Knowledge Asset Tokens

Using the non- and semi-fungible tokens to create financial assets out of Knowledge & Data

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Last updated 4 months ago

Knowledge Asset Tokens

Using the non- and semi-fungible tokens to create financial assets out of Knowledge & Data

We use both NFTs and Semi-Fungible Tokens (SFTs) under the ERC-3525 standard to represent ownership rights over and token-gate access to Knowledge Assets - whether apps, models or datasets.

These NFTs and SFTs serve as a foundation to empower individuals to take ownership of their data, work and digital assets within the Web3 ecosystem, transforming knowledge assets into financial, decentralized and tradable asset.

They also serve as the base accounting entities of the entire KIP Protocol system. By this means we offer users two means to crowd-fund their work. The NFT-based system allows for the creation of revenue pools attached at a revenue-earning asset, while the SFT-based system lets owners sell shares in an asset directly. The former is better adapted for creators wishing to do large-scale crowd-funding via a token launch, the latter for asset-owners who wish to distribute rights among a smaller number of shareholders (a dev team that wishes to hold equal shares in a product, for example).

Pool-Based Crowdfunding

Under this mechanism a creator of a knowledge asset funds their work through pre-sales of a token associated with it. It is thus better-adapted for creators who seeking a large number of small-scale investors.

Upon minting app token, the App Owner sets up the revenue distribution contract specifying that $KIP revenue from the app will go to the Revenue Pool, a Uniswap v2 style liquidity pool, to be used to buy his own token - called $MEME here for the sake of legibility - from the pool and pay it into a wallet owned by the Owner.
He creates his own fundraising token, $MEME and seeds the Revenue Pool with a liquidity injection of $KIP and $MEME (amounts determined by the Owner).
He sells the remaining $MEME to supporters OTC (price determined by Owner).
The app comes online and the $KIP revenue is used to buy $MEME from the pool, thus pushing up the price of $MEME.
Crowd Funders can swap their $MEME for $KIP, or sell on secondary markets.

This funding mechanism is deliberately designed to be comparatively speculative, since the only way for independent creators to equal VC level rounds in the current climate is via speculative raises.

Use of the ERC-3525 Token Standard

The ERC-3525 standard effectively combines aspects of both ERC-20 and ERC-721 tokens, allowing for the creation of various novel on-chain financial instruments. For our purposes, there are two important features to bear in mind:

That ERC-3525 tokens are effectively fungible within a predetermined set (or _slot as the developers put it) but non-fungible outside of that set. I.e. tokens from _slot XX behave like ERC-20 fungible tokens when dealing with other tokens from _slot XX, but like ERC-721 non-fungible tokens when dealing with other tokens from _slot YY.
That ERC-3525 tokens can own and transfer other tokens, in this aspect behaving more like a wallet or a contract than a conventional ERC-20 token. This means that a revenue-generating ERC-3525 token whose ownership is shared 60:40 between wallets A and B can automatically redistribute revenues to these wallets in the correct proportions.

Or, as the ERC-3525 white paper puts it:

The Ethereum whitepaper describes a currency, or a token system, as “a database with one operation.”
A token or tokenized asset, in other words, is a certain type of data that can be operated upon. This perspective provides an easy way to understand an ERC-20 token13: their core data structure is a 256-bit unsigned integer defined by _value or balanceOf(), and a decimal function, decimals(), will determine the token amount. Transferring tokens by this amount, which is implemented through transfer(), transferFrom(), and approve(), is the main operation for sending tokens from one address to another.
Unlike ERC-20s, ERC-721s abandoned the token amount in their data structure. As a result, the 256-bit unsigned integer that originally designates the token amount now defines a unique _tokenID which represents the ownership over digital or physical assets. Although NFTs share the same address-to-address operation as ERC-20s, the ERC-20 transfer is quantitatively operated on the token amount, whereas the ERC-721 transfer is operated qualitatively on the _tokenID and the amount will always be “1,” to simulate the transfer of ownership, implemented by transferFrom(), safeTransferFrom(), and approve(), etc.
Another noteworthy feature of ERC-721 is its metadata extension. With properties like name, description, and image, ERC-721 NFTs could for the first time in history display rich visual information on the blockchain. For example, in the metadata extension for Uniswapʼs V3 LP token, custom price curve and liquidity position are presented in an aesthetically pleasing way. On the other side of the coin, however, since ERC-721 canʼt be fractionalized, the liquidity for V3ʼs positions is still largely limited (...)
The ERC-3525 token standard inherits ERC-721ʼs core structure: _tokenID and metadata extension. It also adopts the standard quantitative attribute _value and extends it with a categorizing attribute _slot (along with Slot Metadata to implement the categorizing function of _slot.) The new data structure within the ERC-3525 is defined as an <ID, SLOT, VALUE> Triple Scalar Model.
One of ERC-3525ʼs major innovations on token operations is token(_tokenId)-to-token(_tokenId) transfer, or quantitative operations for NFTs, implemented by function transferFrom(uint256 _fromTokenId, uint256 _toTokenId, uint256 _value) external payable and function safeTransferFrom(uint256 _fromTokenId, uint256 _toTokenId, uint256 _value, bytes calldata _data) external payable. This means that ERC-3525 tokens sharing the same _slot are fungible to each other and that one ERC-3525 token(_tokenId) may be transferred to another. The feature marks the first time in history that an Ethereum token has gained equal status as users (externally owned accounts, or EOA) or smart contracts (contract accounts).
Furthermore, ERC-3525 has inherited the traditional address-to-address transfer within the ERC-721 standard, which is implemented by transferFrom(), safeTransferFrom()."

Tokenization of Knowledge Asset Ownership into SFTs:

NFTs and SFTs as Ownership Tokens: Each Knowledge Asset is represented as a unique SFT, certifying the owner's rights to the knowledge and data within.
New Funding Sources: NFT/SFT ownership enables users to sell rights to various knowledge assets, opening new revenue streams, as well as to fund future business endeavours by selling shares in their future revenues. Any investor who purchases a share in an SFT or in a pool attached to an NFT will automatically receive a share of the payments it receives. This can be used to crowdfund work, reward contributors to multi-person projects or just to speculate on future asset values.

Integrating NFTs, SFTs and Decentralized Knowledge Assets offers a new way to handle knowledge ownership, incentivisation, and exchange, empowering users to take control over their digital assets and fostering collaboration in a knowledge-centric ecosystem.

PreviousII: KIP Ecosystem NextKIP Protocol

Last updated 4 months ago

We use both NFTs and Semi-Fungible Tokens (SFTs) under the ERC-3525 standard to represent ownership rights over and token-gate access to Knowledge Assets - whether apps, models or datasets.

Pool-Based Crowdfunding

Upon minting app token, the App Owner sets up the revenue distribution contract specifying that $KIP revenue from the app will go to the Revenue Pool, a Uniswap v2 style liquidity pool, to be used to buy his own token - called $MEME here for the sake of legibility - from the pool and pay it into a wallet owned by the Owner.
He creates his own fundraising token, $MEME and seeds the Revenue Pool with a liquidity injection of $KIP and $MEME (amounts determined by the Owner).
He sells the remaining $MEME to supporters OTC (price determined by Owner).
The app comes online and the $KIP revenue is used to buy $MEME from the pool, thus pushing up the price of $MEME.
Crowd Funders can swap their $MEME for $KIP, or sell on secondary markets.

This funding mechanism is deliberately designed to be comparatively speculative, since the only way for independent creators to equal VC level rounds in the current climate is via speculative raises.

Use of the ERC-3525 Token Standard

The ERC-3525 Semi-Fungible Token was adopted by the Ethereum Foundation as its 35th ERC token standard in September 2022, placing semi-fungible tokens (SFT) on par with existing fungible tokens (ERC-20) and non-fungible tokens (ERC-721). In the comparatively short period since the token standard was adopted, it has been chosen for use in projects by multiple governments, notably those of , and . The token was designed for the purpose of representing financial assets - and more particularly debt - on chain. In particular, it allows for the fractionalisation of the assets represented, the creating and trading of shares in these assets, and the distribution of income based upon the ownership of shares.

That ERC-3525 tokens are effectively fungible within a predetermined set (or _slot as the developers put it) but non-fungible outside of that set. I.e. tokens from _slot XX behave like ERC-20 fungible tokens when dealing with other tokens from _slot XX, but like ERC-721 non-fungible tokens when dealing with other tokens from _slot YY.
That ERC-3525 tokens can own and transfer other tokens, in this aspect behaving more like a wallet or a contract than a conventional ERC-20 token. This means that a revenue-generating ERC-3525 token whose ownership is shared 60:40 between wallets A and B can automatically redistribute revenues to these wallets in the correct proportions.

Or, as the ERC-3525 white paper puts it:

The Ethereum whitepaper describes a currency, or a token system, as “a database with one operation.”
A token or tokenized asset, in other words, is a certain type of data that can be operated upon. This perspective provides an easy way to understand an ERC-20 token13: their core data structure is a 256-bit unsigned integer defined by _value or balanceOf(), and a decimal function, decimals(), will determine the token amount. Transferring tokens by this amount, which is implemented through transfer(), transferFrom(), and approve(), is the main operation for sending tokens from one address to another.
Unlike ERC-20s, ERC-721s abandoned the token amount in their data structure. As a result, the 256-bit unsigned integer that originally designates the token amount now defines a unique _tokenID which represents the ownership over digital or physical assets. Although NFTs share the same address-to-address operation as ERC-20s, the ERC-20 transfer is quantitatively operated on the token amount, whereas the ERC-721 transfer is operated qualitatively on the _tokenID and the amount will always be “1,” to simulate the transfer of ownership, implemented by transferFrom(), safeTransferFrom(), and approve(), etc.
Another noteworthy feature of ERC-721 is its metadata extension. With properties like name, description, and image, ERC-721 NFTs could for the first time in history display rich visual information on the blockchain. For example, in the metadata extension for Uniswapʼs V3 LP token, custom price curve and liquidity position are presented in an aesthetically pleasing way. On the other side of the coin, however, since ERC-721 canʼt be fractionalized, the liquidity for V3ʼs positions is still largely limited (...)
The ERC-3525 token standard inherits ERC-721ʼs core structure: _tokenID and metadata extension. It also adopts the standard quantitative attribute _value and extends it with a categorizing attribute _slot (along with Slot Metadata to implement the categorizing function of _slot.) The new data structure within the ERC-3525 is defined as an <ID, SLOT, VALUE> Triple Scalar Model.
One of ERC-3525ʼs major innovations on token operations is token(_tokenId)-to-token(_tokenId) transfer, or quantitative operations for NFTs, implemented by function transferFrom(uint256 _fromTokenId, uint256 _toTokenId, uint256 _value) external payable and function safeTransferFrom(uint256 _fromTokenId, uint256 _toTokenId, uint256 _value, bytes calldata _data) external payable. This means that ERC-3525 tokens sharing the same _slot are fungible to each other and that one ERC-3525 token(_tokenId) may be transferred to another. The feature marks the first time in history that an Ethereum token has gained equal status as users (externally owned accounts, or EOA) or smart contracts (contract accounts).
Furthermore, ERC-3525 has inherited the traditional address-to-address transfer within the ERC-721 standard, which is implemented by transferFrom(), safeTransferFrom()."

By means of ERC-3525 tokens, we are able to transform users' apps, models and datasets into cohesive Knowledge Assets, to token-gate access to these assets, and to collect and distribute revenue received for access, as well as to fractionalise them and trade fractions within a high-liquidity market. For a full technical description of ERC-3525 - please refer to the and its accompanying roposal.

Tokenization of Knowledge Asset Ownership into SFTs:

NFTs and SFTs as Ownership Tokens: Each Knowledge Asset is represented as a unique SFT, certifying the owner's rights to the knowledge and data within.
Monetization and Exchange: Just as allows users to token-gate access to chat rooms, KIP's contracts allow owners to token-gate access to their models, apps and datasets, and to automatically receive fees whenever a user accesses them. Owners can also buy, sell, or trade their NFTs and SFTs, monetizing their knowledge assets.
New Funding Sources: NFT/SFT ownership enables users to sell rights to various knowledge assets, opening new revenue streams, as well as to fund future business endeavours by selling shares in their future revenues. Any investor who purchases a share in an SFT or in a pool attached to an NFT will automatically receive a share of the payments it receives. This can be used to crowdfund work, reward contributors to multi-person projects or just to speculate on future asset values.