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Although the blockchain itself provides a technical framework that promotes transactions, ownership, and trust in the network, asset tokenization is a common trend in value-related digitization. Tokenization is the process of converting assets and equity into digital form or tokens on the blockchain network.
Distinguishing between cryptocurrencies and tokenized assets is important for understanding trading tools, valuation models, and homogeneity across various value networks that arise and pose interoperability challenges. This is not only a technical challenge, but also a business challenge around fair trade.
Asset tokenization has given birth to a business model that promotes partial ownership, namely the ability to own a large sample of assets.
Due to digital assets and their homogeneity in the blockchain ecosystem, various valuation drivers have been generated. including:
- Tokens based on an encrypted supply and demand driven economy model and network utility;
- Non-fungible token (NFT (Non-FungibleToken), non-fungible token see more
- Homogeneous tokens that are valued on various bases, such as the amount of economic activity in the network (cryptocurrency), their usability (smart contracts and transaction network processing), anchor value (stable currency and security tokens), etc.
In this article, I will discuss the rapid increase of NFT after DeFi became popular, NFT has built a new business model with extraordinary innovation and has a global market. All of this is driven by the basic structure of the token and decentralized wallet. Although NFT can be described as a kind of cryptocurrency that has some intrinsic value to the holders or the art and collectibles market, the development of the NFT also marks the arrival of a larger token revolution, which will not only promote large-scale innovation and development. The Web 3.0 protocol has evolved, and the DeFi solution has also been tested, as well as its ability to cross all types of tokens and provide trading platforms and tools.
The growth of the Web 3.0 protocol
The first two generations of network protocols were mainly for disseminating information and connecting people, They promoted tremendous information growth and collaboration, and created miracles to connect the world. However, this web protocol was never designed to move anything of value. At the same time, with the advent of the Web 2.0 era, vulnerabilities such as "fake news" and the movement of assets through a series of intermediaries have emerged. These systems threaten the business and financial infrastructure and can destabilize the system.
And Web 3.0 promises to protect all of our valuable information, truth and digital assets, including those that are homogeneous and inhomogeneous. Web 2.0 is driven by social, mobile, and cloud technologies, whereas Web 3.0 is largely built on three levels of new technological innovation, namely edge computing, decentralized data networks and artificial intelligence.
The development of the NFT not only provides artists, skilled professionals and entrepreneurs with the ability to innovate in the form of tokenization, but also promotes the democratization of the platform, which is also one of the promises of blockchain technology. The underlying infrastructure includes decentralized storage technology, efficient consensus protocols, off-chain computing, and oracle networks to connect and verify existing systems.
Broadly speaking, Web 3.0 technologies envision a connected, trust-free, and responsible network that effectively delivers value, thus creating the infrastructure for what matters. NFTs represent not only transferable entities, but also non-transferable tokens that we evaluate. The latter includes identity certificates, medical records, passports, etc. These things represent our identity and enable us to participate in the digital economy with our unique digital identity.
Intersection with finance - DeFi
DeFi is a revolution in the blockchain application field. DeFi uses decentralized network technology to promote the transformation of legacy financial products into transparent, trust-free protocols, promotes the creation and dissemination of digital value, and requires almost no intermediaries. Due to new synergies and co-creation through new digital interactions and value exchange mechanisms, blockchain technology has laid the foundation for a credible digital transaction network. As a disintermediation platform, it drives the growth of the secondary market and market.
Although DeFi's goal is to democratize finance, NFTs test DeFi's resolve by providing a competitive and inclusive asset class, as well as providing a medium of exchange, homogeneity of other homogenizing asset classes, and traditional illiquidity. The market provides an avenue for liquidity.
The asset classes generated by the DeFi and NFT protocols take advantage of partial ownership of assets, blur the boundaries between asset classes, and use structures such as digital wallets as storage for asset classes. And all of them are backed by the underlying Web 3.0, which provides security and availability through decentralization, trust, and immutability through consensus, and extends these principles to basic computer infrastructure such as storage and interconnection.
The commercialization of the Web 3.0 protocol manifests itself as a homogeneous utility token, which further blurs the boundaries between the various financial innovation products introduced by DeFi, such as the underlying assets and their derivatives, and these products are also tokenized. Therefore, although decentralization is a basic theme, and wallets and tokens are the basic structure, the blurred boundaries between them have deep meaning.