What is Tokenization?

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What is tokenization? How are tokens divided? What functions do they have? We will try to explain all these aspects in the following article...

What is Tokenization?What is tokenization? How are tokens divided? What functions do they have? We will try to explain all these aspects in the following article.

The concept of tokenization

Tokenization is closely related to transforming value data into digital assets. In other words - if we have something that we want to sell, but we are not able to give it to the investor, we can transform it into a token that we put on the blockchain. One of the main benefits of such a solution is mainly transaction security, but also transparency and clear rules.

Division of tokens

We can do tokenization on many things that reflect a specific value. Remember that the token is not a cryptocurrency, which many people are not fully aware of. The only common feature is that we cannot touch both things because they do not exist in physical form.

Tokens use ready-made solutions, unlike cryptocurrencies with their own blockchains. As for the functions performed by tokens, the following can be distinguished:

  • utility tokens,

  • security tokens,

  • payment tokens.

The most important functions of tokens

These tools have a number of specific functions that are mainly related to their purpose. Utility tokens are based on the practical application of their own platform, thanks to which they raise funds for the development of projects. Investors gain access to products or services offered by a given company, which are based on a specific concept. Another function of this tool is crowdfunding - users are motivated by the promise of profit that relates to the development of the project.

Security tokens, on the other hand, are created in such a way that they resemble securities in legal terms. They are designed to ensure the safety of investors when using these solutions. In the case of payment tokens, it can be said that they are mainly used to make payments. Their big disadvantage is the fact that they basically have no other use and function.

Blockchain

The term blockchain literally means "blockchain" - its key task is to store information. We distinguish one block from another by a unique code. A blockchain has several sides that are connected to each other. If we want to attach a new chain, it must be verified. The blocks created are stored in chronological and linear order. Therefore, it is not possible to add a block either to the beginning of the chain or in the middle.

Secure database

Blockchain is often associated with a secure database. This is due to the fact that it is very difficult to change the information in the previous blocks. Each of them has a unique abbreviation (created mathematically) and a password. These considerations turn digital information into strings of letters and numbers.

If we tried to change the information contained in the block, then the hash value of the block will also change. However, the block in front of it will still have the same hash. Modification of such information becomes extremely difficult, thanks to which we gain a greater level of data security.

Tokenization is based on turning certain things into digital assets. It requires acquiring certain knowledge that will allow you to develop skills in this area. This concept is also related to blockchain, which includes a number of blocks that store information. Thanks to these tools, greater security of the database is ensured.

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Urdu Soft Books | News, Articles, and Urdu Books Blog: What is Tokenization?
What is Tokenization?
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