What are tokens?
In the context of blockchain technology, tokens serve as digital assets that are both created and managed on a blockchain platform. These tokens can represent a wide range of value, not only cryptocurrencies, but also digital collectibles and even ownership rights. By leveraging the blockchain, tokens enable seamless and secure transactions and interactions within a specific ecosystem, fostering trust and efficiency in the digital realm.
Fungible tokens
Fungible tokens are a type of digital asset that can be exchanged on a one-to-one basis. Each token is identical and interchangeable with other tokens of the same type. They are commonly used to represent currencies or commodities, where each unit has the same value as any other unit. Stored and managed on blockchain platforms, they enable seamless transactions between participants.
Non-fungible tokens
Non-fungible tokens (NFTs) are a unique type of digital asset that represent ownership or proof of authenticity of a specific item or piece of content. Unlike fungible tokens, each NFT is distinct and cannot be exchanged on a one-to-one basis. NFTs are often used to represent digital collectibles, artwork, virtual real estate, or in-game items. Each has its own unique value and cannot be replaced by another token.
Why tokenize an asset?
Tokenization enables fractional ownership, so assets can be divided into smaller units and opened to broader participation. It increases liquidity, letting assets be bought, sold and traded more efficiently. It provides a secure way to establish ownership and track provenance. And because records sit on an immutable ledger, it brings transparency and security that reduce the risk of fraud.
Want to see how this applies to a specific asset class? Explore Arrabon solutions.