A digital token is similar to issuing a check in a digital form. The holder of the token has the right to claim the underlying asset. Any transferrable asset such as a car, a house, a computer, or also intangible assets such as property rights and licenses, can be represented through digital tokens.
If a company issues digital tokens for its stocks, for example, the receiver of these tokens possesses the right to claim these stocks in exchange for the tokens. Or to go one step further, holding a token equals ownership of the underlying stocks.
Moreover, these tokens can also be passed around between other people. Every transaction of those digital tokens is recorded on a blockchain, providing full transparency about the ownership and security at the same time without needing a central authority or clearing house to regulate anything which in return saves costs and time. The company can even handle its whole dividend payment procedure automatically through these digital tokens because the whole logic behind dividend payouts can be embedded into each token.