January 22, 2025

Here Are 5 Benefits of Token Metadata for Asset Tokenization

EMURGO

Here-Are-5-Benefits-of-Token-Metadata-for-Asset-Tokenization

NFTs (non-fungible tokens) are one of the most intriguing digital assets created using blockchain technology due to their versatility. Given their unique technological properties, NFTs have been used in a widening number of real use cases including media, finance, insurance, charity, and more, to represent real-world assets as digital tokens recorded and transacted over a decentralized blockchain network.

The source of this versatility is the token metadata which is programmable and included in each NFT. It makes them capable of representing many things using a single type of digital token standard. 

Here, we’ll explain how this is made possible and the benefits of customizable token metadata for businesses and users.

What is an NFT and token metadata?

An NFT is an entry into the distributed ledger of a blockchain using a specific ID. It is essentially a unique token that is issued and recorded on a blockchain network which can then represent various real-world assets.

In this model, every NFT has an ID in the form of a cryptographic hash to make sure it cannot be duplicated. That separates it and makes it an individually unique asset. This contrasts with fungible tokens where every token in the supply shares the same identity, making them interchangeable. 

That specific ID is recorded on the blockchain ledger. However, it’s just a set of characters of a fixed length and is unable to record more data. 

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This is where the token metadata plays an important role in enabling NFTs to represent real-world assets on-chain. 

Token metadata refers to data about data. In the case of a blockchain transaction, this could be the block number, the time stamp, the epoch, etc. In the case of an asset the NFT represents, it can contain relevant information about the asset to make it transparent to potential buyers. All this information helps to validate the transaction itself for future reference. The metadata is important because it is a record of the information that lives outside of the data on the blockchain. Furthermore, this token metadata can be programmed and input by the party issuing the NFT. For those created on Cardano, the token metadata can store more data compared to other leading blockchain networks.

Benefits of Programmable Token Metadata for Tokenization

Some benefits of having programmable token metadata for NFTs include:

AB Explainer Here Are 5 Benefits Of Token Metadata For Asset Tokenization IG
  • Security

Token metadata, at least on Cardano, is recorded on the nodes or validators of the network. This makes it as secure as other information saved in the blockchain. That provides a high level of security that cannot be matched by other systems. 

Metadata recorded in this way can be traced by anyone. Any changes to it are also logged, so anyone can track which party made changes, when these happened, and what data was affected. All this makes information far more reliable and trackable.

This makes tokenized asset transactions and verification more reliable, transparent, and secure from the perspective of buyers and sellers.

  • Immutability

Token metadata can also be immutable meaning once it’s set, it can never be changed, even by the NFT creators. Assets that need a high level of security benefit a lot from this feature, as it ensures the information contained in the metadata can never change. 

Most NFTs out there use immutable data because it is also easier to set it up. If the metadata never changes, then there is no need to set up complicated permissions for developers to ensure the data is never compromised.

This adds to the trust of tokenized assets that require immutability such as NFTs representing items that must retain a clear, unaltered history of certain data.

  • Versatility

Of course, token metadata can also be mutable, meaning that it can change over time as is the case with Dynamic NFTs. Mutable metadata is useful when the asset is expected to have a life cycle that needs to be tracked. 

Logistics solutions, gaming, and real estate assets, among others, can benefit greatly from this feature, as the changes the items experience as they move through the custody chain can be reflected in the token metadata. Since each update is trackable, it becomes much more convenient for those monitoring the movement of the asset. 

Read more: Explaining Dynamic NFTs in Cardano

  • Cost

Token metadata as a data storage solution can be more cost-effective than centralized cloud alternatives. Also, if the metadata is immutable, the cost has to be paid only once, when the token is minted. All these can make metadata a more affordable option for recording important information. 

Additionally, metadata can be easier to access since it’s publicly available. Anyone using a blockchain explorer can check this information, and therefore a business with multiple parties has better information dissemination. 

  • Utility

Token metadata doesn’t need to be passive, meaning it only works as a record. Metadata can actively be read by smart contracts and automatically activate certain conditions based on the results in a resource-efficient manner. 

Metadata becomes very important when it is combined with programs that read it. Asset tokenization, logistics, finance, and many other use cases can benefit dramatically from this ability which sets NFTs apart from other solutions. 

NMKR: A Platform for Tokenization

NMKR is an NFT and Tokenization platform service leveraging the Cardano blockchain. It provides a user-friendly platform that enables businesses and individuals to create NFTs without requiring coding skills.

Its NFT tools have been used by businesses, gaming projects, creators, and more to successfully mint NFTs of various assets, including diamonds, e-books, and gaming items.

Its various products including NMKR Studio and NMKR Pay with multi-language support allow businesses and individuals to enter the Web3 space seamlessly and even provide traditional fiat payment options to mint NFTs.

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Disclaimer 

You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by EMURGO to invest.

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