# 4.2.4 Tokenization on the DGT Platform

The DGT platform offers a robust solution for tokenization, allowing the representation of assets through secondary tokenization on top of its native currency, DEC. As with other blockchain networks, DEC represents the value of the DGT network and is distributed among supporting nodes through the minting mechanism. Whether deployed independently or on the DGT MAINNET, consumers can choose between a token-less model based on CORE or the *GARANASKA* configuration (requiring the AGPL 3.0 license). Tokenization is a core function of the DGT platform, enabling SWAP operations between tokens and utilizing notary nodes to certify the value of assets. The DGT-ETHEREUM BRIDGE facilitates the creation of wrapped tokens on the Ethereum network.

<table data-header-hidden data-full-width="true"><thead><tr><th width="140"></th><th width="150"></th><th width="236"></th><th></th></tr></thead><tbody><tr><td>Approach</td><td>Description</td><td>Advantages</td><td>Limitations</td></tr><tr><td>Traditional Method (Based on <em>Smart Contracts</em>)</td><td>Utilize smart contracts inherited from <em>Sawtooth SETH</em> (EVM, Solidity) and <em>SABRE</em> (WASM)</td><td><p>- Compatibility with Ethereum platforms</p><p>- Leveraging existing smart contract ecosystem</p><p>- Familiarity for developers experienced with Ethereum's smart contract languages (EVM, Solidity)</p></td><td><p>- Requires technical expertise and knowledge of smart contract development</p><p>- Potential security vulnerabilities if contracts are not properly audited and implemented</p></td></tr><tr><td><em>Token Fabrics</em> within the DEC Family</td><td>Utilize the 'token' group of commands within the DEC family</td><td><p>- Simplified issuance of tokens using predefined configurations</p><p>- Reduced complexity, making token implementation more accessible for non-technical businesses</p></td><td><p>- Limited customization options compared to the traditional method</p><p>- May not cover all use cases or specific token requirements</p></td></tr><tr><td><em>Custom Transaction Family</em> with Token System Features</td><td>Create a custom transaction family with token system features</td><td><p>- Greater flexibility and customization options for tokenization</p><p>- Ability to tailor the token system to specific use cases and requirements</p></td><td><p>- Requires significant development efforts to create and maintain a custom transaction family</p><p>- May involve a steeper learning curve for developers unfamiliar with the DGT platform</p></td></tr></tbody></table>

These three approaches offer different trade-offs, allowing users to choose the most suitable method based on their needs, technical expertise, and desired level of customization. The DGT platform provides options that cater to both developers experienced with Ethereum's smart contracts and non-technical businesses seeking a simplified token issuance process.

When implementing tokenization on the DGT platform, it's crucial to address the traditional challenges associated with tokenization. The table below outlines common problems, examples, and the corresponding DGT solutions:

<table data-header-hidden><thead><tr><th width="74"></th><th width="148"></th><th width="205"></th><th></th></tr></thead><tbody><tr><td>#</td><td>Problem</td><td>Example</td><td>DGT Solution</td></tr><tr><td>1</td><td>Entry Threshold</td><td>Complexity of token implementation for non-technical businesses</td><td>Implement tokenization factories based on transaction families, providing a simplified infrastructure and parameter control</td></tr><tr><td>2</td><td>Security Vulnerabilities</td><td>Lack of qualified programmers for smart contract implementation</td><td>Implement secure coding practices, conduct thorough code audits, and provide developer education and resources</td></tr><tr><td>3</td><td>Token Liquidity</td><td>Difficulty in verifying the existence of underlying assets</td><td>Utilize Notary Nodes for off-chain verification of assets, ensuring transparency and reliability</td></tr><tr><td>4</td><td>Price Volatility</td><td>Reliance on Ethereum's volatile price and high transaction costs</td><td>Enable the option to fix the token price in fiat currency, creating a stablecoin-like feature</td></tr><tr><td>5</td><td>Lack of Interoperability</td><td>Challenges in deploying tokens on different platforms</td><td>Develop bridges and interoperability solutions to enable token placement on various networks</td></tr><tr><td>6</td><td>Regulatory Compliance</td><td>Adhering to regulatory requirements and legal frameworks</td><td>Implement KYC procedures and ensure compliance with regulatory standards</td></tr><tr><td>7</td><td>Scalability Issues</td><td>Difficulty in scaling tokenization processes</td><td>Utilize a scalable F-BFT consensus mechanism to enhance network scalability</td></tr><tr><td>8</td><td>Data Privacy</td><td>Ensuring protection and privacy of token holders' data</td><td>Implement advanced security tools like Zero-Knowledge Proofs (ZKP) and cryptographic accumulators</td></tr><tr><td>9</td><td>Lack of Token Standardization</td><td>Lack of standardization in tokenization space</td><td>DGT will support standard de-facto ERC-X (Ethereum, 2022)  and NIST Tokenization Framework (NIST, 2021)</td></tr><tr><td>10</td><td>Investor Protection</td><td>Ensuring investor protection in tokenized assets</td><td>DGT will support the Notary mechanism for off-chain certification, incorporating expert reviews and other protective measures</td></tr><tr><td>11</td><td>Smart Contract Upgradability</td><td>Challenges in upgrading and modifying smart contracts</td><td>Simplified process through the use of tokenization fabric in transaction families</td></tr></tbody></table>

The DGT approach to tokenization sets it apart from traditional methods. The platform provides simplified tokenization factories, parameter control, and infrastructure for easy implementation. The utilization of Notary Nodes ensures transparency and reliability in asset verification. Furthermore, the DGT-ETHEREUM BRIDGE enables seamless interoperability with the Ethereum network, expanding token placement options. By addressing security vulnerabilities, scalability challenges, and privacy concerns, the DGT platform offers a comprehensive solution for tokenization.

Tokenization Fabric is a unique concept within the DGT platform that enhances the tokenization process by providing a flexible and customizable framework for creating and managing tokens. It extends the traditional notion of smart transactions by allowing separate token parameters and underlying token code.

With Tokenization Fabric, users can define and configure various aspects of their tokens, such as token supply, tokenomics, transaction rules, and additional functionalities. This modular approach empowers token issuers to tailor their tokens to specific use cases, industries, or regulatory requirements. The fabric enables the creation of different types of tokens, including native coins, stablecoins, security tokens, non-fungible tokens (NFTs), and utility tokens. Each token can have its unique characteristics, such as supply limitations, transfer restrictions, royalty mechanisms, or compliance features.

By utilizing the Tokenization Fabric, businesses and organizations can design and deploy tokens with ease, ensuring that they meet their specific requirements. It simplifies the process of token creation, eliminating the need for complex smart contract development and reducing entry barriers for non-technical users. Moreover, the fabric enhances the upgradability of tokens by providing a modular structure. Changes and updates to token parameters or underlying token code can be implemented seamlessly, ensuring that tokens remain adaptable to evolving business needs or regulatory changes.
