Securitization and incentivization, governance, security, utility, and social tokens – the token economy is complex and intertwined with many areas from finance to law, and computer science. With the newly founded Tokenization Working Group, the European Blockchain Association (EBA) wants to support expert exchange and education as well as provide a collaborative environment to gather hands-on experience with real-life tokenization projects. Nicolas Weber, Head of Business Development at EBA member Amazing Blocks and Philipp Kothe, Blockchain Architect at founding EBA member Datarella initiated the working group. Here is their take on the developments in the field of tokenization and what they want to achieve with the working group. Hint: everybody who is interested to join is very welcome!
EUTOK is the latest of the EBA engagements. What does EUTOK stand for and why was it initiated now?
Philipp Kothe: The name is simply an acronym for “European Blockchain Association Tokenization Working Group”. The idea for the working group came up when Amazing Blocks joined the EBA and we got to talk about their business. Since tokenization is such a broad topic with interfaces to many disciplines from economics to computer science and use cases ranging from securing assets and incentivizing behaviour, to creating new marketing experiences, we felt it is important to provide a framework for interdisciplinary exchange, collaboration, and education. Especially since much of the infrastructure and applications are maturing.
Nicolas Weber: As an EBA member, we wanted to actively contribute to the ecosystem. The working group is a perfect way for us to let others profit from our tokenization know-how while we can explore new developments in the industry together with others. It is still early days for the token economy, but we think it is important to start as timely as possible to bring experts from all areas, legal, tech, finance, together, educate and help others to get on board.
Why is tokenization increasingly becoming relevant on par with the current crypto market performance?
Nicolas Weber: As protocols are becoming market-ready, we are seeing more adoption and more innovative use cases. Players from traditional industries are entering the space. PayPal, Mastercard and Tesla are accepting payments in Bitcoin, artists are selling their pieces as NFTs, and mobility providers are using tokens as incentive for the sustainable use of urban mobility infrastructure. Increasing problems with centralized systems along with growing standardization and progressive regulation for decentralized infrastructures pave the way for a wider adoption of tokenization, which is particularly interesting for imperfect markets like art, real estate, private equity or data, where blockchain provides an efficient infrastructure.
What is the purpose and the goal of the working group?
Philipp Kothe: The main goal is to provide both, a forum for interdisciplinary exchange and networking as well as a collaborative environment for initiating and implementing concrete tokenization projects. We think the best way to develop frameworks and standards is to test them against practical experience.
Nicolas Weber: A big goal is also to provide insights and education at an early stage about different tokens and how to evaluate them. We want to provide people who are interested in the field with a reliable source of information and access to expert knowledge and a path into a new field.
What kind of tokenization projects will you be working on and which token types are you mainly interested in?
Philipp Kothe: For one, the EBA itself is organized as a semi-decentralized Autonomous Organization and we will be working on a reward / governance token to incentivize contribution to and involvement in the EBA. Another project we are exploring at the moment is an NFT with an integrated copyright licence.
Nicolas Weber: As for the tokens, we are basically interested in all of them, whether they are stable coins, utility or security tokens. Also, we focus on newly emerging use cases like social tokens as well as merging DeFi with technologies like AI.
Tokenization touches many scientific areas, four of which you mention on your project page: Business & Finance, Economics, Law, and Computer Science. Where do you see the biggest challenges and how can EUTOK help to address them?
Philipp Kothe: Tokenization always involves all four areas to a certain degree. The business value of the token, its design and the tokenomics, the law frameworks, and the underlying technological infrastructure – all needs to be considered thoroughly before deploying a token. That’s why it’s best to use advanced modelling and simulation systems allow to design and test token economies before they are deployed.
Nicolas Weber: For one, a challenge in business & finance is to integrate the traditional financial sectors and the token economy. One of the biggest overall challenges is to establish a legal framework. Liechtenstein is a pioneer with its Token Act but in many other countries the legal basis is still unclear. But for DAOs or security tokens to succeed, clear guidelines and regulation is needed here. The task is to provide a strong regulatory framework, which still leaves enough room for innovation.
How do you evaluate the sustainability of a token?
Philipp Kothe: That is an important question. To evaluate a token, we look at the community, the functionality, the value flow and circulation mechanisms, the protocol, the asset/ownership/value it represents. Other indicators are environmental aspects of the protocol, i.e. is it based on proof-of-work or proof-of-stake, and the way it is launched and distributed.
What are the next steps for the working group?
Nicolas Weber: Apart from regular weekly meetings, we are planning to create webinars and host online meet-ups to discuss current topics with a broader audience while we are starting on the mentioned projects. But the biggest task we have assigned to ourselves is to get more people on board and spread the word. So, whoever is interested, please contact us!
Who can participate in the EUTOK working group and how can interested organizations and individuals get involved?
Philipp Kothe: The working group is open for all EBA members. We want to address experts from companies, regulators, start-ups, founders – whoever is interested in actively participating in our educational and practical activities is more than welcome!