What is tokenization in blockchain?

Tokenization blockchain

In the blockchain ecosystem, tokens are assets that allow information and value to be stored, transferred and verified in an efficient and secure manner. These crypto tokens can take many forms, and can be programmed with unique characteristics that expand their use cases. Security tokens, utility tokens, and cryptocurrencies have massive implications for a wide array of sectors in terms of improving transaction efficiency, increasing liquidity and enhancing transparency and provability to assets.

Security Tokens, Utility Tokens, and Cryptocurrencies

Generally speaking, a token is a representation of a particular asset or utility. In blockchain, tokenization is the process of converting something of value into a digital token that’s usable on a blockchain application. Tokenized assets on the blockchain come in two forms. They can represent tangible assets like gold, real estate, and art, or intangible assets like voting rights, ownership rights, or content licensing. Practically anything can be tokenized if it is considered an asset that can be owned and has value to someone and can be incorporated into a larger asset market.

Security tokens

Security tokens embody a particular investment, such as a voting right in a company, a share in a company or other centralized organization, or some tangible or digital thing of value. In addition to being a digital representation of an underlying asset or utility, security tokens can be programmed with an unlimited array of unique characteristics and ownership rights. As such, these tokens make up an entirely new type of digital asset.

Tokenized securities

It’s important to take into account that security tokens are not the same as “tokenized securities”. While the two terms are often conflated, a tokenized security serves as a straightforward digital stand-in for its underlying security, and is typically designed to be easily exchanged, aggregated, or used. In other words, tokenized securities mainly exist to broaden the market accessibility or liquidity of the security being tokenized, without the addition of unique programmed or cryptographic characteristics such as those found in security tokens.


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