Introduction
Tokenization is one of those technological terms that may sound complicated, but in reality, it describes processes that have been around us for a long time. In the broadest sense, tokenization is the transformation of value, rights, or information into tokens that represent them, making them easier to transfer, share, and manage. Instead of theoretical considerations, it's best to illustrate this with examples from everyday life that show the diverse applications of this concept.
Examples of tokenization in everyday life
Token as part of something larger
Imagine a huge company worth billions of zlotys – something that at first glance seems completely unattainable. Fortunately, you don't have to buy it in full to have a stake in it. Thanks to shares, a company can be divided into millions of small parts that are individually available. Each share represents a tiny fraction of ownership – and that's enough to participate in its profits or have influence on decisions.
Tokens work in a very similar way, only in the digital world. They enable dividing something valuable – real estate, artwork, a stake in a project – into smaller units. Such division allows more people to participate in something that was previously reserved for the chosen few. It's like assembling a mosaic, where each person holds one tile, but together they create a complete picture.
| Without tokenization (traditional) | With tokenization |
|---|---|
| Ownership only for the few who can afford the whole | Possibility of co-ownership even with a small contribution |
| Limited access to investments | Investment democracy – everyone can join |
| Concentration of power and profits in the hands of a few entities | Distributed value and greater community engagement |
Token as a key to resources
A library card is more than just a piece of plastic – it's a symbolic pass to the world of books, knowledge, and history. You don't need to provide your name, PESEL number, or sign forms every time – the card is enough. It represents the right to use library resources.
Digital tokens play a similar role: instead of manually checking identity and granting access each time from scratch, one token is enough – a trusted sign that says: "this person has the right to be here." It's a quick, convenient, and secure way to provide access to content, services, and functions – without all the bureaucratic overhead.
| Without tokenization (traditional) | With tokenization |
|---|---|
| Manual verification with each access | Automatic, quick access upon showing the token |
| Physical documents, formalities | One digital identifier is enough |
| Need for continuous authorization | Permanent access right, stored in the token |
Token as a sign of trust
In ancient times, important documents were sealed with wax. Such a mark – royal, notarial, or family – said everything without the need to read fine print. One glance was enough to know that the document was genuine, official, and unaltered. The seal was a physical guarantee of trust.
Tokens in the digital world work similarly. It can be an electronic signature, an SSL certificate on a website, or another unique identifier. The common denominator? Instant confirmation that something comes from a credible source and hasn't been tampered with. Without the need for time-consuming verification – trust is built-in.
| Without tokenization (traditional) | With tokenization |
|---|---|
| Manual authenticity checks | Automatic confirmation of identity and source |
| Risk of forgeries and manipulation | Cryptographic security |
| Time-consuming verification processes | Quick, automated trust |
Token as a means of payment
Take, for example, a casino chip. It's not money itself, but in the casino world – it works like a full-fledged currency. You exchange cash for chips and play, bet, and win with them. It's the chips that represent value in this closed system – easier to count, transfer, and secure.
Digital tokens work similarly. They are value carriers: they represent access to funds, credits, points, resources. They can be used once or multiple times, in a specific system – for example, on a platform, in an app, or during one transaction. They're convenient, fast, and often much safer than operating with "real data."
| Without tokenization (traditional) | With tokenization |
|---|---|
| Operating with real currency or data | Symbolic value carriers (e.g., chips, tickets) |
| High risk of theft or error | Limited scope and validity period of the token |
| Rigid transactions | Flexible, programmable forms of payment |
Token as frozen value
When buying a voucher for a massage or dinner at a restaurant, you pay today but use it when you want. The voucher isn't the service itself, but represents the right to receive it in the future. It's like casting value into a piece of paper or code – frozen money that can be used at a convenient time or transferred to someone else.
Tokens in the digital world work similarly. They enable separating the moment of payment from the moment of realization – freezing value or access to a resource for later. This gives flexibility and freedom to both users and service providers: you pay now, use it when it suits you.
| Without tokenization (traditional) | With tokenization |
|---|---|
| Payment and collection must coincide | Possibility of separating payment and use |
| Physical vouchers, easy to lose | Digital tokens easy to store and transfer |
| Limited flexibility | Freedom in choosing time and method of realization |
Tokenization in the digital world
In the digital world, tokenization works similarly, but on a much larger scale. Instead of physical chips or loyalty points, we have digital tokens registered on a blockchain or another digital platform.
How does tokenization work in practice?
- Asset identification - First, we determine what we want to tokenize (real estate, artwork, company shares, gold)
- Valuation - We establish the value of the asset that will be represented by tokens
- Token creation - We generate a specific number of tokens representing the whole or parts of the asset
- Distribution - Tokens are sold or allocated to owners
- Trading - Owners can trade tokens, changing their value depending on supply and demand
Different types of tokens
In the cryptocurrency world, tokens are digital units that represent specific assets or utility in a blockchain ecosystem.
Types of cryptocurrency tokens:
- Utility tokens - provide access to services or functions in a given network (e.g., tokens used to pay for transactions)
- Security tokens - represent investments in a project, similar to traditional securities
- Non-Fungible Tokens (NFT) - represent unique assets, such as digital artworks
Benefits of tokenization
Democratization of access
Tokenization allows for partial ownership of assets that were previously available only to the wealthy. Anyone can buy even a small part of a luxury property or artwork.
Liquidity
Traditionally illiquid assets (like real estate) become more liquid thanks to the ease of trading their tokens on digital markets.
Transparency
All transactions recorded on the blockchain are publicly verifiable and impossible to change.
Security
In the case of personal data tokenization, original data is protected from breaches because tokens themselves have no value to thieves.
Automation
Thanks to smart contracts, many aspects of asset management can be automated (e.g., dividend payments).
Comparison with alternative solutions
Tokenization vs. traditional investments
| Aspect | Tokenization | Traditional investments |
|---|---|---|
| Minimum entry threshold | Low (can buy even a small part of an asset) | High (usually need to buy the whole asset) |
| Liquidity | High (24/7 trading on digital markets) | Limited (dependent on exchange hours, intermediaries) |
| Transaction costs | Low | Higher (broker commissions, notary fees) |
| Intermediaries | Minimal or none | Numerous (brokers, banks, notaries) |
| Transparency | Full (everything recorded on blockchain) | Limited (dependent on regulations) |
| Market maturity | Developing | Established |
Tokenization vs. data encryption
While tokenization replaces data with symbols without a mathematical connection to the original, encryption transforms data using an algorithm that can be reversed with a key.
| Aspect | Tokenization | Encryption |
|---|---|---|
| Reversibility | Only through reference to the original token array | Through application of a decryption key |
| Main purpose | Data protection in internal systems | Data protection during transmission |
| Format preservation | Yes (token can have the same format as original data) | No (encrypted data has a different format) |
| Resistance | High (breaking one token doesn't threaten others) | Medium (breaking the key threatens all data) |
Tokenization vs. crowdfunding
Both methods enable raising capital from many investors, but differ in key aspects:
| Aspect | Tokenization | Crowdfunding |
|---|---|---|
| Ownership | Investors receive ownership of part of the asset | Usually only rewards, rarely shares |
| Secondary market | Exists (tokens can be sold) | Usually doesn't exist |
| Regulations | Complex, dependent on jurisdiction | More standardized |
| Technology | Based on blockchain | Traditional internet platforms |
Challenges and future of tokenization
Current challenges
- Legal regulations - Lack of clear legal frameworks in many countries complicates asset tokenization.
- Technical entry barriers - For the average user, blockchain technology can be complicated.
- Trust - The market is relatively new, which raises concerns about security and legality.
- Scalability - Some blockchains have limitations in the number of transactions they can handle.
Future of tokenization
Experts predict that tokenization will have a huge impact on the global economy. According to the World Economic Forum, by 2030, about 10% of global GDP may be stored and managed using blockchain technology, and asset tokenization will be a key element of this process.
Summary
Tokenization is not just a passing trend – it's a fundamental change in how value flows through an increasingly digital world. From real estate co-ownership to personal data protection, tokens open possibilities that were once available only to a few.
Although legal and technological challenges still lie ahead, the direction of development is clear: tokenization builds the foundation for a more open, transparent, and accessible economy.
Understanding how tokenization works today is an investment in being ready for tomorrow's economy.