The Different Types of Tokenization in Blockchain

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The Different Types of Tokenization in Blockchain




by Sumana Bhattacharya

September 7, 2021

Blockchain

Tokenization refers to the process of converting tangible and non-physical assets into blockchain tokens. The notion of blockchain tokenization has recently acquired a lot of traction. Tokenization is gradually finding uses on the blockchain in conventional industries like real estate, equities, and artwork. When researching the many forms of blockchain tokenization, you will come across digital assets that are suited for trade inside a blockchain project’s ecosystem. Platform tokens, governance tokens, utility tokens, and non-fungible tokens or NFTs are some of the many types of tokenization in the blockchain.

 

Platform Tokenization:

Tokenization of blockchain infrastructures enabling the development of decentralized apps is referred to as platform tokenization. DAI, which may aid with smart contract transactions, is one of the most well-known examples of platform tokenization. Platform tokenization takes use of the blockchain network that serves as the foundation for increased security and transactional support.

 

Utility Tokenization:

Utility tokenization is the process of generating utility tokens in a protocol to use the protocol’s services. It’s crucial to highlight that utility tokenization does not imply the creation of investment tokens. Utility tokens provide the required platform activity for the platform’s economy to grow, while the platform ensures the tokens’ security.

 

Governance Tokenization:

The rise of decentralized protocols has necessitated the addition of yet another important tokenization type for blockchain. Blockchain-based voting systems are the focus of governance tokenization because they can improve the decision-making process surrounding decentralized protocols. The utility of governance tokenization may be seen in the value of on-chain governance, which allows all stakeholders to collaborate, debate, and vote on a system’s administration.

 

Non-fungible Tokens (NFTs):

NFTs are the last and most common kind of tokenization in the blockchain. non-fungible tokens represent unique assets digitally, and this form of tokenization has a wide range of applications. Digital artists, for example, may have more options for controlling their work’s ownership and trade. The demand for NFTs and NFT-based application development has lately exploded throughout the world. As a result, focusing on the construction of NFTs as a major variation of tokenization seems sensible.

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