A primary use case for distributed ledger technologies has been the issuance of tokens — as seen across decentralized finance, gaming, hospitality, law, and various industries. Tokens have been utilized for everything from fungible stablecoins, like USDC or Tether, to unique non-fungible digital assets, as made famous by CryptoKitties. Tokens are defined as securities, credits, points, or even currencies, depending on their management and use. They often take on various shapes and forms, with unique configurations depending on the application, end-user, and regulatory / compliance requirements.
Hedera offers tokenization in two unique ways — this accommodates a wide range of use case requirements from small startups to large enterprise organizations. In addition to making the Hedera Token Service available on testnet to the Hedera developer community today, we’ve released the Tokenization on Hedera whitepaper to clearly define the two ways to tokenize assets on Hedera.
The Tokenization on Hedera whitepaper details the two primary models Hedera Hashgraph supports for tokenization — natively on Hedera, using the new Hedera Token Service, and in a permissioned network setting, using Hedera Consensus Service. Tokenization on Hedera introduces the technical fundamentals of each and aims to assist token issuers with determining the deployment model most appropriate for their use case.
Tokenization with the Hedera Token Service
With Hedera Token Service (HTS), Hedera provides the ability to issue tokens on a globally distributed public network without compromising performance. Developers define and issue tokens directly to the Hedera mainnet. Tokens inherit many of the characteristics of Hedera’s native cryptocurrency hbar, including asynchronous byzantine fault tolerant (ABFT) consensus, thousands of transactions per second, and settlement in a matter of seconds, without the risk of forking. Also, assets tokenized using HTS can easily integrate into the Hedera ecosystem as it becomes available — this includes wallets, exchanges, custody solutions, and more.
“The Hedera Token Service will enable Taskbar to predictably and reliably scale the use cases and versatility of our native utility and governance token.” - Ahmed Shlibak, Co-founder at Taskbar
Tokenization with the Hedera Consensus Service
Hedera Consensus Service (HCS) enables more customized and permissioned networks to tokenize many business use cases. These networks allow builders to define specific network use cases, participants, deployment models, and data privacy. The networks consist of permissioned node operators who have a local copy of a database updated with custom code based on synchronized messages from the Hedera Consensus Service.
“The Hedera Consensus Service (HCS) helps us reduce the risk of fraud through the strict, timestamped audit trails for tokenized assets and their associated transactions.” - Scott Thiel, Partner at DLA Piper (TOKO Tokenization Platform)