In its simplest form, tokenization is the process of converting any rights or assets on digital asset that can be used, owned and transferred by the holder through smart contracts that are powered by blockchain. This could be everything that have value. In other words, tokenization represents a form of digitalization of value and, just like the Internet enabled free and fast circulation of digitized information, the blockchain is allowing the “almost free” and borderless flow of digitized value. Once tokenized, every kind of value can be managed as a digital asset, whose unit of account is a dedicated virtual token. Such virtual tokens can be minted by any individual or organization that defines the set of rules governing them. These include the token features, the monetary policy, and the users' incentive system.

Given the cornerstone role played by tokens in a tokenization process, their meaning is intimately related to the tokenization concept. Following this approach, the token definition moves along two strands: on one hand, it addresses the function performed by tokens, and, on the other hand, it drills to the stand of what they represent.

Looking at the function performed by tokens in economic terms, a token can be described as “a unit of value that an organization creates to self-govern its business model, and empower its users to interact with its products while facilitating the distribution and sharing of rewards and benefits to all its stakeholders”. In simplistic terms, tokens can be seen as privately issued currencies used to exchange value within an ecosystem (e.g., Bitcoin). In reality, their usage has gone far beyond mere currency applications. The roles that a token may play are manifold and include, among others, giving access to a service, granting the right to contribute to a community, regulating the governance through voting rights. More generally, a token can be intended as a socio-economic tool to promote the coordination of the actors in a regulated ecosystem towards the pursuit of a network objective function [12], through a set of incentive systems.

The value represented by the tokens observable in the wild is diversified and cannot be described univocally: it can be either the right to have a discount on an exchange rate, or the proof of ownership of a gold ingot, or the reward for solving a mathematical problem to validate the next block of the chain, or many other examples.