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Digital tokens have come to the fore recently, firstly with excitement about cryptocurrencies such as bitcoin, then with digital tokens being used to represent different assets on a blockchain. How can you digitise a token? Why is it important? The link looks something like this:.
So, the website sent you a token, and you sent it back, proving you had control of that email address. In fact if you did that, and then kept a good record of which friends you gave these to, and if you could record onward transactions as your friends gave them to other friends, you would be doing pretty much the same as what these digital ledgers do.
The newly created coins are assigned to the block-maker. The total number of bitcoins increases with time. They are optionally added to transactions. Each transaction has a fee costing a small amount of XRP. These XRPs are destroyed over time, and not re-assigned to the transaction validators.
The total number of XRPs in circulation goes down with time. The total number of NXT remains constant with time. The block-maker also gets a block reward. Asset-backed tokens Asset backed tokens are claims on an underlying asset, from a specific issuer. These notes could be transferred from person to person, and anyone holding these notes could go back to the goldsmith and claim the actual gold. Asset-backed tokens are the digital equivalent. They are claims on an underlying asset like the gold , that you need to claim from a specific issuer the goldsmith.
The transactions as tokens get passed between people are recorded on the blockchains, and to claim the underlying asset, you send your token to the issuer, and the issuer sends you the underlying asset.
Popular assets for these schemes are currency USD, EUR, etc and precious metals Cryptocurrencies seem to attract the same crowd as gold and silver. Diamonds, art, music… you name it. How do asset-backed tokens work? You can then send these tokens to your friends either in return for something or as a gift , and the tokens continue to be tracked on the same blockchain. Eventually one friend will want to convert this asset-backed token for something real.
They would then transfer her some EUR from their bank account to her bank account. Asset-backed tokens are wonderful in being easy to transfer, with good record-keeping, but on redemption, you still rely on the issuer being liquid. Depending on the setup of the blockchain system, you may or may not need an intrinsic token. In general, permissionless ledgers where anyone can add a block, need some sort of incentivisation scheme for block validators to do their job.
However in distributed ledger systems where you control the validators and block-creators, then they may be doing their job for different reasons , for example because they are contractually obligated to do so. Sometimes the purpose is to be able to transfer assets or rather IOUs quickly and easily while keeping the physical item secure in a warehouse.
For example when I sell you a physical diamond, I also send you the digital diamond-token from my control to your control, and so the blockchain records the provenance of the diamond, like a supercharged certificate-of-origin which includes a full record of ownership. Regarding legal constructs, especially companies and shares, I think there is a difference between tracking claims to underlying objects on a ledger, and actually legally dematerialising the object.
Dematerialising something means replacing a material object with a digital one. For example paper share certificates have now mostly been replaced by ownership registers in databases.
Some paper contracts have been replaced with pdf files. The token is something outside the law which you have invented. Sure, as the owner of shares, you may commit to other people that if they own so-and-so token, then you will pass them certain privileges for example if you own this token, I will pass any dividends I get from really owning the share to you.
However, you own the share because your name is on the share registry, the real legal share registry, not the blockchain ledger which you are using to track the digital token you have created.
Sure, if the law changed and by statute a specific blockchain became, or was deemed equivalent to the national register of companies, then yes, on that statutory blockchain, you could create a company.
It will be interesting to see how laws will eventually adapt to technology. Very well articulated , made it easy to understand. Would it be possible to have a follow up article for an update on statutory changes initiated across the world that capture the trend in adoption of blockchain technology. So how does XRP have a viable future if it were to become successful. Thxs for the clear article.
When you create a new token, how do claim paternity for this token? You are commenting using your WordPress. You are commenting using your Twitter account.
You are commenting using your Facebook account. Notify me of new comments via email. My idea of tokens. A selection of distributed ledger systems and their intrinsic tokens. Would it be possible to have a follow up article for an update on statutory changes initiated across the world that capture the trend in adoption of blockchain technology Like Like. Leave a Reply Cancel reply Enter your comment here Fill in your details below or click an icon to log in: Email required Address never made public.