Modern requirements for the security of the electronic payment system depend on its functionality and capabilities. Modern electronic payment systems must provide integrity, authentication, confidentiality, availability, and reliability to their customers when they make numerous online payments. No compatible payment system will accept funds from users without their express consent. This is designed to prevent unwanted fraud or other incidents. Authorization is the most important connection in any payment system. Payments can be verified in three key ways: authentication, passwords, and signatures, which is why data security software is essential to ensuring proper security when making online payments. Authorization to ensure adequate security is as follows: In this key approach, the authorizer (usually a bank) informs the customer (payer) about the transaction. Approvers must approve or decline payments without a secure channel (such as email or phone) in place. Anyone with a customer's credit card details can initiate a transaction. Legitimate users should monitor their transactions and proactively report any unauthorized activity. If the customer does not complain within a certain period (usually 90 days), the transaction is considered "confirmed" by default.

Password authentication

Password-protected transactions require that all incoming messages contain a cryptographic validation value on the authentication side. The verification value is calculated using a secret known only to the verifying person. This secret can be a personal identification number, a password, or some secret. Additionally, short secrets such as 6-digit PINs are inherently vulnerable to many types of cyber attacks. High security cannot be achieved. They should only be used to control access to physical tokens, in particular, tokenize credit cards (or wallets) that actively use secure cryptographic mechanisms, such as digital mechanisms, to perform actual authentication quickly and efficiently.

Signature verification

In this type of transaction, the verifier needs the digital signature of the person confirming the transaction. Digital signatures ensure the irrefutability of the received information. Only the owner of the private signature key can "sign" the message (the authenticity of the signature can be verified by someone who knows the corresponding public verification key). Confidentiality: Some parties may wish to maintain the confidentiality of their transactions. Privacy in this context means limited knowledge of various information related to the transaction: the identity of the payer/payee, the amount, etc. Key confidentiality requirements typically state that this information is restricted to the relevant participant. If anonymity or non-traceability is required, limiting this information is an important requirement. How will token trading affect the financial sector? All innovations directly affect the business model of classical banking. As such, these companies should already be carefully monitoring the various impacts of tokenization on their value chains. The general tokenization market is in a state of active development.

Availability and reliability

All parties must be able to make and receive payments as needed. Payment transactions must be accessible and secure. Transactions may or may not be fully completed, but they never end up in an unknown or conflicting situation. No payer receives financial loss due to a network or system failure. Availability and reliability require that the underlying network services and all software and hardware components are sufficiently reliable. Disaster recovery requires stable storage and a dedicated resynchronization protocol for all parties.

Blockchain technology allows the digitization of various types of goods, rights, property, and material assets. Many industries are realizing the great potential of blockchain technology and are trying to implement their applications. The rise of joint-stock companies and the development of financial markets considered revolutionary enough to eventually change the entire financial world, was the next step in asset tokenization. The World Economic Forum has published a series of analyzes and studies, according to which about 10 trillion dollars will be tokenized by blockchain by 2029. What is tokenization? The term tokenization describes a certain division. One token is called a currency. In the case of financial instruments, tokenization is the process of digitally securitizing a particular security, commodity, object, or right. Securitization reflects ownership of a specific asset using digital tokens. For example, if real estate is valued, it means that more than one person can buy a digital share of that property. Each of these individuals shares the value of the asset by owning tokens. 

The key cost-effectiveness and portability benefits from the tokenization phenomenon are staggering. There is no need to contact a notary when transferring a token, and there is no transfer fee. Tokens are not lower than values. Profits mobilize industry and influence existing stock and financial markets. Anything that can be traded in digital security today can be tokenized using blockchain technology and launched tomorrow, saving time, and money and increasing the efficiency of existing operations that can easily be expanded with new assets. Corporate compliance. In a highly regulated market environment, effective solutions can be developed that are compliant with regulatory norms and built to existing standards. Compliance with standards ensures a high degree of automation. By integrating your blockchain infrastructure, you can specify and process transactions more cost-effectively. The blockchain infrastructure guarantees the transfer of tokens following current security standards. Digital shares are issued on the market and can be freely traded by market participants.

Tokenization offers significant advantages over traditional approaches to securitization through financial intermediaries such as banks, insurance companies, and law firms. Digital securities and transfers with the help of tokenization can significantly increase the efficiency of digital asset trading. Transaction times are also significantly shorter, as transactions can typically be processed 24/7 via the blockchain. In addition, the costs of these operations have decreased significantly. Another key advantage is that tokenization is less error-prone because there is no human work involved in the process. Tokenization lowers barriers to investor participation in financial markets. Because the new tokens can be divided into very small tranches, investors can also participate in previously under-capitalized private asset classes. In recent years, asset classes such as real estate, art, and automobiles have shown impressive returns, making them promising alternatives to traditional asset classes such as stocks and bonds. A big advantage for issuers is also the elimination of intermediaries when trading digital assets. By partnering with investment banks and other institutions, you can avoid the previously high fees. Tokenization will make it easier for small businesses and startups to obtain the necessary financial resources.

The role of tokenization in corporate finance

Large corporations have attractive financing options, but tokenization opens up completely new opportunities for many business environments. With the help of tokenization, many companies can benefit from the flexibility of implementing financing projects. Today, so-called small and medium-sized companies can already issue bonds in the form of digital securities. For simplicity, these bond issues in the form of digital securities require only a limited requirement for potential customers. Thus, the issuer should only issue a securities information sheet. Notably, these solutions are relatively cheap compared to traditional bonds. The long-term impact of the entire tokenization process on the small business market is still unclear. 

However, smaller companies may be also relying on tokenization to make company shares more tradable. These changes could have a lasting impact on future venture capital markets. Asset tokenization has been considered by various studies and experts. Almost all statements and conclusions lead to the same conclusion. In the coming years, the tokenization market will only grow actively. This is a multi-billion dollar market. Digital asset models have a disruptive structure that can change the entire financial system. If we look at today's financial world, it is largely inefficient, imperfect, and opaque. However, it is expected to become more efficient, transparent, and international in the future. In general, tokenization has many key advantages over traditional financial instruments. Agentless efficiency gains are that digitized assets reduce the importance of banks, insurers, brokers, and agents. 

The global market has become more efficient due to digital trade and the absence of other players in the market. Greater transparency: Digital tracking increases transparency and offers a particularly simple and fast form of investing. Delays in bank transactions for several days are also a thing of the past. More open markets: Some markets were previously only available to certain groups of buyers. With tokenization, investors can invest directly in companies, avoiding the drawbacks of closed-end funds. Investors and issuers have more freedom. Reducing Market Manipulation - Tokenization can also be used to reduce the potential for market manipulation. All transactions are transparent, immediate, and irreversible for the parties involved. Regulators also have access to data that helps prevent fraud.

Banks and financial service providers need to analyze future market trends. This is the only way to determine at an early stage what role these companies want to play in future financial markets. Young, digitally savvy consumers are already showing great interest in new approaches. Therefore, it can be assumed that these user groups will also accept and actively use tokenization. 

Companies that don't want to or can't yet develop their products are forced to use third-party interfaces instead of preparing for new markets. With proper preparation, financial companies can remain competitive in the future. Key factors such as customer satisfaction can help create and grow a healthy ecosystem. New developments in the legislative framework will take place before these advances penetrate the market as a whole. Creating modern media for digital assets has a huge impact on technology adoption.

The impact of tokenization on the active development of the market

The impact of tokenization will affect standard issues such as stocks, bonds, and equity. The art and collectibles market has already been captured in the form of NFTs. The main beneficiaries of the new approach are investors. After all, experts believe that significant savings are possible when effective asset tokenization processes are carried out. In addition, the tokenization of illiquid and less marketable assets such as real estate and small businesses may gain momentum. The ability to buy and sell these illiquid assets faster and more efficiently can lead to their further active development. We can expect greater use of tokenization tools in the medium to long term. Thus, tokenization helps all markets gain liquidity. 

New markets can be attractive to investors because in the past the barriers to entry were very high. In addition to investors, owners also benefit from increased market liquidity. Selling has become much faster and easier. Additionally, sellers can increase their liquidity by selling only a portion of their assets. Many experts expect significant growth rates in the field of tokenization. This assumption is reasonable and understandable. After all, issuing tokens significantly increases the liquidity of the entire market. Investors also benefit from low barriers to entry. There are also some issues with tokenization. It is not yet clear whether blockchain technology will eventually reach mass adoption. Investors can prepare for changes in the medium term. All market participants will benefit from increased transaction transparency and reduced costs. There is also greater liquidity due to trading smaller units of assets.

Tokenization is the digitization of value. Digital assets are created on the blockchain of a specific physical asset. Objects and values in the "real" world are linked to tokens on the blockchain that represent claims to principal payments. These are digital copies of classic and well-known financial instruments such as stocks and bonds. Tokenization significantly reduces administrative and transaction costs by eliminating the need for special intermediaries such as banks. 

Another function of tokenization is to increase the liquidity of assets. Illiquid assets become liquid, making trading easier and faster. The liquidation time of a digital asset is much shorter than that of a traditional IPO. One trend is initial exchange offerings, where tokens are issued directly through an existing exchange, followed by a listing. Legal considerations largely set the limits of what is possible with tokenization. The practice depends on each law. Receivables, like securities, can be tied directly to tokens. Whoever owns the token will be the creditor. Claims are transferred to the blockchain using tokens. 

Another option is to rely on a trust structure in which the trustee negotiates the property. This is necessary if certain formal conditions must be met for the transfer of rights, such as real estate or shares. For real estate transactions to take place through the blockchain, it is necessary to transfer the real estate register to the blockchain, since it is impossible to establish ownership without registration in the land cadastre. However, this can be improved with a trust structure in which the real estate agents of the token holder use the property of the tokens. Shares cannot be directly tokenized. Here you have both the obligation to transfer and the obligation to use the earned funds. Registered shares are already tokenized.