ERC-3643: A Closer Look at Its Applications

Miłosz

09 Jan 2024
ERC-3643: A Closer Look at Its Applications

At Nextrope, we recognize the transformative impact of technologies such as ERC-3643. In this article, we highlight its applications in the burgeoning DeFi sector. The aim is to showcase the opportunities the standard brings, thereby increasing the efficiency of the global market.

ERC-3643 in Action

The advent of ERC-3643 has significant implications across multiple branches. This section highlights the potential it holds for each.

Find out how ERC-364 compares to other standards!

Financial Sector: Securities Furtherance

This standard frames the process of issuing, trading, and managing securities, providing a more transparent system. It opens up avenues for crowdfunding and democratizes access to investment seizing.

Project Overview

A global financial institution issuing securities sought to expand its trading framework, aiming for greater inclusivity.

Implementation

Leveraging ERC-3643, the entity tokenized its range of securities, including stocks and bonds. This improved the trading process, incorporated compliance mechanisms, and created opportunities for retail investors.

Outcome

The project was a milestone in financial democratization, easing nominal entry barriers. It spelled a change in the view of more accessible and secure financial assets trading.

Real Estate: Augmented Liquidity and Accessibility

ERC-3643 may supply liquidity into a traditionally illiquid market. Therefore, investors can buy and sell fractions of assets. This also simplifies the process of operating properties, reducing the transaction costs and bureaucratic hurdles associated with the dealings.

Project Overview

A real estate company willing to tokenize a portfolio of properties.

Implementation

The company issued digital tokens in the form of property shares. Each token embodied a portion value, enabling people worldwide to invest with smaller capital outlays.

Outcome

The project successfully extended access to real estate investments, previously a domain of high-net-worth individuals or institutional parties. It provided liquidity through secondary markets and ensured compliance with local and international regulations.

Art and Collectibles: Unlocking New Value

The world of collectibles is undergoing metamorphosis with ERC-3643. Artists digitize their artworks and enable them to be traded on blockchain platforms. ERC-3643 not only ensures authenticity but also allows for partial ownership, attracting previous audiences priced out of the market.

Project Overview

A gallery tokenizing rare artworks and increasing accessibility to a broader audience.

Implementation

Through ERC-3643, they were made available on-chain allowing the enthusiast to own and trade parts of high-value masterpieces.

Outcome

Token holders could trade on secondary markets, introducing a new dynamic to art valuation.

Intellectual Property and Patents

Creators often grapple with opaque licensing processes, and challenges in royalty distributions. Traditional methods hinder them from fully capitalizing on intellectual matter which predisposes ERC-3643 to becoming a pivotal player here. 

Project Overview

A technology company aimed to rethink the way patents are managed and monetized. 

Implementation

This involved creating digital tokens, optimizing the licensing, and royalty allocation process.

Outcome

The initiative advocates the author’s right management and activities related to know-how materialization. It enables transparent licensing, simplifies the commission splitment, and broadens accessibility enabling partial ownership for those interested.

Supply Chain and Logistics

In the supply chain, ERC-3643 can be utilized to empower provenance verification. Tokenizing allows for real-time tracking and auditability. This standard could facilitate smoother agreements between parties, leading to decreased operational time and cost of the transactions.

Project Overview

A multinational manufacturing company with a vision to refine supply chain procedures and further product traceability.

Implementation

The company issues ERC-3643 tokens linked to specific batches of products. Each one carries data with origin, manufacturing date, and logistic journey through the supply chain.

Outcome

This increases consumer trust and diminishes the risk of counterfeit goods entering the market.

Green Energy Projects

The renewable energy sector, particularly small-scale green projects, endures funding acquisition due to high initial costs and limited supply. This hinders sustainable energy solutions growth. 

Project Overview

A renewable energy startup planned to fund solar panel installations through tokenized investments.

Implementation

The participants received tokens that not only figured equity in the project but also entitled them to profits from energy sales depending on the token ratio owned.

Outcome

This approach facilitated crowd-sourced funding for sustainable energy initiatives, offering an opportunity to environmentally-conscious investors and promoting the development of green infrastructure.

ERC-3643's Role in Decentralized Finance

Known for crafting monetary ecosystems based on blockchain technology, decentralized finances benefit immensely from adopting ERC-3643. Below, we present some symbiotic examples.

Conducive Regulatory Environment

One of the fundamental contributions of ERC-3643 is the infusion of legal compliance into the decentralized finance sector. While DeFi thrives on the principles of openness and lack of central authority, specific jurisdiction-based law adherence has been a grey area. ERC-3643 pursues seamless KYC, AML integration, and advanced token control features within the token's smart contract. It simultaneously strengthens security and trust among institutional funds.

Broader Asset Tokenization

Beyond typical cryptocurrencies and NFTs, ERC-3643 diversification enriches the DeFi space unlocking new liquidity pools.

Optimized Operations

This includes faster and more cost-effective transactions. Thanks to its modular architecture, it simplifies the integration of new functionalities and services within platforms built on Ethereum.

Conclusion

ERC-3643 transcends being merely a technological leap. From transforming traditional finance to conquering new requisitions around myriad markets. A nexus, merging the rigor of regulations with cutting-edge solutions. As we conclude, it’s evident that the standard emergence signifies a shift between the old and the new, heralding a digital-forward future with endless possibilities.

If you are interested in utilizing ERC-3643 or other blockchain-based solutions for your project, please reach out to contact@nextrope.com

FAQ

What is ERC-3643 and how does it change asset tokenization?

  • ERC-3643 is a blockchain standard streamlining Real World Asset (RWA) tokenization, overcoming regulatory hurdles, enabling fractional ownership, and enhancing transfer processes.

What benefits does ERC-3643 offer for intellectual property and infrastructure projects?

  • ERC-3643 facilitates IP tokenization, simplifies revenue distribution, and fosters collaboration. In infrastructure, it broadens investment opportunities, improves project management, and ensures regulatory compliance.

How does ERC-3643 contribute to healthcare and AI integration?

  • ERC-3643 secures funding for medical research, enhances facility management, and ensures data security in healthcare. It also aids AI content verification, ensuring authenticity and origin tracking.

Why is ERC-3643 significant for asset management?

  • ERC-3643 ensures regulatory compliance, offers flexibility and scalability, and provides a framework for tokenizing challenging assets, making it essential in modern asset management.

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Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.

source: https://www.canva.com/design/DAFDTNKsIJs/8Ky9EoJJI7p98qKLIu2XNw/view#7

Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics

Summary

The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

FAQ

What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.

What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Karolina

18 Mar 2024
What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Enter Berachain: a high-performance, EVM-compatible blockchain that is set to redefine the landscape of decentralized applications (dApps) and blockchain services. Built on the innovative Proof-of-Liquidity consensus and leveraging the robust Polaris framework alongside the CometBFT consensus engine, Berachain is poised to offer an unprecedented blend of efficiency, security, and user-centric benefits. Let's dive into what makes it a groundbreaking development in the blockchain ecosystem.

What is Berachain?

Overview

Berachain is an EVM-compatible Layer 1 (L1) blockchain that stands out through its adoption of the Proof-of-Liquidity (PoL) consensus mechanism. Designed to address the critical challenges faced by decentralized networks. It introduces a cutting-edge approach to blockchain governance and operations.

Key Features

  • High-performance Capabilities. Berachain is engineered for speed and scalability, catering to the growing demand for efficient blockchain solutions.
  • EVM Compatibility. It supports all Ethereum tooling, operations, and smart contract languages, making it a seamless transition for developers and projects from the Ethereum ecosystem.
  • Proof-of-Liquidity.This novel consensus mechanism focuses on building liquidity, decentralizing stake, and aligning the interests of validators and protocol developers.

MUST READ: Docs

EVM-Compatible vs EVM-Equivalent

EVM-Compatible

EVM compatibility means a blockchain can interact with Ethereum's ecosystem to some extent. It can interact supporting its smart contracts and tools but not replicating the entire EVM environment.

EVM-Equivalent

An EVM-equivalent blockchain, on the other hand, aims to fully replicate Ethereum's environment. It ensures complete compatibility and a smooth transition for developers and users alike.

Berachain's Position

Berachain can be considered an "EVM-equivalent-plus" blockchain. It supports all Ethereum operations, tooling, and additional functionalities that optimize for its unique Proof-of-Liquidity and abstracted use cases.

Berachain Modular First Approach

At the heart of Berachain's development philosophy is the Polaris EVM framework. It's a testament to the blockchain's commitment to modularity and flexibility. This approach allows for the easy separation of the EVM runtime layer, ensuring that Berachain can adapt and evolve without compromising on performance or security.

Proof Of Liquidity Overview

High-Level Model Objectives

  • Systemically Build Liquidity. By enhancing trading efficiency, price stability, and network growth, Berachain aims to foster a thriving ecosystem of decentralized applications.
  • Solve Stake Centralization. The PoL consensus works to distribute stake more evenly across the network, preventing monopolization and ensuring a decentralized, secure blockchain.
  • Align Protocols and Validators. Berachain encourages a symbiotic relationship between validators and the broader protocol ecosystem.

Proof-of-Liquidity vs Proof-of-Stake

Unlike traditional Proof of Stake (PoS), which often leads to stake centralization and reduced liquidity, Proof of Liquidity (PoL) introduces mechanisms to incentivize liquidity provision and ensure a fairer, more decentralized network. Berachain separates the governance token (BGT) from the chain's gas token (BERA) and incentives liquidity through BEX pools. Berachain's PoL aims to overcome the limitations of PoS, fostering a more secure and user-centric blockchain.

Berachain EVM and Modular Approach

Polaris EVM

Polaris EVM is the cornerstone of Berachain's EVM compatibility, offering developers an enhanced environment for smart contract execution that includes stateful precompiles and custom modules. This framework ensures that Berachain not only meets but exceeds the capabilities of the traditional Ethereum Virtual Machine.

CometBFT

The CometBFT consensus engine underpins Berachain's network, providing a secure and efficient mechanism for transaction verification and block production. By leveraging the principles of Byzantine fault tolerance (BFT), CometBFT ensures the integrity and resilience of the Berachain blockchain.

Conclusion

Berachain represents a significant leap forward in blockchain technology, combining the best of Ethereum's ecosystem with innovative consensus mechanisms and a modular development approach. As the blockchain landscape continues to evolve, Berachain stands out as a promising platform for developers, users, and validators alike, offering a scalable, efficient, and inclusive environment for decentralized applications and services.

Resources

For those interested in exploring further, a wealth of resources is available, including the Berachain documentation, GitHub repository, and community forums. It offers a compelling vision for the future of blockchain technology, marked by efficiency, security, and community-driven innovation.

FAQ

How is Berachain different?

  • It integrates Proof-of-Liquidity to address stake centralization and enhance liquidity, setting it apart from other blockchains.

Is Berachain EVM-compatible?

  • Yes, it supports Ethereum's tooling and smart contract languages, facilitating easy migration of dApps.

Can it handle high transaction volumes?

  • Yes, thanks to the Polaris framework and CometBFT consensus engine, it's built for scalability and high throughput.