Everything you need to know about tokenization
New technologies have brought with them a host of new concepts, including tokenization.
Today, tokenization is synonymous with security, digitization and ease, as it introduces a new alternative to the payment methods already available in today's financial sector. The functionalities it is bringing to both sellers and consumers have made this concept spread around the world.
As it is a new concept, it can be difficult to understand and it is not understood to what extent it can offer benefits to companies, but don't worry, because in this post we are going to explain everything you didn't know that you needed to know about this concept.
What is Tokenization?
When you make an online purchase, the server asks you for your personal and bank details. Providing this information in the browser is risky, because there is a possibility that it could be intercepted or stolen. You are not guaranteed the protection of your data in digital services.
Tokenization arises to solve this problem. This technology offers the guarantee that all the data sent in the browser of your device remains secure and without outside interference. What happens is that the moment your data is sent through the browser, it is converted into a set of random characters that hide sensitive information called tokens. In this way, that information cannot be intercepted by hackers, as they will not be able to decrypt that signal.
This is just an example of what tokenization can guarantee. But with this example we can understand what this concept is.
Tokenization is the process of protecting, designing, programming, launching, marketing and storing a series of tokens. This procedure replaces sensitive data with tokens. It is not a one-off event prior to the token issuance process, but a continuous process.
You may be wondering what a token is, and we are going to explain it to you.
A token is the digital representation of an asset integrated into a public blockchain. Although some people think that this concept has no value, they are very wrong. This digital representation is what gives value to an asset.
Any object, whether physical or digital, can be tokenized, as long as it represents value to a third party. The tokenization process involves a cost, so it is important to find an asset that has value, otherwise there would be no point in investing in that object.
Tokenization has infiltrated all sectors of society. From financial systems to other sectors such as real estate investments. The possibilities introduced by this concept are abysmal, and many companies are realizing this and are adopting these technologies in their business strategies.
Advantages of tokenizationAt Tutellus we have performed more than 30 tokenizations in 4 years, so we can tell you with certainty what are the main advantages of this technology.
- Access to international markets
Tokenization allows you to reach markets all over the world. It doesn't matter where you do it from or how far you want to go, because with tokenization all this is possible.
With just one click, you can reach investment markets anywhere in the world, and you don't have to go through all the paperwork involved in traditional investment processes.
- Provide liquidity to illiquid assets
On its own, tokenization is not capable of providing liquidity. However, at Tutellus, every time a token is created, it is endowed with a liquidity pool. In addition, they incentivize LPs or Liquidity Providers to increase the size of that pool.
- Save on your investments
Thanks to tokenization, investment investment processes are much faster and cheaper. All assets invested in are cheaper, allowing investors to save more once their investments are finalized.
- Faster processes
Administrative processes are much faster when we include tokenization. We leave aside all the paperwork and bureaucracy of traditional investment processes and find ourselves with much faster and safer investments.
- Guaranteed security
Undoubtedly, this is one of the most exploitable advantages of tokenization. In a context of conflicts and dangers in the network, tokens appear as a guarantee of security for all our data on the Internet. We can carry out all the economic operations we want in browsers without fear that our information could be stolen.
In conclusion, tokenization is here to stay. A structured tokenization allows us to obtain financing for a project, invest in different assets and protect all the data we share on the Internet. Not every asset is tokenizable and not every tokenization is going to be profitable, but to get ahead you don't always start by winning.