Following cryptocurrency and blockchain tech developments, you’ve probably stumbled upon the term “tokenization” a few times. Based on the word alone, you can guess that it might refer to the act of turning something into a token–and while this is somehow correct, we’ll give you a better definition:
Tokenization is the process of encoding a real world asset onto the blockchain*
*A blockchain is a digital ledger in which cryptocurrency transactions are recorded chronologically and publicly.
What’s With the Hype?
The concept of tokenization is all the rage in the crypto space with crypto enthusiasts spreading awareness with hashtags to #TokenizeTheWorld. What’s with all the hype?
Suppose someone was selling you a Pizza token with 1 Pizza token represents 1 full 12-slice pizza. If you can’t afford a Pizza token, you don’t have to miss out on the pizza. You can just buy 0.5 Pizza token and enjoy 6 delicious slices of pizza.
This concept can also be applied to items that are not inherently divisible like a house or a car. The point is that you can have a full ownership of an asset with 1 token or a 0.001 ownership with 0.001 of a token.
On the blockchain, you can trace where your token’s journey. In the case of a used car, you can trace all previous car owners and check its history–information some car dealers will be reluctant to tell you.
Tokenization can be applied to various industries. The opportunities are endless. Already, people have been trying to tokenize real estate, debt, and even governments!
The movement to ‘tokenize the world’ is in place and it is just about time that companies capitalize on it.