With any new or cutting-edge technology, it’s not always clear how to get the most out of them. When it comes to blockchain, we like to focus on four essential features inherent to the technology that make it ideal for enterprise applications. Let’s see what makes DLT special for businesses exploring digitalization.
Tokenization adds a quantifiable substance to a digital asset. This means that things which exist outside of a blockchain environment or in the real world (pieces or art, commodities, services, intellectual property rights, etc.) get a digital representation as a token. We can also distinguish between fungible (divisible) and non-fungible tokens (NFTs). Blockchain does a very important job with tokens. It accounts for ownership without needing any centralized bookkeeper. The distributed ledger is the bookkeeper, and it not only accounts for ownership but allows tokens to be safely and reliably transferred from one owner to another. This ability to digitally represent both tangible and intangible assets digitally is one of blockchain technology’s greatest and most misunderstood features.
Governance means adding rules and restrictions to the use of digital assets directly on the blockchain level. Unbreakably binding an action to conditions is unique to blockchain technology. This enables the transfer of values (tokens) between parties based on predefined conditions. For businesses, this means that KYC and AML results can be applied as rules to the blockchain. On programmable blockchains, such as Ethereum, there is the possibility to create special programs known as “smart contracts.” The name refers to these programs’ ability to make a transfer between participants based on specific criteria or conditions. For example, the transaction may be triggered after a certain amount of time has passed, or when two or three additional stakeholders give their consent. A wide variety of prerequisites are possible. In fact, smart contract management is one of the most important considerations for any business looking to work with DLT.
The fourth feature of blockchain technology is trading, or value conversion. DLT helps prevent fraud through features like “atomic swaps.” This is a set of smart contracts that ensures transactions don’t happen at all unless both parties are fully able to fulfill their end of the bargain. It then completes all the transactions instantaneously. Because of the way atomic swaps work, it also means that you can string together viable transactions, for example, trade pairs in a barter system. Using this concept, CoreLedger invented a completely new method of trading based on linking offers to each other and forming instantaneous transaction sequences. This trading method, called TokenWARP, essentially makes the physical location of an asset irrelevant, and means that any asset can be exchanged for any other if there are enough viable trade pairs. This enables businesses to create thriving ecosystems and increase liquidity, among other use cases.