When blockchain became the next best thing, people scrambled to understand the ins and outs of this advanced technology. Just when you think you’ve got to grips with it *bam* enter tokenization. The new kid on the block, said to change the landscape of business altogether. While cryptocurrency and blockchain have crept into many industries, tokenization is still fairly unheard of to the general masses.
What Is Tokenization?
Tokenization offers a blockchain platform identification and accessibility. Every blockchain platform has a token that represents its “purpose”, which are sometimes referred to as coins. Bitcoin for instance, is a cryptocurrency, represented by tokens, or coins. These tokens hold a value and can be traded as such, however tokens do not necessarily need to represent a currency, as is the case with Ethereum, where their token is Ether and acts as a fuel for developers to operate on the platform.
Tokens derive their value from demand and functionality. Let’s use Bitcoin as an example of demand: as more and more merchants accept Bitcoin as a means of payment, demand is raised, thereby increasing its value. Likewise with Ethereum and functionality, Ether acts as gas that allows developers to build smart contracts on the platform (of which the possibilities are endless), resulting in a highly valued digital asset.
What Is The Power Behind Tokenization?
As we have seen in recent years with the boom in the ICO industry, startups are economizing their businesses with the tokens they offer as a stake in the company’s future. This allows startups to finance their initial operations with the intention to build a successful and functional company. While there have been many successful, and even more unsuccessful examples of this, that is not the be-all and end-all of tokenization.
Tokenization has been around for years: in fact, it is the very ideology behind air miles. The airline offers you “loyalty points” to use as a voucher at a later stage. The concept is similar.
The power behind tokenization is the movement of money, both privately and securely. It is traded constantly, twenty-four hours a day, seven days a week and is subject to no bank holidays. It is also open to everyone, completely democratized. There are of course bumps in the road that the field needs to overcome, i.e. regulation, laws and widespread adoption, but with time these will structuralize as they have done in the past.
Why Is Tokenization The Future?
As Matthew Roszak (the man who gave Bill Clinton and Richard Branson their first Bitcoins) said “tokenisation brings one of the greatest generational opportunities for entrepreneurs and investors.” It allows entrepreneurs the opportunity to develop in this open source, decentralized environment and it incentivizes early adopters and investors to create new economies. Tokenization brings liquidity to new found markets.
How Will Tokenization Grow?
Vertex is an OTC trading platform that acts as a secondary market to non-listed tokens. Without platforms like these, great projects with huge potential could fall by the wayside. The liquidity this platform offers encourages strong projects to further their growth and gain more exposure. As this platform, unlike most OTC trading spaces, offers a minute minimum offer, tokenization is open to the smallest or largest of investors. With this mindset, tokenization in blockchain is the future.