Token Economy: Money, NFTs & DeFi

The main questions that need to be answered in an economic design process are:

Asset transfer tokens:

Security tokens settled by Web3 infrastructure can facilitate frictionless settlement processes, without sacrificing legal protection.26 Compliance comes built into the token contract. The self-enforcing code is an efficient answer to a complex aspect of trading securities, where regulation can vary depending on asset type or investor type, taking

In Web3, asset-backed tokens could be seen as a type of representative money, since they represent a physical object or digital property right.

If a token is built on an existing blockchain infrastructure using smart contracts or similar approaches, the token is referred to as an “application token.”

A token contract represents the deeds to the property and adds all relevant information in the form of metadata to the token – such as the size, the address, the price, the ownership history, and other relevant data.

Minting event: Tokens are minted upon proof of a certain event. This event can be a part of the incentive mechanisms of a Web3 protocol, where participants of a distributed network are rewarded for some kind of action within the network. In this case tokens are designed to incentivize a new form of collective value creation towards a common purpose

“Fractional-reserve banking” refers to a banking practice where banks only hold a fraction of their customers’ bank deposits as liquid assets in reserve, and are allowed to lend the remainder of the money to other customers, thereby earning money with their depositors’ assets.

The implementation of security tokens is a complex techno-legal task and their feasibility often also depends on network effects.