Zap Components #3: Tokens
Today, tokens are everywhere. In fact, there are some 4000+ ERC20 tokens alone. Some estimate that, in the future, there will be millions. In theory, we can tokenize anything. For now though, we’re only seeing significant interest in tokens that track stable currencies: Stablecoins. In the near future, we’re expecting to see more and more tokenized assets, such as real estate or collector cars, commodities like oil or gold, and stocks such as Amazon or Tesla.
Ethereum ERC20 Tokens
Besides offering oracles and bringing real-world data to blockchain, Zap Protocol has the unique power to issue ERC20 tokens. And combine them both. This opens up an endless array of distinctive possibilities. An instant stablecoin springs to mind. Or instant tokenization of real estate. Or commodities, or blue-chip collectables. Basically, you can tokenize anything and set oracles to track whatever data you need for it. Simultaneously. Instantly. In the past, this required time-consuming, custom-built solutions on top of Ethereum. With Zap Protocol, these powerful functionalities come right out of the box.
Basically, you can tokenize anything and set oracles to track whatever data you need for it. Simultaneously. Instantly.
These tokens can list and trade on regular exchanges, just like any other Ethereum token. This enables entire secondary markets outside of Zap Protocol, which can be seen as their native, autonomous decentralized exchange. Furthermore, Zap supports auto-listing these tokens on ‘regular’ decentralized exchanges to automate the listing process.
But Zap ERC20 tokens aren’t your average ERC20 tokens either. One major recurring issue with these has been the lack of liquidity. A token isn’t liquid untill a lot of people buy and trade it, but who buys and trades an illiquid asset? This has been a big limiting factor in both use and adoption.
Zap ERC20 tokens are minted and burned automatically as people bond and un-bond to their bonding curves, basically creating a completely autonomous, self-adjusting supply. This ensures an always liquid token model that overcomes the liquidity bottleneck from the get-go.
Another barrier Zap Protocol tackles is the issuance of individual tokens for assets or services that projects offer. Take Propy or Curio Invest for example, who do real estate and collector cars respectively. Like most projects, both have a general platform token, but no individual token per offered asset. This is because it’s hard to release hundreds or thousands of specific tokenized assets and to get them sufficiently liquid.
Zap solves this by offering a pre-made solution to issue individual tokens with that are instantly liquid through built-in automated market making. This way, Zap makes it easy for developers to include this valuable extra capability into their platforms. This subsequently opens up entire speculation markets and true price discovery possibilities per asset offered.
Example: Rally RD is a platform where anyone can invest in blue-chip collectables, yet trading windows are limited to once every two months due to liquidity constraints. It could take years to build sufficient liquidity per asset to enable 24-hour trading. Having these assets tokenized with Zap Protocol would eliminate this bottleneck.
As mentioned earlier, these tokens can list and trade on any exchange just like any other crypto token, allowing crypto speculators to diversify into luxury real estate properties and rare collector cars, for example. Once token holders redeem their tokens on the protocol, profit is collected if the underlying asset appreciated in value. Additional dividends holders are possibly entitled to, such as rent, are handed over when tokens switch owners.
Note this principle can be applied to any form of tokenization, ranging from oil and gold to data and oracles. Obviously, additional revenue streams such as rent or dividends are exclusive to real estate and stocks.
Now we tackled both data, tokens and how these intertwine on the Zap Protocol, there’s only one major component left to discuss: Bonding Curves.