Tokens enable turning traditional non-digital objects into digital forms that live on the blockchain. They can then be used to represent ownership of real-life assets, company assets, or investment assets.
Tokens offer an efficient way to represent ownership of an asset on the blockchain and increase the asset’s liquidity, tokens have also been used to establish authenticity and provenance of a product, provide single-touch access to complete product data, and facilitate disintermediation, etc.
And so, more businesses are finding assets that can be tokenized and also finding out ways tokenization can help them improve on current business processes or generate more revenue.
Even though the benefits may seem obvious, the concept of tokenization seems complex and highly technical. Understanding what tokens are and how they can be helpful to a business can be quite daunting, especially for those who are less technically inclined.
The token taxonomy framework by creating a common language for tokens enables a universal and consistent way to build tokens; breaking down tokens into their various component parts and ensuring that these parts are well defined, well understood, and well-known.
Having a common language for tokens, anyone can build tokens and define their characteristics in a universal and consistent manner. Thereby breaking down tokens into their various component parts and ensuring that these parts are well defined, well understood, and well-known, which will allow for more people to understand the features and functions that are programmed into tokens.
Tokens are generally made up of similar layers. They only differ in the features and capabilities the components of each layer enables. The layers that make up a token are the base token layer, behaviors or behavior group layer, and token property layer. There are varied options on what you can feed into each layer for example the base token layer offers different options or types of base token same as the behavior and property layer
Base Token, Behaviors, and Property.
The token base determines what sort of behavior is possible for a token. Certain behaviors are incompatible with certain base tokens and some behaviors are implicit for certain base tokens. The behaviors together with the base token will determine a token's possible use cases and what sort of token property it may require.
Base token types
Fungible (tF) or interchangeable tokens and non-fungible (tN) or unique tokens are the basic.
These can be further broken down into fractional fungible, fractional non-fungible, singleton, unique fractional fungible, unique whole fungible, whole fungible, whole non-fungible, and Hybrid which could consist of a parent fungible with a child non-fungible or a parent non-fungible with a child fungible.
Behaviors
Behaviors are capabilities that apply to a token. An example of a behavior is transferable (t), which simply is the ability to transfer ownership of the token. In contrast, is non-transferable (~t), which implies that change of ownership is restricted.
An example could be a vote token. Other behaviors that exist under the token taxonomy framework include burnable, divisible, indivisible, pausable, issuable, mintable, delegate, and holdable attestable.
A behavior group is used when we have a common set of capabilities that are so compatible they are often used together. An example is PPC (Processed Claim Control) - a group comprising 3 behaviors (pc, m, r) which stands for processable, mintable, and roles.
Property
They are information or data a token contains about itself or the object it references. It can also be used to record a token’s activities. An example will be a token that references an inventory item having the SKU property.
The next step is piecing the various pieces into an easily digestible whole:
Creating a Token Template
The above components can be combined to create a token template that can be implemented or put to use i.e. used to represent an asset on the blockchain. The process is similar to when a UX designer makes a template for an app that engineers can then execute.
A template mainly describes the characteristics of a token and how it will function while implementation involves writing the smart contract and deploying it to the blockchain. A token template could, for instance, be designed for car manufacturers to represent their vehicles on the blockchain, and a shoe manufacturer could also tokenize their product using such a template. Token templates can have various applications, as long as their capabilities and restrictions are appropriate.
A token template has two parts: a template formula and a template definition.
A template formula is a shorthand way to define and describe a token template by using letters and symbols to represent the components of each layer that make up the token (base, behavior/behavior group, and properties).
[Layer1 {Layer2, Layer 2} + Layer3]
BASE TOKEN BEHAVIOR, BEHAVIOR GROUP PROPERTY SET
[Base token {behavior, behavior group} + property set]
The token taxonomy framework formula syntax.
A template definition describes the formula more explicitly.
Let’s say we were to create a token template, the formula could go thus;
[ꚌF {~d, g, SC} + SKU ]
And the definition would be:
With a fungible token (tF) that is non-divisible (~d) and delegable (g), owners can allow another party to burn or transfer the token on their behalf. Supply can be added and removed based on need (SC) and specific SKU information can be added to the token.
Conclusion
The token taxonomy framework makes it easier for non-technical people to understand, define and describe a token through its function and behavior. But its major advantage is that having a common language for understanding tokens helps the various parties involved in a tokenization project to work more seamlessly.
One could create a token template or manipulate an existing template under the token taxonomy framework using a visual studio code extension called the
Though the token taxonomy initiative and its framework are still a work in progress, we can already see its usefulness. It will enable faster and more secure development of valuable token projects which will encourage the global adoption of digital assets.
Also published here.