Why businesses need to realise the importance of tokenisation

One of the most important implementations of the blockchain technology is to reliably record and verify information monitoring when and where it was added to the network.

This combined with its ability to synchronize in real time with an unlimited number of nodes in any location, means that all involved parties can get the same information at the same time. This also means that all stakeholders can have the utmost confidence in the truthfulness of that particular information. The result of this breakthrough is that you can treat blockchains like an infallible digital notary that can record truthful information and share it in seconds. Whilst this is incredibly useful, it does have significant limitations.

Being able to know where and when a product was manufactured, and have an opportunity to trace its entire history is a powerful way of reducing fraud. Whilst this is incredibly useful, it is not an economic unit that can be bought or sold.

The power of digital tokens

Digital tokens, on the other hand, are designed for economic activity and blockchains are perfect for processing them.

Let us consider something complicated such as a packet of prescription medication. Not only is there a requirement to record when and how it was manufactured and packaged, but when the time sell it to pharmacies or distribution partners comes, we still need to keep track of it.

If we create a digital token that represents the packet of medication, we would be able not only to trace the full history of the packet, but also to buy and sell the token by moving the token in between accounts.

Public blockchains such as Ethereum are mainly based on the ability to combine both complicated business logic with smart contracts and an unlimited number of digital tokens. Tokens that represent money can be considered as fungible, whereas other types are unique. Either way, we can safely say that the future of business is in contracts that involve exchanging products and service tokens for money tokens.

Through the use of digital tokens, we can create a type of sophistication that exceeds the existing financial and operational business world by being cheaper and less complex – all using the same single system. The future of business contracting will involve the exchange of product and service tokens for virtual payment tokens.

When we combine tokenisation with the complicated business logic that is facilitated through smart contracts, we can represent very complex business transactions faithfully and much more reliably than companies do at the moment. It is not unusual for companies to discover that their ability to negotiate an agreement often far exceeds their ability to keep their side of agreed.

Example of use

A good example of use case would be a volume purchasing agreement. Generally, businesses beyond a certain size often have many different resource planning systems as well as numerous subcontractors and subsidiaries which can make executing simple tasks very complicated. If you cannot track volume, you cannot get discounts but with blockchain and a smart contract for procurement, it is possible to always calculate the correct price for each PO.

As the token economy matures and businesses put more and more products, services, and assets onto public blockchains, we can expect the delivery of complex financial services to be made digital as well.

Everything from receivables factoring to trade finance can be a one-click activity and once participants have created a trustworthy track record of doing business over the blockchain, a record of precision will far exceed the reliability and accuracy of a traditional credit report.

But to get there, the first and most important step is for businesses to embrace tokenisation and to move far away from just treating blockchains like a techy, digital notary.

At E&S Group, we can help you to understand the benefits of tokenising your business and services. Furthermore, we can take you through every step of the transition. Contact us today by sending us an email on [email protected] to find out more.