Blockchain is the single most disruptive technology of our time. It’s a revolutionary way to store and transmit data, and it’s already found its niche in the online world. The digital ledger that makes up blockchain offers a safe, reliable place to store transactions that can be shared with others.
On a blockchain, tokenization is the process of converting rights to an asset into digital tokens. Tokenization Platform can be used to represent ownership, provide liquidity, raise money for businesses, and create smart contracts. Tokenization can be applied to physical assets like paintings, collectibles, real estate, or cars. It also has applications in finance, where it provides liquidity to illiquid assets like stocks or commodities. Tokenization technology is evolving rapidly as new opportunities are being created nearly every day.
What are stablecoins?
A stablecoin, or cryptocurrency, is a virtual token that functions similarly to a traditional fiat currency. While they are valuable, they are not intrinsically valuable, and they do not store value.
As a new type of currency, they are valued not by traditional metrics like supply and demand, but by others, such as the number of users, country of origin, or relationship to a fiat currency. This unique feature makes stablecoins more stable than traditional cryptocurrencies.
While some people believe stablecoins are an interesting technology, they are not the answer to creating a more secure and stable cryptocurrency.
How do they work?
The most well-known stablecoins are Tether and Gemini Dollar. Tether is an official “token” pegged to the U.S. dollar. A company website states that Tether has no central authority backing it. Tether issuances do not involve any government, regulator or governmental body.”
So far, no mechanism would protect the dollar Tether’s value, nor is there any definition of a “stable” currency, and in general, companies backing a currency are trusted because of their history and record of integrity. With cryptocurrencies, though, we lack those same standards.
If you own Bitcoin or another cryptocurrency and the value of the dollar goes up, then your cryptocurrency is going to go down.
Why are they important?
The value of crypto assets is directly tied to the viability of the underlying infrastructure supporting them. This is in stark contrast to fiat currencies, whose value has been pegged to the U.S. dollar since the end of World War II. To make crypto-assets useful for buying stuff, we need a way to store value without their value going up and down constantly.
In 2016, users first figured out that the blockchain would be a great way to store value. The technology behind the blockchain is a decentralized database shared by everyone on the network. Since you can’t own any bitcoin or ether directly, you put your assets in a crypto equity, or crypto asset, which is a way to store it and send it to other people without the risk of the asset being hacked.
What are security tokens?
You might be thinking: Stablecoins is just an enhanced version of the bitcoin blockchain! That’s true, but there’s an important difference. Blockchain is built on something called smart contracts. They are digital contracts embedded in the blockchain. Users in accounts on the blockchain hold these smart contracts. They act as a guarantee of the exchange rate of the token.
Security tokens are entirely different technology, but they do the same thing. In a similar way to blockchain, they use distributed ledgers and smart contracts to store data. However, instead of containing economic logic, they contain the rules for establishing what the token is, how it’s issued, how it’s used, and how it can be valued.
What are their functions?
Stablecoins allow for a set of crypto assets to be “tied” to a fiat currency, such as the U.S. dollar. For example, Bancor uses the Ethereum blockchain to assign a value to a stablecoin in ETH. The value of the stablecoin is tied to the value of the currency it’s pegged to and is calculated every 10 minutes. In that sense, a stablecoin and a security token operate at the same time as a crypto asset. Their two functions are actually inseparable: that’s why they’re called stablecoins and security tokens, rather than more complex categorizations.
These currencies are already gaining traction. Between 2017 and 2018, bitcoin’s total market capitalization rose by a staggering 2,500%, to reach an astronomical US$145 billion in December. However, a lot of this is simply speculative money.
Traditional cryptocurrencies and the most popular altcoins, such as bitcoin, Ethereum, and Litecoin, are still relatively volatile. With them, you can only make withdrawals from exchanges after the value of the asset increases.