Binance Research, the market research and analysis arm of Binance, has published a report on tokenization and the key factors when evaluating and developing on-chain token economies.
The World of Tokenization states that, in spite of Ethereum’s current dominance, it is too early to rule out potential competing blockchains.
Ethereum has played a major role in spurring the tokenization of the blockchain universe. It is currently the most used blockchain worldwide for developers to issue new tokens. Specifically, there are hundreds of thousands of tokens already issued on Ethereum, along with many token standards either fully developed or in progress.
Scalability constraints have, however, paved the way for competing programmable blockchains to support their own token standards, either natively or constructed, Binance Research observes.
“In the long-run, a wide variety of programmable blockchains will likely coexist if interoperability solutions across chains develop and prove to be secure and usable,” it comments
Binance Research flags up several examples of competition occuring between different blockchains, such as:
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dApp availability or growing use cases: the more applications a blockchain has, the greater the value proposition is.
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Transactions and pace: the faster a blockchain is, the more appealing it generally becomes. On-chain transaction frequency also reflects the popularity of a network.
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Blockchain fees: the lower on-chain and token issuance fees are, the higher the incentives to interact within the on-chain ecosystem.
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Easiness to build: elements like a test-net, EVM-compatibility and number of smart-contract languages play a key factor in attracting users.
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Security and blockchain development: general activity on the blockchain, reflected by the number of improvement proposals or the count of developers on layer 1, is generally an accurate measure of the health of a blockchain. In addition, blockchain security remains essential with vector attacks and past attacks being focal points.
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(De)centralisation: the degree of centralisation impacts the value proposition of a chain, particularly from the perspective of potential token stakeholders.
At the same time, however, ‘impossible trade-offs’ remain, which ultimately stem from the blockchain triangle (i.e., scalability, security, and decentralisation cannot be achieved simultaneously). “As a result, key drivers such as on-chain metrics, level of adoption, or the size of the developer pools remain as some of the core factors to consider,” according to Binance Research.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.