Tokenization is the process by which a real-world asset, such as a Euro, is made available as a crypto-native token. There are three steps to tokenizing Euros into EUROC:
- A user sends Euros to an issuer's bank account.
- The issuer sends a request to the EUROC smart contract to mint an equivalent amount of EUROC.
- The issuer makes the newly-minted EUROC available to the user while holding the Euros they were sent in reserve.
When you redeem EUROC, you essentially initiate the reverse process, exchanging a crypto-native token for the real-world asset it represents. In the case of redeeming EUROC for Euros:
- A user with EUROC requests a redemption from a EUROC issuer.
- The issuer takes the user’s EUROC and sends a request to the EUROC smart contract to take that EUROC out of circulation.
- The issuer sends Euros from its reserves to the user’s bank account (net of any fees).