Tokenisation is a process where the form of asset is converted into a token that can be moved, stored or recorded on a blockchain. In simpler words, tokenisation is digitally representing an asset in the form of a token to put real-world assets like land or a house on the blockchain.

These tokens are backed by an underlying physical asset, complete with warranties, insurance, and legal enforceability to create trust and trade. This allows everyone to track resources prevent wastage, clear tamper-proof records of transactions.

Tokenisation also increases the liquidity of an asset as it facilitates fractional ownership. These asset tokens contain all the relevant information about the asset.

So if you want to buy gold or a painting but cannot pay in full, you can buy tokens equal to as small as 0.0002 percent of the ownership of that asset.

Also Read | Tokenization: Redefining digital payment eco-system with encryption

Using tokens

Tokens can be used as trademarks, copyrights, and patented technologies. It simplifies exchange due to the seamless exchange process on the blockchain as each transaction that involves a token has a sender, receiver signatures, timestamp and amount.

The transaction receipt is immutable, verifiable and available for all to see.

It has global access as it's the same blockchain in the US, Argentina or China. It ensures liquidity by the way of a global audience and large participation and one can create conditional scenarios as well.

For example, an active wallet for X number of years may lead to token transfers to another person. Also, an X amount of token transfer may lead to an ownership exchange as well. It also reduces cost, eliminates middlemen, and there is no management cost.

So far gold, real estate, bonds, equity, painting have been tokenized.

For more, watch the video

Also Read | As RBI scraps tokenisation, you won't be able to shop in one click from Jan 1; here’s all you need to know

(Edited by : Yashi Gupta)

First Published:Sept 13, 2021 5:02 PM IST