6.1 Understanding Digital Tokens - Video Tutorials & Practice Problems

So, we've talked about smart contracts and we said that smart contracts enable these business processes to be run autonomously. And we talked about a certain type of smart contract called a digital token smart contract. So, let's talk about digital tokens now and understanding what digital tokens are all about. To do so I wanna present to you an example. We talked about Bitcoin and we said that transferring a Bitcoin over the internet is something that's done peer-to-peer. You don't need a third party and you actually leverage the Bitcoin network and use it's blockchain. Now, this is very, very clear. You can actually transfer a Bitcoin over the internet by using Bitcoin. But, what if you wanna transfer a physical object like a car? Let's say you own a car and you actually wanna transfer it over to someone else. How do you do that? Well, you do that by using a digital token. A digital token is a digital asset that can represent anything. Some examples include securities, loyalty points, and real physical assets. So, let's go into a concept called tokenization. And this is a key concept you need to understand. Tokenization is the process of representing an asset as a token that can be stored, recorded, and transferred on a blockchain. Let's use that for the example of a car. If you tokenize a car, what you really do is you create a digital representation of an asset. You can create a unique digital asset which represents that car and you can even have a QR code. So, you know exactly where that car may be. So, as you transfer the car from one person to another, you could basically just scan where that QR code. All that information as that token moves around is stored and recorded on the blockchain. Furthermore, the transfers are recorded on the blockchain and they are recorded permanently and immutably.