In this Crypticle we will go over the potential of Tokenization rather than the project or technology that will take us there, reason being is because there are many projects aiming to achieve this, it doesn’t matter which one from a consumer perspective.
What is a token?
In traditional terms, it is a tangible physical item that represents something else. A good example is chips in a casino where a chip represents a certain amount of money.
In ancient times, tokens were used for counting and related to certain commodities. For example in Iran (3300BC), a lenticular disk represented a flock of animals, potentially up to 10.
What is Tokenization
Tokenization is when a physical asset is represented online as a digital token. So things like; Real Estate, Gold/Silver, could be represented as a token online. Due to the immutable benefits of Blockchain/DLT (see DLT article here), there’s no way to hack or alter details such as ownership therefore it would be very secure.
Benefits of Tokenization
As it will be online, it can thus be traded very easily and quickly, reducing the time it takes to trade physical assets which would otherwise be difficult to trade such as real estate, commercial real estate or precious metals (Gold/Silver).
Think of buying a property, as someone who has bought a property in the UK, it is a very cumbersome long process of paperwork involving the property deed, land rights etc etc. If a property was tokenized including all it’s relevant information and rights, you would literally be able to send that as fast an email (or maybe as fast a HD movie). The speed reduction could potentially be from several months to potentially Days/Hours/minutes. The speed could very well be determined by the speed of your internet! (Reality check, be aware this future is far in the future).
Another thing that can be done when a physical asset has been tokenized is, you can sell shares or pieces of that physical asset to raise money. Let me paint you a picture, imagine you bought a flat for £50,000 and you needed some cash, £10,000 for example. You could sell £10,000 worth of tokens (of your property) on a market and keep the rest (securities law do apply here). This has already been done in Manhattan by serial real estate broken Ryan Serhant with a $30 Million Condo, the property has been placed on the Ethereum Blockchain. Full details here
The barriers to Tokenization
The main barriers to tokenizing things like Property, precious metals and other physical things is the government. And for good reason, all the policies and legislation need to be in place to make sure everything is regulated and operated in a manner which prevents corruption, mismanagement and hacking due to weak infrastructure. These things will take many years. Our estimate would be 5-10 years, maybe even more.
Ethereum is winning
At the moment, it is the Cryptocurrency Ethereum (ETH) which is leading the race in terms of making tokenization a reality, with their ERC 720 token standard which is a specific set of standards which allows for items to be placed on the block chain which are unique. So for example a property is unique as it has a unique address to others, with ERC720 standards, this information can be stored as such and thus cannot be copied or changed.
If that confused you, just understand that the Cryptocurrency Ethereum has the framework to allow physical assets to be converted into tokens safely and securely.
Tokenization is converted physical (or virtual) items into digital tokens on a blockchain, currently Ethereum is leading the race however we are quite a distance away from mass adoption. Once we do get there though, most physical assets will be represented online as some sort of token which will be tradeable in a fraction of the time it takes now.
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