Thread by @CrossChainAlex

🧵 Was cooking dinner and mulling over tokens, why there are so many, do we ever need them, maybe ERC-20 tokens are not what we thought they were, and why I'm slowly catching on to the potential of #NFTs. Random thoughts, some of it obvious, felt like typing it up. 1/16

Currently I only really see two "use-cases" for the majority of ERC-20 tokens in most cases not providing much real utility. Projects create them as it is an easy way to bootstrap a fundraise and a way to provide future incentives to use their protocol. 2/16

Us guys follow that thread and look to speculate on this something out of nothing value creation to try and acquire these tokens at lower prices and sell them at higher prices, whilst trying to outrun lack of real utility or high emissions. 3/16

When are ERC-20 tokens required? I guess it's really for the #PoW or #PoS layer 1 and layer 2 blockchains. We need $BTC, $ETH and arguably some of the native tokens of the other chains in order for the #blockchain to run and operate as it should. 4/16

Aside from that what are the justified use cases for a token? I do think their are some sensible models for governance, security and incentives and the likes of $AAVE, $CRV and the interaction between $LUNA and $UST spring to mind. Probably others too, just a few examples. 5/16

Beyond that the models tend to veer into extreme Ponzi territory but perhaps this speculative side is the rocket fuel to pull money into the ecosystem and incentivise usage of legitimate protocols. And we can't complain with the gains that we can make on these opportunities. 6/16

And this is where I've started to warm to ERC-721 AKA #NFTs. I originally dismissed them as overpriced crap art (and missed lots of gains with that view), but I've been educating myself and clearly there's a lot more at play that we're starting to see come to fruition. 7/16

If ERC-20 tokens are the foundational layer for #blockchain operations and core borrowing, lending, and trading operations, then #NFTs are the ownership layer for assets on the blockchain, offering a complimentary alternative to use cases ERC-20 has failed to capture. 8/16

We're now seeing use cases where ownership of an ERC-721 token offers you non-fungible, equitable and direct ownership of an asset. Whether that's a fund, community, piece of land in a #metaverse (maybe a real piece of land in the future)... all very valid and interesting. 9/16

Once you remove the need to pour money and tokens into liquidity pools with hyper liquidity (and a focus on speculation rather than usage) then there is a whole world of opportunities. Many of which I am starting to explore now and am excited about developing. 10/16

You don't necessarily need hyper liquidity for meaningful assets that don't need to be bought and sold daily. Although it's interesting to see a use case for ERC-20 being played out as a liquidity layer for #NFTs, see @NFTX_ and @FloorDAO for example. 11/16

But here's what I find really interesting. The emergence and potential of ERC-3525 offering the potential to combine the best of both worlds for fungible "utility" tokens and non-fungible tokens, a semi-fungible token, @SolvProtocol are doing some interesting things there. 12/16

A trifecta of hyper liquid fungible tokens, somewhat fluid semi-fungible tokens, and hard fixed ownership of a unique asset via non-fungible tokens. Super interesting and multiple opportunities for them to layer and interact with one another in many interesting ways. 13/16

Anyway, sorry, like I say a stream of consciousness series of thoughts I wanted to get down for my own benefit if nothing else. Some of this is probably blindingly obvious to many of you. It's very surface level and a topic that I want to dig into a lot deeper. 14/16

To clarify, I'm not saying ERC-20 is useless. Far from it. I'm just really interested in the new dynamics and what the future holds. I think it's going to throw up a whole load of new models, innovation with new possibilities as part of the next evolution of #crypto. 15/16

Thanks for reading, hope someone out there found this interesting. Would love to hear about thoughts, opinions, projects relevant to the above. There's definitely smarter people out there with views on this topic so please direct me to any resources I may find useful. 16/16