Is future fractional? Everythings getting tokenized

I wonder why the buzz around tokenization? It’s a better way to handle sensitive data, and it's going to be a core part of how digital systems operate moving forward.

What’s the deal with tokenization?

Imagine this: you’re making a payment on your favorite shopping app. You enter your card details, and bam, payment completed. But here’s a twist: your actual card details never leave your device.

How?

That’s where tokenization comes into play.

Instead of sending your real card number over the internet, the payment system uses a “token” – a unique, encrypted identifier – that stands in for your card details. It’s like giving someone a secret code rather than the actual key.

This token is then used to process the payment. The real card number is kept safe and sound, away from prying eyes.

How it works

• You enter your card into a wallet or app.
• The app asks a token provider (like Visa) to generate a token.
• The token gets stored on your device.
• When you pay, the token (not your actual card) is used.
  

Does it matter?

It’s not just about security. It helps with compliance (think GDPR, PCI-DSS). It also improves UX—no more updating payment info across platforms when a card expires. The token handles it. 

And it’s adaptable. The same model can be used beyond payments: for personal data in apps, healthcare, messaging. Anywhere sensitive data needs to be stored or transmitted.

Real-life example: Apple Pay and Samsung Pay

Apple Pay uses what’s called a “device account number” – a fancy term for a token. When you make a payment, Apple Pay sends this token instead of your actual card details.

Samsung Pay has a similar setup, using a “digital token” to handle transactions. These tokens are stored securely on your device, often within a special chip known as a Secure Element.

None of your real card data leaves the device or hits a merchant’s server.

Why tokenization is here to stay

Enhanced Security

Tokenization offers a robust layer of security by replacing sensitive data with tokens. It’s like using a decoy that’s useless without the real information.

Compliance and Regulation

With strict data protection laws like GDPR and PCI-DSS, businesses need to safeguard sensitive information. Tokenization helps meet these requirements by reducing the amount of sensitive data stored and transmitted.

Convenience and Efficiency

Tokenization streamlines transactions and makes managing payments across different platforms a breeze. You don’t have to constantly update your payment details; the token takes care of that.

Innovation-Friendly

Tokenization supports innovation in digital payments and beyond. It’s a flexible solution that can adapt to new technologies and use cases, from fintech apps to secure messaging platforms.

Tokenization and Real World Assets (RWAs)

You might be thinking, “How does tokenization apply to things like property or art?”

Well, here’s the scoop.

Whats RWA?

Real World Assets refer to tangible items of value like real estate, artworks, or precious metals. Traditionally, these assets are bought, sold, and managed through physical paperwork and intermediary processes.

Imagine owning a piece of art or a property. The ownership is documented in legal papers, and transferring that ownership involves a lot of red tape and manual processes.

Now, enter tokenization.

How tokenization changes the game

Tokenization can transform these physical assets into digital tokens that represent ownership rights. Here’s how it works:

• Digitising the Asset: The asset is evaluated and then represented as a digital token. For instance, a property might be split into several tokens, each representing a share of the ownership.
• Blockchain Recording: These tokens are recorded on a blockchain, a tamper-proof digital ledger. This means that each token’s history, ownership, and transaction details are transparently tracked.
• Trading and Ownership: Tokens can be bought, sold, or traded on various platforms. This makes it easier for people to invest in high-value assets without needing huge amounts of capital.

Why This Matters, Again?

• Fractional ownership: lowers the barrier to entry.
  
• Liquidity: turns illiquid assets into tradable tokens.
• Transparency: blockchain tracks ownership immutably.
• Global Access: anyone with an internet connection can invest.

Real-Life example: Real Estate

Traditionally, buying property requires a hefty down payment, a complicated legal process, and often a lot of waiting around. With RWA, a property can be split into numerous tokens. Investors can purchase these tokens, thus owning a fraction of the property. This can significantly lower the barrier to entry for property investment.

For example, a luxury apartment worth AED 1 million could be divided into 1,000 tokens, each representing a 0.1% ownership stake. Investors can buy as many tokens as they can afford, making property investment more accessible. Remember the StakeApp? is going something similar "fractional ownership" in the UAE, however its not DLT enabled yet.

• Ondo Finance: Tokenized exposure to U.S. Treasury bills and bonds (SEC compliant btw)
• RealT: Tokenized real estate in the US
• Tangible: Tokenizing physical luxury goods (real estate, wine, gold)
  

Challenges and considerations

Tokenization is a protocol-level upgrade to how we manage value and identity. First payments, now assets, and eventually almost everything involving sensitive or high-value data.

As systems get more digital and AGI begins to run more of them, tokenization will be foundational. Not because it’s exciting, but because it works.

the hands of artificial general intelligent (AGI) beings (most likely)!