Blockchain tokens are the digital representation of complete or shared ownership in anything of value. Blockchain tokens are commonly leveraged in payments and settlements between participants. The tokens also enable representation of multi-party ownership of an indivisible asset, such as a work of art, and ease the exchange of such ownership between parties in a blockchain network. Tokenization introduces new avenues to optimize business processes involving multiple partners and bring in new business models. The IDC predicts that by 2025, the worldwide tokenized asset market will reach USD 500 billion.
Interoperability
of networks and the ability to use tokens across networks and industries ushers
new business models and newer ways to improve business processes. InterWork
Alliance (IWA), an association of industry leaders, academics, and the government
is working towards developing some standards and governance framework around
tokens and has introduced a taxonomy called the Token Taxonomy Framework (TTF).
This taxonomy provides a common language, called token formula, to communicate
a token’s properties and capabilities. TTF enables the creation of standardized
tokens that are platform and technology-neutral, allowing the tokens to be used
across blockchain networks.
What tokens can bring to enterprise
systems
A
token-based blockchain platform enables the transfer of ownership and value in
the same transaction, unlike traditional methods where there is a considerable
delay between the transaction time and the settlement.
Another
major advantage provided by tokenization is the value realization of intangible
and illiquid assets. An intangible and/or illiquid asset can be tokenized and be
made available for increased shareholding and trading in a marketplace thereby
providing liquidity and value realization for partial owners.
Cash or
physical assets can also be tokenized and used as intermediary currency in the
settlement of other types of assets in exchanges. These asset-backed tokens,
called stable coins, optimize business processes by eliminating intermediaries
and escrow accounts, allowing the settlement to happen alongside the business
transaction. The collateralized asset can be held and validated by external
entities to increase the trustworthiness of the token. There are several gold
and fiat currency-backed tokens currently in the market.
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