Lawyers for Tokenization Solutions
Experienced Counsel in Tokenization
Do you need legal assistance with tokenization? Are you considering tokenizing certain assets but are unsure how to proceed? Do you need tax assistance with your newly issued tokenized assets? If so, then you need a legal team experienced in tokenization.
Tokenization is the process of using blockchain technology to represent the real value of an asset digitally. Many industries have embraced tokenization and are tokenizing assets to the benefit of their businesses, clients, investors, and the general public.
That said, finding a law firm experienced in tokenization is challenging. Few lawyers understand the process of tokenization, nor do they understand how to apply it for businesses and individuals.
At Oberheiden, P.C., our team is different. We understand what it takes to tokenize assets and how this will affect your business operations and tax obligations.
Our team of attorneys and consultants have a vast knowledge of the tokenization process. We can advise you on various issues involving tokenized assets.
Secure the advice you need ahead of time. Put Oberheiden, P.C. on your side today to resolve your legal uncertainty and get you ready for the future.
What is Tokenization?
Tokenization is the process of converting a meaningful, sensitive piece of data—such as an asset—into a nonsensitive string of characters called a token.
This process uses a database that stores the connection between the original form and value of the sensitive data and the corresponding token.
Tokenization is useful for businesses that deal with sensitive information. Once tokenized, the tokens can be used for regular business operations and the sensitive nature of the asset is stored in a secure manner.
Best practices dictate that the storage be away from the business’ accounts and systems—on the blockchain.
In other words, the goal of tokenization is to replace sensitive data with an undecipherable, nonsensitive token that can be used just as the original form without fear of breach of the original form.
As an example, every time an individual uses their payment credit card or bank account numbers online, they would use a token. The token represents the card number or account number but does not have any value on its own.
The tokenization process only permits the payment processor to use your payment system for authorization; the computer system never has any of this information.
Tokenization in Various Industry Sectors
Various industries have already begun tokenizing assets. These industries generally deal with sensitive business information, personally identifying information, or other confidential client, customer, or patient details.
Consider the accounting industry first. Accountants process various personal and confidential information for their businesses and clients. Blockchain technology ensures that this information is processed and stored through a secure system.
The banking and financial institution industry process sensitive customer data every day. By digitalizing customer data, customers can be assured that their information is secure and almost free from breaches or theft.
In additional to maintaining confidentiality, using blockchain technology for tokenizing information in banking and financial institution industry can lower the cost and transaction times for international transactions.
Everyday businesses also stand to benefit from tokenization and blockchain technology. For instance, shareholder issues, management meetings, financial details, loan transactions, and so on are filled with personal information.
Mismanagement, fraud, and insider trading are very real risks for businesses. Blockchain technology and tokenization protects sensitive information and keeps it secure and away from central business operations.
Other industries that process sensitive information—such as those for which identities need to be verified or confidential projects need to be stored—can benefit from tokenization.
Identity verification is a critical component of due diligence before beginning important projects, business deals, and sensitive operations. A blockchain-secured system for storing this information ensures that everything is safely maintained and authenticated.
In the end, tokenization is a form of artificial intelligence, which reduces human labor as well as the possibility of human judgment errors. This can save time and money for individuals and businesses.
Encryption versus Tokenization
Is there a difference between encryption and tokenization? Yes. With encryption, the code is changed to create a new form, but the original form is still present within the new code. Encrypted data can be decoded with a key.
The individual parties to the transaction must have this key in order for the encrypted code to be decoded. Without this key, it would be very difficult to decrypt the data since encryption relies on cryptography to generate a new value. Yet it is possible for the encrypted code to be hacked and the keys stolen—which would also decrypt the code.
Both the sender and receiver must have access to the key for encryption to succeed. Thus, the security of the key is not free from fraud. If the key falls into the wrong hands, anyone without access can decrypt the entire code.
On the other hand, tokenization completely removes the sensitive nature of the original form and transfers it to the blockchain to be stored away from business operations. The original form is replaced with an insignificant, valueless token.
The token has no value, and the original form cannot be deciphered. The token’s original value is not locked in the new form but is instead completely unrelated to the original form.
If someone tries to hack the token or otherwise compromise it, the original form will still be secure since it was transferred to a cloud token vault and not associated in any way with the token.
Access to this token vault is highly restrictive, which makes tokenization a very attractive business tool for entities dealing with personal or confidential information.
Benefits of Tokenization
Tokenization is offering multiple benefits to individuals and entities, including the following:
- Increased security and safety;
- Ease in payment solutions;
- Reduced data breaches and risks of theft;
- Increased transaction speed because of automation;
- Increased liquidity options;
- Facilitates e-commerce and other financial innovations;
- Greater access to assets and investment opportunities through partial ownership;
- Enhanced security; and
- Transparency (keys not stored with the company as it is with encryption but instead transferred to the cloud token).
The above are only a few examples of how tokenization and blockchain technology can help you. If you have questions about how tokenization applies in another industry or how it can help the specific needs of your business, give our tokenization and blockchain team a call today.
Need Legal Advice on Tokenization
Tokenization is causing an uproar in all industries, as individuals and businesses are both seeking to understand the process and utilize it to their benefit.
Tokenizing sensitive or confidential data via tokenization keeps the information secure and free from theft. Even when the tokenized version is breached, there is no sensitive information to steal since the original form is stored on the vault away from central business operations.
Despite the many advantages, tokenization is still in its beginning stages. Thus, it is important that you and your business receive accurate and comprehensive advice on this process before undertaking major transactions.
At Oberheiden, P.C., our team can walk you though the tokenization process, what it means, how you can use it, and how it can benefit your business.
Get the advice you need right away. Call or contact us today for a free consultation to resolve all uncertainty and enhance your business’ security.