Token Ontology
Tokenizing "real world" assets is a key use case of any blockchain. Among the most common manner one hears blockchain being applied is to create and track digital twins of X. This idea has become so common around blockchain that it has begun to obscure the hidden complexities in accomplishing this task effectively. While it may seem almost trivial (or at least as trivial as any task involving a barely 10 year old technology can be) to just digitize an asset, there are a myriad of hidden assumptions that users and businesses inevitably have regarding how should behave. We expect some things to be divisible and interchangeable while others ought to be fixed and unique, or we assume that there exist some items that can be separated and recombined while there are others whose entropy is irreversible.
To address these complexities, Topl has gone beyond the simplistic dichotomy of fungible and non-fungible tokens represented by the ERC20 versus ERC721 created by Ethereum and adopted by numerous other chains. Instead, Topl has developed a rigorous ontology for tokens created on the Topl Blockchain. We believe such a strong foundation is necessary in order to accurately capture the universe of "real world" assets that can be tokenized and build a robust set token-centered functionality without introducing confusion and difficulty to developers and users.
Within Topl's token ontology, an asset is fully categorized through the answers to 5 questions:
    What is the atomicity of the asset? Or what is the base unit that we use to count instances of the asset?
    Is the asset fungible? Can any two units of the asset be interchange with each other without any effect?
    Is the asset unique? Can only one instance of the asset exist?
    Is the asset divisible? Can the asset be separated into multiple parts without becoming something different?
    Are such divisions reversible? When the asset is divided can it be recombined without any additional work required?
Seeing as 4 of these questions are binary (yes/no answers only), we might expect that our ontology would produce 16 distinct categories; however 10 of these potential categorizations are not logically possible. For example, if an asset is fungible, it cannot also be unique; or if an asset is not divisible such divisions obviously cannot be reversible (since they're already impossible). Ruling out these impossibilities, we are left with 6 distinct categories of tokens in our ontology as pictured below.
These 6 asset categories are capable of accurately capturing the fundamental behavior of tangible assets ranging from coffee (fungible, reversibly divisible) to diamonds (non-fungible, non-reversibly divisible) and intangible assets ranging from commodity futures (fungible, non-divisible) to loan agreements (non-fungible, non-divisible).
Topl's token ontology forms the basis for future token functionality as we will see when discussing Smart Tokens and Impact Credits.
Last modified 9d ago
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