The Future of Tokenization: Exploring the Three Token Models of Web3 Applications

On April 15th, at the main event of the 2023 Hong Kong Web3 Carnival, titled “The Future of Tokenization”, Xiao Feng, Chairman of Wanxiang Blockchain and Chairman of HashKey Group, delivered a closing keynote speech titled “The Three Token Models of Web3 Applications”. He stated that Web3 applications must meet various needs, and the token models at the Web3 application level and the basic protocol are different. The basic protocol is a single token model, The world should be unified, and the application protocol is a three token model with unique application scenarios. Among the three token models, the first is NFT (data, product, and service value), the second is functional token (usage value), and the third is securities token (ownership value, also known as equity value).

Xiao Feng: The Web3 application layer three token models include NFT, functional token, and securities token

At the 2023 Hong Kong Web3 Carnival, Xiao Feng, Chairman of Wanxiang Blockchain and Chairman of HashKey Group, presented a closing keynote speech titled “The Three Token Models of Web3 Applications”. In his speech, he emphasized that Web3 applications must cater to different needs, and the token models at the web3 application level and the basic protocol are not the same. He suggested that the world should be unified through a single token model at the basic protocol level. However, the application protocol must adopt a three token model with unique application scenarios, comprising NFT, functional tokens, and securities tokens.

Outline

I. Introduction
II. Web3 Applications
III. Token Models
IV. Basic Protocol Token Model
V. Application Protocol Token Model
VI. NFTs
VII. Functional Tokens
VIII. Securities Tokens
IX. Conclusion
X. FAQs
XI. Keywords

The Three Token Models of Web3 Applications

Web3 applications are an advanced version of web applications with the ability to communicate with the blockchain seamlessly. Unlike traditional web applications, web3 applications can execute decentralized operations without a trusted third party. To achieve this, web3 applications utilize a set of protocols, mainly blockchain, to execute the operations.
Token models are an essential part of web3 applications as they facilitate transactions between participants. Tokens are digital ledger entries that represent either assets, utilities or securities. Tokens enable users to carry out transactions in a trustless manner while remaining anonymous.

Basic Protocol Token Model

The basic protocol identifies the token model for transaction units and settlement agreements. The model requires a single token, usually Ether, which is the default coin on Ethereum.
Feng suggested that the basic protocol level should adopt a single token model globally. The primary aim of this model is to standardize the fundamental token model to ease the transaction process between different web3 applications.

Application Protocol Token Model

The application protocol consists of three token models: NFTs, functional tokens, and securities tokens.

#NFTs

NFTs (Non-Fungible Tokens) are unique digital assets that cannot be exchanged for something else at a set value. NFTs are being embraced by the gaming industry, art industry, and digital collectibles. With NFTs, items like virtual homes, skins, and in-game items can now be uniquely owned and transferred between users without fear of duplication.

#Functional Tokens

Functional tokens are utility tokens that provide holders with the right to utilize specified services, products, or platforms. These tokens are pegged to the service or product’s worth, and their value fluctuates based on the market demand for the service or product.

#Securities Tokens

Securities tokens are tokens that represent ownership of digital or physical assets, similar to traditional securities. Securities tokens allow investors to have fractional ownership of assets that were previously reserved for only the elite.

Conclusion

Tokenization is revolutionizing the way exchange transactions are carried out in web3 applications. It is significant to understand the different token models available, especially for corporations looking to adopt web3 applications into their business models. By adopting a three-token model at the application protocol level, web3 applications can cater to individual user needs, providing investment opportunities, creating unique ownership experiences, and facilitating seamless transactions between participants.

FAQs

Q: What is the difference between fungible tokens and non-fungible tokens?
A: Fungible tokens are interchangeable digital assets, like cryptocurrencies, while non-fungible tokens are unique, immutable digital assets that cannot be exchanged for something else at a set value.
Q: How can I buy functional tokens?
A: Functional tokens are purchased on cryptocurrency exchanges and can also be bought through ICOs where available.
Q: Are securities tokens regulated the same way as traditional securities?
A: Yes, securities tokens are subject to the same laws and regulations that apply to traditional securities.