There are many different aspects of blockchain technology, the most notable and well-known being cryptocurrency. A lot of people look at cryptocurrency as it’s own technology without acknowledging the underlying software and network behind the coins, which of course is blockchain. However, there are many different uses for blockchain other than being used for cryptocurrency, one of the most interesting ones is tokenization.
What is Tokenization?
Tokenization is the process of replacing data with identifying “symbols”. These can be made into or out of just about anything within software. In blockchain specifically, this is mostly done with tokens on a blockchain network. Tokens on a blockchain network actually have nothing to do with tokenization. Despite the name of the process, they are simply cryptocurrencies on a blockchain network that are not the main currency of the network. These usually have other uses besides securing the network. How this process and those pieces of data (tokens) can be brought together can lead to some very interesting use cases.
Tokenization with tokens on a blockchain network utilizes the same underlying process that is tokenization, except when replacing data you don’t use “identifying symbols” you would use a token. Data can literally mean anything that can be put into software, from encryptions to documents.
Once this process is completed the tokens can be used as the normally would on a blockchain network. Traded, staked, held, and any other use case created for them could be done. Likewise this occurs while holding the data and value of whatever they tokenized. Therefore pieces of data and documents can be used as pieces of software on a decentralized network. This is something that never could have happened before blockchain technology’s emergence. And since the blockchain networks they run on can be decentralized and be “open-ledgers” trading can be done seamlessly, trustless, and instantly. This brings financial value to the tokenized data specifically from being on blockchain technology.
So while tokenization alone can be used in much low-level software and network applications, tokenization with blockchain and cryptocurrencies has the potential to add a lot more value to the data being tokenized financially.
In time this can most certainly lead to bringing more value to this data. Without blockchain technology this might not have been possible. Companies that can utilize this may be able to spark unseen innovation in many industries…
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