The Three Token Models of Web3 Applications: Understanding What They Are and Their Importance

On April 15th, at the main event of the 2023 Hong Kong Web3 Carnival, titled “The Future of Tokenization”, Xiao Feng, Chairman of Wanxiang Blockchain and Chairman of HashKey Group, delivered a closing keynote speech titled “The Three Token Models of Web3 Applications”. He stated that Web3 applications must meet various needs, and the token models at the Web3 application level and the basic protocol are different. The basic protocol is a single token model, The world should be unified, and the application protocol is a three token model with unique application scenarios. Among the three token models, the first is NFT (data, product, and service value), the second is functional token (usage value), and the third is securities token (ownership value, also known as equity value).

Xiao Feng: The Web3 application layer three token models include NFT, functional token, and securities token

In the recent 2023 Hong Kong Web3 Carnival main event entitled “The Future of Tokenization”, Chairman Xiao Feng of Wanxiang Blockchain and HashKey Group delivered a closing keynote speech that touched upon web3 applications and the importance of token models. He emphasized that the needs of web3 applications vary, and therefore, the token models at the application level and the basic protocol are different. According to him, the basic protocol employs a single token model while the application protocol uses a three token model with unique application scenarios. This article aims to provide a comprehensive overview of these three token models and their significance in web3 applications.

Outline

– Introduction
– Explanation of Web3 Applications
– Importance of Tokenization in Web3 Applications
– Basic Protocol
– Single Token Model
– Characteristics of the Single Token Model
– Application Protocol
– Three Token Model
– Explanation of Three Token Model
– The Three Token Models of Web3 Applications
– NFT
– Data, Product, and Service Value
– Functional Token
– Usage Value
– Securities Token
– Ownership Value or Equity Value
– The Importance of the Three Token Models in Web3 Applications
– Conclusion
– FAQs

Introduction

Web3 applications refer to decentralized applications that operate on blockchain technology. Blockchain technology has revolutionized the way we conduct transactions as it is secure, transparent, and operates without intermediaries. In web3 applications, tokens are used as a medium of exchange, store of value, or digital asset that represents ownership in a particular area.
Tokenization, or the representation of tangible and intangible assets as digital tokens, is critical in web3 applications. Tokenization allows users to have ownership of digital assets and transfer them effortlessly. It also provides new ways of value creation and exchange, facilitating the democratization of finance and ownership.

Basic Protocol

The basic protocol, as defined by Chairman Xiao Feng, employs a single token model. The token is used as digital currency, facilitating transactions and value exchange in web3 ecosystems. The single token model has a wide range of use cases, from simple payments to complex transactions.
Some characteristics of the single token model include divisibility, portability, and fungibility. Divisibility is the ability to break down the token into smaller units, which enables micro-transactions. Portability refers to the ease of transfer of tokens from one account to another without intermediaries. Fungibility is the interchangeability of tokens, meaning that each token has the same value as any other token.

Application Protocol

On the other hand, the application protocol uses a three token model unique to various applications in web3 ecosystems. The three models include Non-Fungible Tokens (NFTs), Functional Tokens, and Securities Tokens.
NFTs are unique tokens that represent ownership of digital data, products, and services. NFTs have value as collectibles or art pieces, and users can verify their authenticity and ownership in the web3 ecosystem. NFTs serve as a valuable tool for digital content creators and developers who can license and monetize their creations.
Functional Tokens are used as a utility token in web3 applications. They grant users access to certain features or functionality of the application, such as voting rights or storage space. Functional tokens are designed to be used within a specific ecosystem and can be exchanged for goods or services.
Securities Tokens represent ownership or equity in an asset or company in accordance with local laws and regulations. These tokens are issued as investment vehicles, representing a share of ownership in the asset or company. Securities Tokens are subject to regulatory compliance, including registration and reporting requirements.

The Importance of the Three Token Models in Web3 Applications

The three token models in web3 applications serve distinct purposes, and their importance lies in the democratization of finance and ownership. NFTs provide a decentralized way of proving ownership and monetizing digital assets, including art, music, and other types of digital data. Functional tokens offer new ways of value creation and exchange, empowering users with more control over their data and assets. Securities Tokens democratize investment, providing more accessibility to a broader range of investors, and help to introduce more transparency and accountability to traditional investment practices.

Conclusion

The three token models in web3 applications play a crucial role in catalyzing a decentralized and democratized ecosystem. The Basic Protocol’s Single Token Model and Application Protocol’s Three Token Model both provide unique ways of creating and exchanging value in web3 ecosystems. While the basic protocol uses a single token model, the application-level protocol necessitates the use of different token models based on the specific needs of the application. The use of web3 applications and token models in a decentralized finance ecosystem can promote transparency, inclusivity, and the democratization of finance.

FAQs

1. What is the basic protocol in web3 applications?
The basic protocol in web3 applications employs a single token model that serves as digital currency, facilitating transactions and value exchange in web3 ecosystems.
2. What are Functional tokens in web3 applications?
Functional tokens are used as a utility token in web3 applications. They grant users access to certain features or functionality of the application, such as voting rights or storage space.
3. What are Securities tokens?
Securities tokens represent ownership or equity in an asset or company in accordance with local laws and regulations. These tokens are issued as investment vehicles, representing a share of ownership in the asset or company.