The token, the fuel of blockchain
In previous posts, we have discussed what Security Token Offerings (STOs) are. We established what are their benefits and challenges, and why we are calling Brickken the new era of investment. Today, we are going to explore the concept of tokens and how it plays a role in blockchain, the engine running under the hood of Brickken.
Back in 2013, the Initial Coin Offering (ICO) trend was letting the users invest in lots of different projects. This was a manner by which companies raised money to fund their projects, in an easy, worldwide, and providing access in a generalized way.
Due to the enormous number of people attracted by the opportunity, the bubble became so big that many ICOs ended up being scams or part of projects that never got developed. Nonetheles, it was an historical moment because, for the first time, digitized tokens were starting to play a role in the global economic game.
What is a token?
In the broad sense, a token is basically the representation of something else. The casino chips or the theater tickets can be considered tokens, as they are tools that represent the exchange between the money and the service offered. The use of digital tokens in modern technologies is not that uncommon, since it is already used in several applications like digital payments. In this example, tokens are used for the purpose of hiding sensible information to retailer. Instead of the customer payment details being stored in the retailer’s database, they are hosted by a trusted third-party service, which provides the service of payment through a token where the customer details are stored.
Nowadays in blockchain, tokens are again in a growing uptrend. According to Shermin Voshmgir, in his book Token Economy, a token in blockchain can be defined as follows:
“Cryptographic tokens represent programmable assets or access rights, managed by a smart contract and an underlying distributed ledger. They are accessible only by the person who has the private key for that address and can only be signed using this private key. Tokens might affect the financial world in the same way as email a affected the postal system.”
The token as a disruptor
Bearing in mind this definition, it is easy to establish that several business opportunities are being created on a daily base around the concept of digital tokens. As one may already know, blockchain technology brings a trustless and decentralized environment, where users are able to perform transactions between each other. Every transaction is then stored in a public shared ledger, so that everyone can verify the validity of any information. Since it is a shared public ledger with its own consensus rules securing the validity of transactions, nobody can fake transactions or perform invalid actions; all of this is done without the human intervention or the need to rely on a privileged role of a central authority, controlling and detaining all the power.
For us, a token is based on Shermin Voshmgir‘s concept. We use the process of representing a real-world asset with a digital token and dividing it into a fixed number of pieces; this is what is called “tokenization” (i.e. to make tokens out of it).
In Brickken, we are interested in the revolution brought by tokenization on blockchain. The fact that real world assets can become digitized and represented by blockchain tokens, is a game changer. It gives the ability to provide access to anyone to markets with high entry tickets, such as the real estate one, rewrite the rules operating them and reorganize the decision making around those markets. Nonetheless, the most important value for us is that with tokenization, it is possible to provide availability and accessible to anyone in the world.
Using tokens in real estate
Our first efforts are being dedicated into the tokenization of real estate assets. Imagine being able to divide a real estate asset into thousands of small pieces, each one representing a portion of it. Binding these thousands of pieces with tokens makes possible to have a truthful representation of a real-world asset inside the blockchain. Now imagine that anyone can purchase those tokens and their ownership assigned in the blockchain.
Once the ownership is recorded on the chain, anyone can directly verify who is the owner behind the token and therefore, the proportional part of the asset. Tokens can be exchanged, sold, bought, borrowed, or lent as securities and they can even earn interest parallel to the capital gains made by the real-world asset. This can happen in blockchain without any human intervention, no middlemen and no central authorities. The user has the total freedom of doing anything with his/her tokens.
Blockchain as a public ledger
Whenever users trade and exchange tokens, every move is recorded in the blockchain as a form of transaction, guaranteeing a complete public traceability of every single token movement. Moreover, users can hold different kinds of tokens, having the ability to differentiate and increase the investment opportunities in the market.
Having no central authorities and running the system on blockchain lets us reduce the cost associated with such investments in the real world. Reducing costs also opens the door to new investors who want to join a specific market. That is what we mean when we claim Brickken is the new era of investment, where access becomes democratized.
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What token are we currently using?
During the years, there have been many proposals for a standard definition of a blockchain token, and we decided to follow the common and widely adopted definition of the ERC20 token of the Ethereum blockchain protocol. The ERC20 standard defines fungible and tradable digital tokens which are associated to users and can be generated (minted) or destroyed (burnt).
Every asset present in Brickken’s platform is connected automatically with an ERC20 token smart contract in the blockchain, and every movement of tokens is recorded in it.
A smart contract is like a software running inside the blockchain. In this case the ERC20 token smart contract is in charge of keeping track of all the user’s balances, the total supply and to handle the generation and destruction of tokens.
While we already have a vision to bring a revolution today, at Brickken, we also truly believe in the potential of the blockchain technology and we are committed to its implementation and use at a global scale. Therefore, we are continuously looking for the next big thing. We are always exploring different token definitions and standards, designing new market opportunities, and bringing the best technology out there in the most efficient way while at the same time simplifying the user experience.
This is just the beginning! Join Brickken!