By Asset 0 - Tokenization

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(Under development. Please, come back later. Just published to share the progress)

1. Introduction

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The nature, behaviour and price of a cryptocurrency is determined by the interaction between a demand and a supply coordinated by a monetary policy. Depending on the policy we will have different types of tokens.

We will discuss the Maturity Model in this post and leave demand and supply for next posts.

2. A Tokenization Maturity Model

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A Tokenization Maturity Model could be established as a ranking of the purity in capturing the properties of the underlying asset. This model would not evaluate the value of the asset, or its utilities within the token model, but the ability of the capture process. The main criteria for this maturity model would be:

• Decentralization in the network consensus. Existing great work by a16z for protocols decentralization should be referenced here
• Decentralization in the smart contract
• Independence from other currencies

In that way, 2 tokenization protocols capturing gold as underlying asset, could be at different level of maturity depending on the goods of the designed protocol.

The picture below represents a initial structure of the maturity model. It only considers the goal of the capture process. Sub-levels could be established to accommodate different degrees of issuer intervention.

Commodity Money would be at the highest level of the maturity Model as its value matches the value of the underlying asset. However, attention should be paid on the decentralization guaranteed by the processes of the issuer.

3. Applications

Each tokenization pattern has a different set of applications.

Type	Capture	Typical Applications
Unbacked Tokens	No	Governance, Memecoins
Utility Tokens	Utility	Web3 including Infra Tokens, Supply Chain Tokens, eBusiness Tokens (Ticketing, Loyalty, Marketplaces), SocialFi, GameFi, Metaverse
Security Tokens	Yield	DeFi
Stablecoins	Price	DeFi
Units of Account	Value	Commodity backed Cryptocurrencies
NFTs	Asset	Ownership, collectibles

3.1. Token Patterns as Currencies

If we evaluate the tokenization patterns as potential currencies, we see that only Units of Account match the requirements.

Type	Collateralized	Fungible	Stable	Decentralized	As Currency
Unbacked Tokens	No	Yes	No	Possible	No Suitable
Utility Tokens	Yes	Yes	No	Possible	No Suitable
Security Tokens	Debatable	Yes	Yes	No	No Suitable
Stablecoins	Debatable	Yes	Yes	No	No Suitable
Units of Account	Yes	Yes	Yes	Possible	Suitable
NFTs	Yes	No	Yes	Yes	No Suitable

Unbacked Tokens cannot be a currency because they do not have any collateral and are not stable.

NFTs cannot be a currency because they are not fungible.

Stablecoins/Synth and Security token cannot be a currency because they are fiat and, therefore, centralized.

Utility Token have been created as ecosystem barebones but they are not stable to become currencies.

Only Units of Account can potentially implement Sound Money. However a design is required for this mission.

4. Tokenization Map

		Maturity Model
Type	Assets	Unbacked	Utility	Yield	Price	Value	Asset
Physical Assets	Commodity					X
	Real Estate
	Art
	Art
	Industrial Assets
	Collectibles
Digital Assets	Digital Art
	Digital Collectibles
	Music
	Gaming
	Corporate Branding
Financial Assets	Currencies
	Bonds
	Equities
	Investment Funds
	Loans
Certifications	Entry Tickets
	Proof of Participation
	Diplomas and Certificates
	Web Domains
	Proof of Maintenance
	Vouchers
	Loyalty Points
	Awards