What can the Tokenized protocol provide that no other token protocol can?
James Belding: I would like to preface my response with the fact that I believe every token protocol has various trade-offs, and I believe that a decent case can be made for some of the other protocols for certain use cases, or when looking to optimize around certain design principles and/or philosophies. I also think that there has been a lot of inspiring work done by some of the other token protocol teams.
With that said, I believe the Tokenized Protocol distinguishes itself from the other protocols in that it optimizes for maximum utility for users. In other words, our design process started with the customer experience and worked backwards to the technology, rather than the other way around. This approach is something that I believe a lot of people pay lip service to, but do not actually deliver on.
In contrast to our ‘maximizing user-utility’ approach, I believe other protocols have optimized for things such as the following: best developer experience, maximum decentralization over some control/authentication features, minimum amount of technical complexity, the perceived alignment with an ideology, and the smallest possible data footprint.
Designing for maximum user-utility is a challenge because it involves understanding what drives value for the intended users of the protocol, and that is a complicated subject. Part of what makes it so complicated is the fact that the process involves a lot of analysis of the full value chain for many different products and services that are relevant to the protocol. It also involves surveying/understanding different types of people and different types of organizations/institutions, as well as comprehensive product research and development, and many rounds of iteration. We spent a lot of time thinking everything through and planning far into the future, and then feeding our insights back into our protocol’s design to ensure we had the optimal balance in the design.
We believe the Tokenized Protocol excels in several areas to such a degree that it makes it the most compelling solution available (and ready) in the market. Firstly, our set of features is currently unrivaled, and they are really important features. The set of features also cover many important and related functions that are logically and inextricably linked to the lifecycles of the legal instruments the tokens represent, and these features can’t practically be done without a design like ours (i.e., using an off-chain smart contract agent). It is also important to know that our protocol is not just a ‘token’ protocol. It is best described as a commercial records protocol that features tokens, smart contract, oracles, registries, and compliance and governance functions. I don’t believe that any other token protocol has tackled the scope that we have, nor have they begun to think about how to optimize for those features. A lot of these records are important and meaningful to users, and having them on the blockchain is a big and novel value-add.
Secondly, we believe that our structured, generalized, and comprehensive approach to smart contracts, whereby the entire contract is stored on-chain within the parameters of the protocol, yields significant value for users. Our approach allows for a global contract state that depends on actions that are linked outside of the Scripting language native to Bitcoin SV. The contract state allows for many useful features such as practical governance and compliance. I’d also argue that Script, by itself, is fairly limited in its ability to handle many of the functions necessary for really valuable smart contracts…especially with respect to terms and conditions that affect all token holders on a particular contract.
Thirdly, our approach allows for the same flexibility that traditional IT infrastructure offers, while at the same time allowing for all of the benefits conferred to data that is passed and stored on a blockchain/DLT/Bitcoin-based network. That is, users of our protocol have all the control and visibility they need to manage business in a practical manner such that no new risks are introduced into their operations, only benefits. If mistakes to their records are made, they can be fixed. If a token holder, or contract administrator, loses their private keys, they can get their tokens/admin control back and in an efficient and cost-effective manner. If the contract has a bug in it, it can be fixed. If new features become available, the contract can be upgraded in a seamless manner that doesn’t unnecessarily disrupt the rest of the ecosystem.
We believe we have been successful in developing a protocol that strikes the best balance for our design goals and the solution requirements, and ultimately that means users will get a better, faster, and, cheaper experience when using products and services that utilize our protocol, in comparison to any other solution. We look forward to testing our hypotheses in the market.
What are Tokenized’s top goals for 2021?
James Belding: Our top goals are to deliver a few key features that ensure our first few customers get a great product and for them to have a world-class customer experience. We have some big announcements that will be made over the next few months, but I am unable to share too much at moment.
What are you most excited to see built atop the Tokenized protocol?
James Belding: I am really looking forward to having fully on-chain, and real, entity contracts, in a similar-style to Ricardian contracts, with tokenized ownership certificates and on-chain smart contract-enforced governance. There are some exciting features that this approach enables on the UX-side of things which drives value by stripping out middlemen, administrative costs, and process inefficiencies that currently hinders the financial system. It also allows for us to make contracting and financial services much more accessible without reducing the value proposition of more complex financial arrangements.
In other words, we believe that we can make the process of creating, trading, and managing commercial records faster, simpler, and lower cost in a universal sense.
Since the launch of the Tokenized API, have any customers surprised you in how they want to utilize the Tokenized protocol?
James Belding: Definitely. There has been a number of interesting, novel and compelling use cases that are in the works, but unfortunately, I can’t reveal any details at this stage.
Of the Upcoming Features mentioned in the blog post detailing the API launch, which do you consider to be of top priority?
What are your thoughts on the recent NFT craze?
James Belding: I think it is mostly nonsense. I am a big believer in the fair exchange of value, and I think some people involved in NFT transactions are not getting the value that they think they are, or worse, are being taken advantage of by people who know better. I sincerely hope that no one has been financially devastated by the NFT craze. I would not be surprised to see some more lawsuits get filed in the coming months.
With that being said, I believe that a great deal of value can be generated from products and services that leverage non-fungible tokens, especially when they are used to represent real, valuable, and clearly defined legal rights and duties. I also want to be clear in that I think there are several companies/projects out there that are doing the right thing with respect to delivering real value to people with NFTs, and I also know that there is also a lot of harmless fun being had by people who know what they are doing.
Do you see any opportunity for Tokenized here?
James Belding: Absolutely. We have plans to support many types of non-fungible tokens including ones that represent the following: copyright assignments, commercial and consumer-focused digital media licenses, financial instruments, and many more. However, you probably will not hear us use the term ‘NFT’ that much. 😊
Can you give your thoughts on the ‘Layer’ labels for Tokens? (ex. STAS as L0, sCrypt as L1 and Tokenized as L2)
James Belding: I do not think it is a useful abstraction, especially when one considers the totality of the IT systems involved with real commerce on Bitcoin, and the relative risks, opportunities, and costs for each token protocol. I also take issue with many of the perceived positives and negatives of the different ‘layers.’
Sometimes a feature/function can be better or worse, in comparison to another approach, but to a degree that is not meaningful to the value proposition. The magnitude of pros and cons is important. For example, I’d humbly suggest that those who say L2 solutions ‘can’t scale,’ or ‘have issues scaling,’ have not actually done a proper assessment to evaluate the actual costs vs the benefits.
What are your thoughts on using satoshis for tokens?
James Belding: I generally refer to token protocols that use satoshis to represent the unit of account for other tokens as colored coins, and I am not a fan of that approach. I do not think there are enough to fully account for a global financial system, by a long shot, without using many different denominations (e.g., $2, $5, $10, etc. bills). There are simply too many financial instruments in global markets.
Unfortunately, using many different denominations blows up the size of the transactions up (my estimates are 2-5x the size of non-colored coin solutions) while also making scripts that involve tokens much more complicated, and also making wallet/application development more complicated. I also suspect that services/agents will be needed to allow wallets to practically operate with denominations. Having said that, I understand why some companies/projects are using them for some use cases, and I think the teams providing solutions that use colored coins will likely deliver on a basic set of needs in the short term.
Do you think multiple Token protocols atop BSV can exist? If so, why?
James Belding: I do think so, but I think there will only be one that becomes a global standard for financial instruments and commercial records. The relative complexity of a smart contract-based financial system that utilizes a public distributed ledger is significant in comparison to modern financial messaging standards. I think it will be too complicated to support more than one on a global scale, and I don’t think there are any benefits to offset the integration complexity and costs. One well designed protocol can do it all and can do it well.”
How is that different than claiming multiple crypto currencies can co-exist?
James Belding: If multiple token protocols exist atop BSV, then they will service different use cases and they won’t compete with each other. However, I think the same reasons for why there can only be one global distributed ledger in the long term, will also apply to token protocols.
How can BSV out-compete Ethereum?
James Belding: By being faster, better, and lower cost. A key aspect of ‘better’ and ‘faster’ for BSV, in comparison to Ethereum, is its advantage in scaling its data throughput. BSV’s scaling capabilities are effectively unbounded, and that drives economies of scale which allows for much cheaper costs on a per transaction basis, not to mention allowing for it to be an actual mainstream solution.
Ethereum’s scaling roadmap is a disaster and the protocol’s core design choices do not allow for the same degree of parallelism as BSV’s scripting system.
How can BSV profit from cooperating with ETH and DeFi?
James Belding: I’m not so sure about ‘cooperating’, but there are many companies that have become disillusioned with Ethereum and other blockchains, and are actively looking for practical solutions that allow them to deliver on their business plans.
Token-focused solution providers on BSV can provide significant value to these customers now, and in a competitive way, that will generate profit for the BSV industry.
What impact do you think the LAW narrative has had on BSV with respect to tokenization?
James Belding: I think it has been extremely helpful as it resonates with the type of people we want to attract to the network, and it has addressed critical concerns/questions that have been holding back the mainstream adoption of the technology.
I am all for disruptive innovation (I’m an admirer of the likes of Uber and their approach to legal uncertainty and ‘playing in the grey’), however, I think commercial records, aka people’s wealth/livelihoods, is a lot more consequential to a lot more people than ride sharing.
A lot of laws and regulations are there to protect people, and the history of the financial industry is full of incidents where innocent people were seriously affected for the worse by the actions of others. I consider many laws and regulations to be the result of important lessons we have learned in the past, and I am not so quick to throw them all out. I also believe that the opportunities Bitcoin enables does not require changing most laws, if any.
If you could wave a magic wand and change something about the BSV culture or business environment, what would it be?
James Belding: I wouldn’t change a thing!
Thank you, James, for taking the time to answer my questions. I hope the readers learned more about Tokenized. Please be on the lookout for the next interview in this series.
This article was lightly edited for grammatical and clarity purposes.
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