How Public Blockchains are going to play important role in Hyper Tokenization this? What potential hyper toenization has?
Table of contents
- What is Hyper Toenization?
- Hyper Tokenization – What factors would lead to it?
- Hyper Tokenization -What is the Potential?
- Hyper Tokenization – Who Invented Tokenization?
- Hyper Tokenization – Can You Invest in Tokenization?
- Hyper Tokenization – Is Tokenization is same as Blockchain?
- Types of Tokens
- Tokenization vs Encryption
- Hyper Tokenization – Current Examples of Tokenization
- Ripple’s CBDC Platform Powers Fubon Banks Real Estate Tokenization Pilot.
- The Tokenization of Real – World Assets
- Tokenized Real-World Assets could be a Safe(r) Path to Crypto.
- The Key Benefits of Asset Tokenization on Blockchain
What is Hyper Toenization?
First, a token is a digital asset that represents utility although, transferring from one party to another without any 3rd party consent to put is simply.
Hyper tokenization means adding a layer of monetization to anything in this world with a cash flow. E.g. shares, bonds,collectible, as well as, real estate.
Just like computers shifted data from newspaper to database ,web3 would tokenize every asset in real world.
Assets like stocks, bonds,real estate ,art and anything with cash flow can be tokenized. This phenomenon is called Hyper tokenization.
Tokenization of assets is the process of transferring rights to a physical ,financial or intellectual asset into a digital token.
The simplest example is to replenish a bank account with cash. The process of replenishment at the cash desk or ATM is the tokenization, and the received virtual money is the tokenized assets.
Tokenization includes 3 Elements –
a. Incoming asset (cash)
b. The mechansim of “substitution” of the asset
Hyper Tokenization – What factors would lead to it?
Crypto is going to bring same model to money. If you use traditional system,it takes days to send money around the world.
This is, of course better than the gold which can take weeks to send over all around the world.
Whereas, because of blockchain,we can have transactions settle clearly in just a few minutes undoubtedly. . This is one of the main features that will lead to the hyper-tokenization of everything.
The ability of transferring value at the pace of information is a power giving to society.
Anything with cash flow will end up tokenized. Public blockchains are going to play an important role in this.
Certainly, in far future, we will eventually deal with stocks,bonds,as well as, real estate all on the different blockchains.
Hyper Tokenization -What is the Potential?
Easy to create with Multi Chains.
Tokens are easy to create because of ERC20 and 721 standard. And are created on any chain with smart contract.
Similar to API keys
When you buy an API from Amazon Web Services,you can redeem that API key for time on Amazon’s cloud.
The purchase of a token like ether is similar, in that you can redeem ETH for compute time on the Eth network.
Faster Than Banks
Nevertheless, Bank accounts freeze due to millions of transfer in minutes internationally but decidedly a token sale paid in digital currency is always open for business (20x increase in Buyers worldwide).
They have a Liquidity Premium
A token has a immediate price after its sale, and that price floats freely in a 24/7 global market. This is quite different from VC own equity.
That can take 10 years for equity to become liquid in an exit. The ratio between 10 minutes and 10 years is too much.
Evidently, Token launches can occur in any country. Nevertheless, the importance of coming to the United States in general or Silicon Valley /Wall Street in particular to raise financing will diminish. It will not be necessary to physically travel to the United States.
Token Buyer X Professional Investor
It will break down the barrier between professional investors and token buyers in the same way that the internet brought down the barrier between professional journalists and tweeters and bloggers certainly.
Tokens for logins and rewards
Selling tokens as tickets for access to logins,to car-rides,to future products or access to events or as a reward to creator who provides exclusive experience to its fans.
Anyone can buy tokens, not just 1%
Before, only accredited investors who had 1 million net worth could invest in startups. Its 3% of US population but now anyone in US or globally can buy tokens.
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Hyper Tokenization – Who Invented Tokenization?
The concept of tokenization was created in 2001 by a company called Trust Commerce for their client ,Classmates.com,which needed to significantly reduce the risks involved with storing cardholder data.
Hyper Tokenization – Can You Invest in Tokenization?
Tokenized stocks might be ideal for investors who want but don’t have access to traditional financial markets.
For example, someone without a bank account can not register with a stock brokerage,but they could potentially trade tokenized stocks.
Hyper Tokenization – Is Tokenization is same as Blockchain?
Tokenized assets can be currencies ,equities,bonds,artwork NFTs, and more. Tokens move on blockchain networks that keep track of how many tokens each network user owns.
And the transactions they use them in a blockchain is in effect a digital ledger.
In hyper tokenization, When an asset is tokenized using a blockchain, the blockchain infrastructure is used instead of a bank,and crypto tokens are used instead of digital dollars.
In all other aspects, the process is not fundamentally different from the tokenization of cash in a bank,currencies on Forex or shares on stock markets.
The key difference in tokenization via the blockchain is what distinguishes the blockchain from banks and traditional financial exchanges.
Tokenization of assets on the blockchain, is removing most of the intermediaries.
Since the distribution registry system serves as a “source of truth” that ensures the integrity of the transaction, is responsible for the safe storage of digitized assets and conducts transactions.
Types of Tokens
Numerous ways to classify tokens exist. Three main types of tokens are as defined by SEC and the Swiss Financial Market Supervisory Authority differ based on their relationship to the real – world asset they represent.
These include the following-
a. Asset /Security token
These are tokens that promise a positive return on an investment.These are economically analogous to bonds and equities.
b. Utility Token
These are created to act as something other than a means of payment.For example, a utility token may give direct access to a product or platform. It adds value to the function of a product.
c, Currency /Payment Token
These are created solely as a means of payment for goods and services external to the platform they exist on.
Most importantly, in Payment context , there is also n important difference between high-and low-value tokens.
A high-value token acts as a direct surrogate for a PAN in a transaction. And can complete the transaction itself.
Low-value tokens also act as stand-ins for PANs but can not complete transactions. Instead they must map back to the actual PANs.
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Tokenization vs Encryption
Digital tokenization and encryption are two different cryptographic methods being used for data security.
The main difference between the two is that tokenization is not changing the length or type of the data protected. Whereas encryption does change both length and data type.
Ultimately, this makes the encryption unreadable to anyone without a key,even when they can see the encrypted message.
Additionally, Tokenization does not use a key in this way. It is not mathematically reversible with a decryption key.
Tokenization uses non-decryptable data information to represent secret data. Encryption is decryptable with a key.
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Hyper Tokenization – Current Examples of Tokenization
a. Bitcoin is the first ever token that successfully transferred value at the pace of information.
b. Creator Tokens enabling fans to access unique content and unlock exclusive experiences with their icons.
c. Digital Rupee by India also acts as a token which represents Indian currency ,has a utility and would enable tracking and trading.
Tokens used in metaverse to buy assets ,NFTs are like tokens which tokenize art online.
It is expecting grow at 21% from 3.4 Billion (2021) to 8.7 Billion (2027).
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Ripple’s CBDC Platform Powers Fubon Banks Real Estate Tokenization Pilot.
Fubon Bank ,the Hong Kong subsidiary of Taiwan’s Fubon Financial Holding Co. ,has reportedly announced its intention to launch a pilot program for real estate tokenization.
The program is expected to begin in the 3rd quarter of 2023 by utilizing Ripple’s Central Bank Digital Currency (CBDC) platform.
The bank will convert convert the traditional Hong Kong dollar into a digital version at 1-to-1 exchange rate for testing purposes.
Ripple and Fubon Bank joined forces in May as part of the Hong Kong Monetary Authority’s e-HKD pilot program.
The two entities will work together on real estate tokenization using e-KHD. Actually, Ripple’s CBDC director also commented on the initiative.
He explained that the Ripple CBDC platform would integrate a hypothetical e-HKD., tokenized real estate, and financial lending agreements,using the XRP Ledger (XRPL).
With the tokenized asset industry projected to reach $16 trillion by 2030,Ripple is positioning itself to take full advantage of this business opportunity.
The Tokenization of Real – World Assets
This tokenization of real-world assets is not just happening in art, but in bonds,cars,gold,houses,and more.
It’s a concept gaining momentum and interest from traditional finance players.
he core idea of real-world asset tokenization is basically to create a virtual investment vehicle on the blockchain. Which is linked to tangible things like real estate,precious metals,art and collectibles.
So instead of the deed to a house being a physical piece of paper,the ownership is put on-chain. This could be traded between two parties directly, or fractionalized and offered to many people to buy.
The tokenized real-world assets for things such as stocks can account for fractional ownerships more efficiently and generate faster settlement times.
Noting transactions on the blockchain do not have the up-to-72 hour settlement time that traditional markets take.
This speed and efficiency helps smaller investors with fewer funds be able to participate in investments that otherwise would be out of reach for them.
In the case of fiat currency, stablecoins are the most obvious form of real-world asset tokenization.
Tokens such as Tether or USDC are tokenized dollars. Each token represents one actual dollar that the company has in reserve,and allows for faster and direct settlements between parties.
The Bank of America
it recently called Real-world asset tokenization ,a key driver of digital – asset adoption. According to their report, the tokenized gold market has captured over $1 billion in investment.
There is also a growing demand for tokenized U.S. Treasury bonds,with the combined market capitalization of tokenized money market funds nearing $500 million,according to data compiled by CoinDesk.
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Tokenized Real-World Assets could be a Safe(r) Path to Crypto.
According to research, the tokenization of real-world assets (RWA) will be one of the major growth areas in 2023.
In the latest report Coin Metrics highlighted growth areas for the crypto industry in 2023. It cited the tokenization of real-world assets as one of those growth sectors.
The process involves representing physical and traditional financial assets as digital tokens on a blockchain.
Furthermore, this allows for a more secure and efficient investment environment for those that do not or can not hold the physical assets.
The tokens can then be bought,sold, and traded just like securities.
The crypto bear market has seen a decline in the tokenization of real-world assets in the latter half of 2022.
Nevertheless, CoinMetrics still sees this as a growth area going forward.
Despite, this decline, RWA tokenization remains a promising area of growth in the crypto market.
It cited an example of a number of banks recently piloting a program to tokenize various projects to reduce transactions settlement times.
Furthermore, J P Morgan, Deutsche Bank,and SBI traded tokenized currencies and sovereign bonds in November 2022. They used the Ethereum layer 2 scaling network Polygon for the experiment.
This demonstrates the increasing adoption of RWA tokenization by major financial institutions and their adoption of L2 for scaling.
There has been increase in RWA-backed loans. This indicates the growing demand for RWA tokens as a means of financing real world assets.
One of the most exciting use cases for blockchain technology is commonly referred to as Real World Assets ,or RWA.
Based on a report from Boston Consulting Group ,the on-chain RWA market is expected to reach between $4 trillion and $16 trillion by 2030.
According to the Financial Times,non-fungible token creators have been diversifying into RWA to generate new revenues amid, an NFT market slump.
Overall, the adoption of RWA tokenization is increasing in the crypto market,with major financial institutions and platforms exploiting the use of these tokens in various transactions.
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The Key Benefits of Asset Tokenization on Blockchain
The tokenization of assets on the blockchain opens up broad opportunities for growth and diversification of assets in the market.
This has been proven by many successful cases that are bringing real profit through both issuers and their investors.
Nevertheless, many still fear to implement this process in their business.
Tokenization includes 3 elements –
a. Incoming asset (cash)
b. The mechanism of “substitution” of the asset(bank infrastructure)
c. Virtual asset version (digital dollar)
Blockchain Communities –
Among the blockchain communities ,the idea of tokenization of entire countries is gaining momentum.
Imagine, if every citizen had a token that would give the right to manage the state and the income or loss generated by it, what it would give?
This would increase the involvement of citizens in political processes and make them more responsible .
Because this is not about the abstract budget of the country, but about money in your own pocket.
Unlike traditional databases,information recorded on the blockchain can not be changed, deleted or “corrected” by bribing an official or hacking the system.
This is one of the properties of the blockchain architecture which, conventionally speaking, records information in “layers in blocks”.
It is thanks to this feature that blockchains are introducing into state registries,online banking systems and corporate databases. Where accuracy of the stored information is important.
Immutability, is important for tokenization because it allows you to track the history of tokens i.e. assets who created it and when, who,to whom,when and what price sold.
In addition to, immutability,the data in the blockchain protect two more things:cryptography and the distribution registry.
Cryptography is a method of ensuring the confidentiality of open data . When this data is encrypting using a secret algorithm (key). Decrypt such data using the same or another secret algorithm.
Almost all blockchains are open source software. In most cases,this means that any user or developer can view the source of the blockchain in order to:
a.Personally make sure that software does not contain vulnerability and unacceptable functionality for the user.
b. change the source code of the software and use it freely in your needs.
What can be done with blockchain tokens?
a. change,trade,store and use as collateral.
use as a means of payment for the purchase of goods and services.
c,use in loyalty programs,promotions,ratings.
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The future of asset tokenization
Tokenization is poised to transform asset management as we know it today. It democratizes access to markets while ensuring fairness and security.
The only obstacle today being legal boundaries — to what extent this hurdle stands in the way depends on the type of asset you want to tokenize.
A network for exchanging Basketball cards will have small hurdles compared to a platform of expensive paintings.
Creating a legal bridge between assets and distributed ledger technology needs legal professionals to solve tax-related and cross-jurisdictional issues.
Nevertheless, new solutions will come into the market, which will iron out these concerns in the years to come.
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The value advantages for enterprises opting to tokenize their assets are prolific reasons for driving the growth of digital tokens.
With a detailed understanding of what tokenization actually means and how it works,one could clearly estimate the foundation for its benefits.
Most importantly, individual users could also find exceptional benefits from digital blockchain-based tokens.
For example, people could have a stake of ownership in assets that were conventionally inaccessible to them due to capital requirements.
The key to understanding, the true potential of tokenized assets always starts with a detailed overview of the concept itself.
Right now the future looks bright for tokenization with global business advisory firm Boston Consulting Group forecasting that the market for tokenized assets could mushroom to $16 trillion by 2030.
It refers to the process by which a piece of sensitive data,such as a credit card number,is replaced by a surrogate value known as a token. The sensitive data generally needs to be stored securely at one centralized location for subsequent reference and requires strong protections around it.
NFTs can represent digital or real-world items like artwork and real estate. “Tokenizing” these real-world tangible assets makes buying ,selling,and trading them more efficient while reducing the probability of fraud . NFT can represent individuals identities ,property rights,and more.
Tokenization is a process that converts the rights and benefits to a particular unit of value, such an asset into a digital token that lives on the Bitcoin (BSV) Blockchain.
Tokenization is one of the most popular security measures that merchants,payment processors,and banks use to protect sensitive financial and personal information from criminals.
A tokenized card transaction is considered safer as actual card details are not shared with the merchant during transaction processing.