Tokenization Explained for Beginners

Tokens can decentralize organizations, raise funds, and build communities. These days, they’re more accessible than ever.

Gold coins floating in the air

Early in Pirates of the Caribbean: At World’s End, we witness a meeting of the Pirate Council. Its membership was reserved to the most venerable of scoundrels, but despite their hair-rising fame, they all needed to present a token. In Hector Barbossa’s words, the tokens confirmed the members’ “Lordship and right to be heard”.

Those bastards were on to something. Centuries later and on other seas, tokens emerge as a powerful tool to confirm holders’ rights, crowdfund worthy causes and govern organizations.

What is tokenization?

The idea is quite simple. An asset, whether material, intellectual, or a mix of both, is split into small portions. Tokens are then minted to provide a functional representation of the portions, and distributed among interested parties.

Tokens can be used to express shares, voting power, or ownership. They can power crowdfunding initiatives, dApps, ICOs and charities, serving just about any purpose that a company or organization wants diffused among a larger number of people.

Tokenization can also benefit individuals, especially those looking to kickstart a career based on personal performance. Athletes, influencers and creators can distribute tokens among fans and supporters to garner support. In return, holders can expect their tokens to be repurchased by the issuer in a move known as buyback, which reduces the number of tokens in circulation and promotes deflation.

Are tokens the same as coins?

A coin serves as the native unit used to perform and fund transactions on a blockchain. To create a new coin, you need to create a new blockchain. It’s a complex process that involves a lot of backend lifting.

Tokens are more lightweight than that. They don’t need a dedicated blockchain, because they’re powered by smart contracts. A single blockchain, such as Ethereum, can host one coin and multiple tokens.

Ethereum is hardly the only blockchain that supports tokens, but it’s the biggest and most established. It offers multiple token standards, the most popular of which is called the ERC-20. It ensures that each token is of the same type and carries the same value. At the time of writing, Ethereum listed a little over 510,000 ERC-20 tokens.

Creating an ERC-20 token is way easier than creating a coin, but even token creation used to require a fair bit of technical skill—until recently. Nowadays, there are easy-to-use terminals that enable casual users to create their own token in as little as 10 minutes.

How can I create my own token?

If you’d like to enjoy the advantages of tokenization, but you don’t want to do the legwork, you can use a token terminal.

Terminals are designed to simplify the process and automate the coding tasks. A user connects their wallet, for example using a Metamask account, then sets up the properties of their token. These include the name, symbol and number of decimals, which determines the smallest fraction of a token that can be sent, bought or sold. You can also select properties such as a cap, initial supply or the ability to burn tokens.

Example contract summary on the STC Terminal

When you’re ready to deploy your token, you can either run it on a test network first, or go straight to mainnet. The tokens will land in your wallet within minutes.

How to choose a token generator?

ERC-20 token building services are offered by companies such as Student Coin, TrustSwap, BlockchainX or CoinTool. The core functionalities are supplied by the Ethereum infrastructure, so they’re similar across providers.

The difference lies in the tools offered to help issuers harness the full potential of their token, including marketing support, vesting and token management. If you’re serious about your project, take your time to compare token generators and pick the one that best suits your needs. Many will simply transfer your tokens, charge a fee, and bid you goodbye.

If you’re new to crypto and tokenization, you’re likely to find additional services essential. Tokens don’t just magically generate buzz as soon as they’re minted. To work well, they need an agile exposure and distribution strategy.

Extra perks or an integrated ecosystem?

Many token builders offer some forms of support, but few provide a comprehensive ecosystem. If it’s something you think you could use, you might want to consider giving the job to Student Coin.

If you build your token on the STC Terminal and integrate your project with the larger Student Coin ecosystem, the team can provide marketing tips and tools, including access to a wider audience.

The package can also include a launchpad, token airdrops and entry to the upcoming STC Exchange.

Last but not least, tokenizing your project on the STC Terminal gets you into a community of like-minded creators, token holders and crypto enthusiasts, making your first steps in the crypto space a little easier.

Whatever service you end up choosing to tokenize your project, you’re likely to find that it will energize your existing community, attract new supporters, and create a clear roadmap to success. Think up a strategy, find a token builder you can trust, and start minting. See you there.

This article features products developed by Student Coin, which also runs Coinpaper.