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New form of business digitization based on decentralized Blockchain technology. It consists in creating tokens and strictly assigning them to a given company, specific project or person
Tokens have value!
Tokenization is called creating tokens and assigning them specific values. The simplest use of tokens is to transfer the value of traditional money to the blockchain network. A token is a unit of value that an organization creates to independently manage its business model to enable users to interact with its products as well as facilitate the distribution and sharing of rewards and benefits with all interested parties.
ICO vs STO
Tokens at first glance, may seem very similar, even identical but they are distinguished by technical issues and the approach of regulatory institutions.
ICO - Initial Coin Offering
ICO state as direct reference to the popular IPO in the stock exchange world. ICO cryptocurrency should be understood as the emission of a new cryptocurrency, through which the company wants to raise funds and financing for the development of its project, service or product. Interested investors are buying a new cryptocurrency token (using other cryptocurrencies or traditional money), which in the future will be used for settlements under the new network or will have a typically speculative character - ensuring return on investment along with appreciation of its value on exchanges.
STO - Security Token Offering
At first glance, ICO and STO do not differ from each other - in reality, however, STO deals with the issue of tokens that are to have the features of a security and are subject to the Act on Trading in Securities, thus meeting legal restrictions similar to those on regulated markets. Security Token Offerings have become a response to the controversy surrounding the ICO - the assignment of new tokens to the issue of securities was aimed at reducing the risk of fraud and, through actions in a regulated environment, also rebuilding the trust of potential investors. At the beginning of 2019, the STO market experienced strong growth, increasing the number of active projects by over 130% and raising over USD 120 million in funding from January to March.
Tokenization philosophy by Zoe Adamovicz, CEO Neufund.
"It is about a much broader perspective, a new philosophy of functioning of companies on the market in which stakeholder - i.e. often simply a user of the website or client of the company - and shareholder - i.e. the investor of that company - through easy and simple tokenization on blockchain get along and create a business together, the framework of its functioning gives a new sense, which very often in today's corporations is focused solely on maximizing profit. Blockchain and tokens will facilitate future business creation and healthy relationships. If stakeholders are allowed to participate in such projects, then first of all there will be more money in this business, the process itself will be simpler, cheaper and much faster, and secondly token holders will become real co-decision makers in this business."
Ethereum ERC Tokens Standards
The community of Ethereum blockchain has developed a diverse standards (ERCs) for documenting how contracts can act among themselves.
- ERC 20 - keeps track of fungible tokens: any one token is exactly equal to any other token. useful for things like a medium of exchange currency, voting rights, staking, and more.
- ERC 721 - convenient for non-fungible tokens, often used for collectibles and games. Comes up in situations like real estate or collectibles and games, where some items are valued more than others
- ERC 777 - a richer standard of ERC20, it brings tokens and Ether closer together by providing the equivalent of a msg.value field but for tokens.