A Comparison Of Distributed Ledgers For Tokenization
If you’re like me, hearing the very word “blockchain” causes you to immediately tune out. Over-hyped as a solution to nearly every business problem imaginable, trying to wade through the noise is nearly a full time job. However, the technology can offer very powerful solutions to certain business problems. Tokenization is one such area where blockchain can have an enormous impact.
In this article we’ll look at the suitability of three popular public blockchain networks for tokenization use cases. Starting with an overview of tokenization and the business problems that it addresses, we’ll then present a high-level overview of blockchain and distributed ledger technology. We’ll be looking at three of the most popular blockchain networks, Stellar, Ripple, and Ethereum. We won’t be doing a deep technical dive into each blockchain network, instead we’ll evaluate each platform using a common set of high-level functional and non-functional tokenization requirements.
Tokenization is a common model that most people have encountered even if they weren’t aware. Logging in to a website, credit card processing, loyalty points, even gift cards all leverage tokens.
In a nutshell, a token is a virtual representation of something else. That “something else” may be an asset such as a commodity, a payment token representing a credit card authorization, a loyalty reward point representing an alternative form of currency, even a login token so you don’t have to keep entering your username and password on your favorite websites. The token represents an exchange of something for a virtual representation of that thing. Credit card processing takes your credit card information and “tokenizes” it into a payment authorization. When you enter your username and password on a website, that information is turned into a token which is temporarily stored by your browser so you don’t have log in every time you click on a page. For loyalty points, the token is a point you earn which represents a virtual currency you can possibly use in the future.