various abilities which are decentralized and immutable. The smart contract has taken the qualities and principles of a digital asset and has “Tokenized” the asset allowing business’s the ability transfer assets (value) efficiently while enabling accountability.