If you're a business owner, you may have heard about tokenization. You might have even asked yourself whether this technology could be right for your company. If so, then we have some great news: Tokenization is a solution that has never been more relevant than it is today. There are many reasons why companies should tokenize their business and here's why they should do it now:
Tokenize your company to get the capital you need
Tokenization is a way to raise capital, attract investors and entrepreneurs, attract consumers, marketers and employees. Tokenization is a way to create a new product or service and create a new market for them. You can use tokenization as an instrument for innovation in business models, marketing strategies or sales channels.
Tokenization reduces risk from data breaches
Criminals target businesses that accept credit and debit cards because there's a wealth of intelligence in payment information. Hackers target insecure systems that contain this intelligence, and sell the stolen data or use it themselves to make fraudulent purchases.
The costs to businesses are all too familiar. Ponemon Institute's 2018 Cost of a Data Breach study pegged the average cost of a data breach at $3.86 million. Ponemon's estimate for each lost or stolen record containing confidential information now stands at $148.
Tokenization helps protect businesses from the negative financial impacts of data theft. Even in the case of breach, valuable personal data simply isn't there to steal. Tokenization can't protect your business from a data breach—but it can reduce the financial fallout from any potential breach.
Tokenization helps foster trust with your customers
Consumers want safety and security, wherever they shop. Building trust and loyalty with customers begins with keeping their payment and other personal data safe. In a 2018 CA Technologies/Frost & Sullivan study 59% of consumers said a data breach had a negative impact on their trust in the affected company.
Tokenize your company to give people the opportunity to invest in something they believe in.
By tokenizing your company, you can create a community of people who are actively engaged in the success of your product. As a result, they will spend more time using it, and they will be more likely to share it with others.
Tokenization can also be used as an incentive for users to share products on social media platforms—this is especially useful for companies that rely heavily on organic traffic from search engines, because when users post about their experience with your product on their personal profiles or blogs, those posts will show up when potential customers search for keywords related to what you do.
Tokenization means less red tape for your business
Businesses that accept credit and debit cards need to be in compliance with the Payment Card Industry Data Security Standard (PCI DSS). Tokenization makes achieving and maintaining compliance with industry regulations significantly easier while enabling access to data like ownership history from all resources. An asset's history and register is public, and each owner is free to consult it at any time.
Working with a PCI-compliant vendor offers a smart approach to payment security. Leading payment technology companies offer tokenization as part of their payment processing services. That lets you focus on growing your business while your payment partner reduces red tape to help keep your business in compliance.
Tokenization drives payment innovations
The technology behind tokenization is essential to many of the ways we buy and sell today. From secure in-store point of sale acceptance to payments on-the-go, from traditional eCommerce to a new generation of in-app payments, tokenization makes paying with the devices easier and safer than ever.
The rising popularity of in-store payments with customers' mobile devices features tokenization. When consumers pay with a mobile wallet such as Apple Pay or Google Pay, their credit card data is stored on their phone as a token.
Tokenization is a cornerstone to eCommerce by making payments safer and improving user experiences—whether online, mobile or in-app
Tokenize your company to make a splash in the media.
Tokenizing your company is a unique way to get the media's attention. Moreover, tokenizing your company gives you the opportunity to reach out directly to influencers in any field you're interested in partnering with: for example, if you're looking for someone who has a large following on social media or has worked with similar businesses before (like an agency), then offering them some tokens might be enough incentive to attract their attention.
Tokenize your company because it's not just for banks and billion dollar companies anymore.
Tokenization is a new way to raise capital. It's not just for banks and billion dollar companies anymore. If you want to get your company funded, tokenization can help you or, if your goal is to increase user engagement, tokenization might be what you need.
Ability to reach a larger group of people
These days, when people hear about a big business deal or an IPO on CNBC or Bloomberg News, they want to know: "What do I have access to?" Tokenization offers startups the opportunity to reach out directly to potential investors through an ICO (Initial Coin Offering). You can sell tokens that represent ownership of your business; investors receive these tokens while they support your venture
- In a highly liquid global market, tokenization enables the sale and purchase of assets without middlemen, 24/7, often with a single click.
- No geographic restrictions are applicable on trade.
- It offers more possibilities than traditional solutions, including checking for change in ownership based on the monetary value of a cryptocurrency.
There are many reasons to tokenize your company, and they might be more relevant than you think
There are many reasons why you should tokenize your company and they might be more relevant than you think.
- Get the capital that you need
- Give people the opportunity to invest in something they believe in
- Increase user engagement
- Save yourself the red tape
- Reduce risk from data breaches
- Make a splash in the media (and their wallets)
- It's not just for banks and billion dollar companies anymore. The average investor can now get involved with smaller and niche projects, which may have been too expensive or complicated before cryptocurrencies made them available at low cost on decentralized exchanges like IDEX and EtherDelta.
How to tokenize your business and other asset types?
Transferring the business to blockchain seems like a huge and complicated decision. The procedure isn't widespread knowledge, and at first, it may seem there are way more milestones than there actually are. Moreover, the benefits of the process seem unclear as well. So what is the reason to conduct it?
Tokenization refers to a set of technological and legal procedures for transferring asset ownership rights to a blockchain. Tokenizing the company stocks, for instance, is believed to enhance liquidity and is also a great tool to make the whole process way more convenient both for investors and business owners. But, of course, these aren't all the possible advantages blockchain can actually bring to your company.
Fundraising for companies or projects
The two main ways in which a company can raise funds by making use of tokens are Initial Coin Offering (ICO) and Security Token Offering (STO).
The Initial Coin Offering (ICO)
Initial Coin Offerings are now widely used in the world of cryptocurrencies and Blockchain and are consolidating as a viable possible alternative to traditional financing tools especially for startups or new innovative projects.
What is ICO?
The ICO is a form of crowdfunding: a type of capital raising used by companies when they want to propose a project or an innovative idea and the necessary capital is raised through the presentation of a specific economic design in which interested investors decide to participate.
What are the advantages of this method?
The advantage of this method of financing is given by the possibility of reaching a very wide audience of investors, without having to undergo the bureaucratic constraints required by a listing. A company promoting an ICO issues digital tokens on a public blockchain, the most widely used of which is definitely Ethereum.
The backer-financier buys the token by paying for it with the cryptocurrency of the chosen blockchain and then the token can be sold, traded, or converted into goods or services produced by the company.
The Security Token Offering (STO)
STOs are similar to ICOs in that both serve as a means to raise funds, but STOs are offerings where the issuer explicitly acknowledges that the token is a security. STOs have the potential to benefit investors and companies in unique ways.
What can STO be used for?
Companies can raise funds for a specific project or division, unlike other forms of equity participation where investors are generally required to acquire shares in the entire company. In addition, companies can gain more flexibility because STOs allow them to define the rights and terms of ownership of a token.
The tokenization of a company is therefore a true form of investment that is becoming increasingly competitive with traditional methods. Tokenization will allow a company to have easy access to capital that can be crucial to its growth and development using an innovative forward-looking system.
Switzerland is at the forefront in this field with the new DLT regulation that came into force in February 2021 thanks to which companies can finally issue their shares in the form of uncertificated securities using a DLT registry.
There are many benefits to tokenizing your company and the future of this technology is only just beginning. If you're considering tokenizing, you should know that it's a great way to get more capital and engage more customers with your brand. Tokenization also gives people who hold tokens access to special offers or discounts on services or products offered by other companies in the industry, which can help them earn even more money while keeping their money invested in something they believe in.