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By Laxmikant Khanvilkar
Cryptocurrency enthusiasts are very well familiar with tokens but at a certain stage, it becomes essential to understand the technical aspect that differentiates Tokens from Tokenisation. Both are subclass of digital assets that use blockchain based technology of cryptography. However, they are important elements of cryptocurrencies or cryptographic considering the fact that they help create economic value.
Hence, tokens were put to their best use during recently concluded Football World Cup. We encountered with Argentine Fan Token or for that matter Cristiano Ronaldo Fan Token. They were seen driving curiosity of individuals.
Back home, efforts are on to introduce during the Indian Premier League – the cricketing extravaganza that has attracted great exponents of the sport from across the globe. Probably the highest
franchisee-based sporting events in terms of value is set to encounter with Fan Token very soon as Mumbai Indian franchisee owner are preparing ground to drop the team token in ensuing event.
In view of India’s favorite sport lovers are offered with the opportunity to participate by purchasing token.
As we know, a token represents particular asset or utility. Within the context of blockchain technology, tokenization is the process of converting something of value into a digital token that’s usable on a blockchain application.
In fact, the concept of tokenizing real-world assets is not new, it gained significant traction in recent months among financial services providers as a means of resolving the inefficiencies inherent in traditional securities settlement. For some institutions, tokenization is a less risky way of having crypto exposure compared to investing directly in tokens.
As per industry analysts, whatever the reason, it is important to note that tokenization lacked similar support among such entities in the previous 2018-19 crypto winter.
To circumvent the fear, banks are currently utilizing tokenized versions of financial instruments across several institutional DeFi use cases, often via public blockchains.
Societe Generale issued OFH tokens based on AAA-rated French home loans that can be used as collateral to borrow up to 30M DAI, while JP Morgan, DBS Bank, and SBI Digital Asset Holdings traded tokenized currencies and sovereign bonds in early November 2022 via Polygon.
Other similar entities have pilots to tokenize wealth management products and other securities. That said, we think the scope of these efforts are unlikely to expand beyond financial instruments for the time being, as the RWA total value locked on Ethereum has declined to $612M after peaking at $1.75B in 2Q22.
Part of the reason is that while issuers are resolving the financial and legal hurdles to tokenizing other less liquid real-world assets like real estate, the market for these is still underdeveloped.
Undermining fears about digital assets depends on its acceptance along with the degree of safety. Tokenisation should help pave the way for its acceptance in the virtual world.
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