EIP-3525: Semi-Fungible Token Explained | TKX Weekly

by @Guaaronnnn
editor @FriedWagyuu

Part I. About EIP-3525

Intro

Recently, EIP-3525 from Solv Protocol was approved. EIP-3525 is a token standard for semi-fungible tokens. It is the first standard where a token takes both the descriptive features of a non-fungible token (NFT) and the quantitative attributes of a fungible token (FT). In other words, ERC-3525 = ERC-20 quantitative operations + ERC-721 compatibility.

Design of ERC-3525

ERC-3525 extends the structure of ERC-721. Besides having tokenIds which differentiate each token, ERC-3525 introduces two new values — slot and value. All three attributions enable quantitive operations like dividing, combining, transferring, and comparing NFTs within the same slot.

  • tokenId: from ERC-721, represents the nature of non-fungible tokens.
  • slot: an attribute that is attached to each token, the same slot represents the same token attributions, allowing tokens with different tokenIds to be identified as identical. For example, if two bonds have the same issuance date, maturity date, and interest rate, then they will be assigned the same slot. So the two bonds can be divided or combined like one.
  • value: the amount of the assets. For example, a $100 bond can be divided into two $50 bonds. 100 and 50 can represent the value of the assets being held.

The <ID, SLOT, VALUE> design allows quantitive operations like dividing, combining, transferring, and comparing the tokens within the same slot attribute. It is worth noting that ERC-3525 has backwards compatibility with ERC-721, which means ERC-3525 tokens can be used in all the infra that support ERC-721, and developers can switch to ERC-3525 without additional development.

Why We Need ERC-3525

To understand why we need ERC-3525, here is a comparison with existing token standards:

  • ERC-20: ERC-20 is the first token standard for Ethereum. Every token is fungible so the quantitative nature brings high liquidity and scalability. However, there is no tokenId property, so each contract can only represent one kind of asset.
  • ERC-721: adds tokenId property so each token can represent different kinds of assets. But each token cannot be divided, merged, or represent quantitative value, so it is harder to quantify and manage when there is a need to split a token.
  • ERC-1155: allows each token to be configurable on top of ERC-721, adding supply, metadata, and other attributes for each tokenId. The main use case of ERC-1155 is to distribute the same NFT with multiple supplies. However, the tokenId and supply of each NFT are fixed when minting, so tokens cannot be combined or merged and there is no backward compatibility with ERC-721.
  • ERC-3525: maintains both features like ERC-20 and ERC-721. Tokens are non-fungible through slot and tokenId. And tokens can be very fungible with abilities to divide and merge. ERC-3525 solved the problems of ERC-1155 with trade-offs between ERC-721 and ERC-20.

Potential Use Cases of ERC-3525

  • DeFi: the nature of ERC-3525 is suitable and compatible to be used in financial instruments like bonds, insurance policies, vesting plans, mortgages, etc. The splitting and combining features allow people to quantify tokens and increase flexibility in asset management. Financial instruments usually have various attributes, for example, there are different types of bonds with different issuance dates, maturity dates, interest rates… With ERC-3525, bonds with the same attributes (slot) can be split or combined by value transfer. The same applies to other financial instruments.
  • GameFi: ERC-3525 can also be used to create and distribute virtual assets in games and metaverses. It can split gaming assets into smaller pieces. For example, a piece of virtual land can be split into pieces and owned by different guild members instead of held by one entity.

Closing Thoughts

ERC-3525 would be counted as an exclusive asset class on top of ERC-20 and ERC-721. Both ERC-20 and ERC-721 are representing billion dollars market, and ERC-3525 might be the one to combine both. Looking into the past, ERC-721 was proposed in early 2018, but its general adoption started in 2021. Thus, we are still in a very early stage to explore the applications and possibilities of ERC-3525.

Part II. Market Updates

White House: Bitcoin Mining Must Be Greener — Or US Should Ban It
The White House today suggested that U.S. lawmakers and regulators could soon crack down on cryptocurrency mining because of its large carbon footprint. They said crypto miners should reduce greenhouse gas emissions, with help from the Environmental Protection Agency (EPA), the Department of Energy (DOE), and other federal agencies.

SEC Chair Gary Gensler Backs Giving CFTC Bitcoin Oversight
Gary Gensler said that he supports handing the Commodity Futures Trading Commission (CFTC) the power to “oversee and regulate crypto non-security tokens and related intermediaries.” He stressed that should Congress give the CFTC prime oversight over crypto, his own federal agency shouldn’t be overlooked.

Crypto Investment to Slow in 2022 as Market Matures, Says KPMG
As global investment in cryptocurrency and blockchain companies dropped to $14.2 billion in the first half of 2022 from a record $32.1 billion last year, accounting firm KPMG predicts that a slowdown in crypto investment will continue for the remainder of the year.

Russia Wants to Use Stablecoins to Get Around Western Sanctions
Deputy Finance Minister Alexey Moiseyev today said the country is exploring stablecoins to make payments with “friendly countries”. The country’s biggest news agency quoted Moiseyev as saying that Russia is working to “create bilateral platforms” with “tokenized instruments” to avoid using U.S. dollars and euros.

The Final Countdown to the Ethereum Merge Has Officially Begun
The Ethereum blockchain’s Merge is officially underway and will likely kick in sometime between Sept. 13–16. The Bellatrix upgrade — the network’s final “hard fork” before the Merge — was activated on Tuesday, marking the beginning of Ethereum’s long-awaited transition from proof-of-work (PoW) to proof-of-stake (PoS).

Part III. Fundraising News

Mysten Labs (Sui) — Layer 1 blockchain
Raised $300M in a series B funding round at a $2B valuation led by FTX Ventures. Other investors include a16z Crypto, Jump Crypto, Apollo, Binance Labs, Franklin Templeton, Coinbase Ventures, Circle Ventures, Lightspeed Venture Partners, Sino Global, and others.

Hubble — Solana-based DeFi protocol
Raised $5M in a funding round led by Multicoin Capital. Other investors include DeFiance Capital, Delphi Digital, Digital Currency Group, Crypto.com Capital, ParaFi, Jump Capital, Decentral Park Capital, CMS, Spartan Group and others.

Spice AI — Web3 data platform
Raised $13.5M in a seed funding round led by Madrona Venture Capital. Other investors include Blackbird Ventures, Basis Set Ventures, Alumni Ventures Blockchain Fund, Asymmetric fund, Protocol Labs and IEX Fund.

Dust Labs — NFT Software Company
Raised $7M in a seed funding round. Investors include Foundation Capital, Solana Ventures, Metaplex, Jump, Big Brain Holdings, FTX Ventures and Chapter One.

Internet Game — Web3 mini-game
Raised $7M in a seed funding round. Investors include ParaFi Capital, Dragonfly Capital, Delphi Digital, Uniswap Ventures, Collab+Currency, Gmoney, Milk Road and Ready Player DAO.

Reference

https://twitter.com/fionaclairema/status/1567376224930136064
https://techflowpost.substack.com/p/erc-3525
https://eips.ethereum.org/EIPS/eip-3525

About TKX Capital

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Note: TKX Capital do not offer any financial advice for retail investors and we have no affiliation with projects in this research.

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