Definition ∞ Tokenized funding involves raising capital by issuing digital tokens on a blockchain, which represent a share, utility, or other claim within a project or entity. This method allows for broader investor participation, potentially lower transaction costs, and enhanced liquidity compared to traditional funding rounds. Projects leverage tokenized funding to finance development, distribute network access, or provide governance rights to token holders. It represents a modern approach to capital formation within the digital economy.
Context ∞ The state of tokenized funding is presently evolving rapidly, with projects utilizing various models such such as initial coin offerings and security token offerings to secure capital. A key discussion revolves around the regulatory classification of these tokens, determining whether they constitute securities or commodities, which impacts compliance requirements. Future developments will likely include clearer legal frameworks for tokenized funding, leading to increased institutional participation and a more standardized approach to digital asset capital raises.
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