Everything To Know About Tokenization In Blockchain
Everything To Know About Utility Tokenization In Blockchain
The introduction of the blockchain technology has revolutionized the way we carry out transactions, as it has replaced many economic assets and technologies with the help of its precise, stable and distributed structure.
Out of the many benefits that come with blockchain technology, tokenization is one of the most prominent. However, many people and even some crypto enthusiasts don’t entirely understand the concept of tokenization.
Hence, in this article, we will provide an in-depth analysis of what tokenization in the blockchain is all about and how you can use it for your benefits. Let’s start with the basics.
What Is Tokenization In Blockchain?
Tokenization is a method where some assets are changed into a token that can be transferred, collected, or registered on a blockchain. There are majorly two types of tokens; utility token and security token.
The main purpose of conducting tokenization is to purchase or trade objects that aren’t easily available. Blockchain, with the help of its reliable structure, allows such trading of complex assets to take place, for example, computing power or electrical usage without tokenization.
Additionally, as tokenization registers your assets directly on a blockchain, you get the added advantage of the security and easy accessibility.
What Is A Utility token?
The literal definition of a utility token as published in the Merriam-Webster is,
“A digital token of cryptocurrency that is issued in order to fund the development of the cryptocurrency and that can be later used to purchase a good or service offered by the issuer of the cryptocurrency.”
But, what does this actually mean?
Simply put, a utility token is a non-physical token which has been created solely for crowdfunding purposes. This token is not mineable. Basically, trade for a utility token is carried out when a buyer has paid the issuer funds at this moment, for the issuer’s company to develop a product. Once the product is developed, the buyer can use their utility token to purchase the product. This entire process is known as Initial Coin Offering (ICO).
What Is Token Burning?
Token burning is an intended action practised by the coin’s creators to “burn” — or eliminate from circulation — a particular number from the total accessible tokens in existence. There are many reasons to burn tokens this way, but usually, the activity is conducted for deflationary purposes.
The burning mechanism is different for cryptocurrencies, as conventional fiat currencies are generally not “burned,” though the flow of available currency is otherwise managed.
Token burning is comparable to the idea of share buybacks by publicly-owned companies, which decrease the number of stock accessible. Even so, token burning has numerous unique uses and serves different purposes.
Do Token Holders Benefit From Token Burning?
While the face value of token burns may show that the purpose of the activity is to give the project an edge, the underlying truth is that token burning is highly beneficial for both developers and investors. This is because in most scenarios, by burning tokens, one can not only stabilize a coin’s value but also curb any potential price inflation.
Due to this stability, investors are encouraged and motivated to hold their coins, which ensures that the coins are valued at a more favourable rate. This in turns results in healthy network up time and bandwidth.
Additionally, another benefit of token burns is developing a sense of confidence and reliability, especially if it is carried out in the early stages of the coin’s development.
Why BizzCoin Is The Ultimate ERC-20 Token
Following the importance of utility tokens, BizzTrade has launched its very own ERC20 utility token named BizzCoin, which has already started revolutionising the way we carry out payment, be it shopping from BizzMart, or arranging for the next trip by booking flights and hotels from BizzTravels and many more. Moreover, you can use 100% BIZZ, ensuring you can make the most of your cryptocurrency experience.