Thread by @blockworksres

A (Potential) New Ethereum Token Standard

EIP 3525 could open up a whole new world of use cases within crypto that are still being uncovered.

But how? 🧵 by @swmartin19

1/ Token standards provide a universal framework for developers and users on how various tokens can be transferred, requested, and approved.

There are two primary token standards used today: ERC-20 and ERC-721.

2/ The ERC-20 token standard introduced a standard for fungible tokens i.e. where every token is equal to one another (think AAVE, YFI, UNI, and other Ethereum tokens).

This standard allows any dev to easily create their own transferable and composable asset.

3/ The ERC-721 token introduced a standard for non-fungible tokens through unique TokenID's.

This eventually led to the rise of digital collectibles but has the potential to be used for things like events ticketing, music, representing LP positions (UniV3), and more.

4/ Both token standards come with drawbacks:

- ERC-20: A separate data structure is required for tokens with different properties, resulting in a large amount of contracts created.

- ERC-721: Have no quantitative customizability, which limits liquidity and computability.

5/ Projects like NFTX use ERC-20 tokens to bring the standard's quantitative factors to NFTs (ERC-721's).

On the other hand, projects like 88mph use ERC-721's to bring their descriptive nature to ERC-20 tokens.

There is clearly product market fit for a hybrid between the two.

6/ EIP-3525 looks to introduce a standard for semi-fungible tokens, bringing the best of both ERC-20 & ERC-721 tokens together to enable the financialization of NFTs.

7/ Semi-fungible tokens are essentially NFTs with quantitative factors.

This is possible by extending an ERC-721's data structure to include a "slot" to signal properties and a "unit" that acts similarly to an ERC-20's "balance".

8/ Tokens with a different "slot" are non-fungible, whereas tokens with the same "slot" are fungible.

An NFT with a unique slot can be fractionalized by splitting up the amount of "units", whereby the sum of every "unit" is always equal to the original amount of "units".

9/ The above framework paves the way for a semi-fungible standard that can tokenize real-world assets in a way that ERC-20 and ERC-721 tokens could not.

The use cases are still being uncovered, but this token standard is ideal for bonds, insurance policies, or vesting contracts.

10/ @SolvProtocol is an example of a team working on bringing bonds to crypto through ERC-3525 compliant vouchers.

11/ These vouchers:
- Receive and lock an amount of token collateral
- At maturity, charge the issuer stablecoin for principal repayment & accrued interest
- Send stablecoin payment to the investor’s wallet
- Pay back the investors in native tokens if the call option is exercised

12/ Semi-fungible tokens could open up a whole new world of use-cases within crypto that are still being uncovered

If you enjoyed this thread, follow @blockworksres and check out Solv's project docs to read more on how they are using the ERC-3525 standard docs.solv.finance/solv-documenta…