2017 was an exceptional year for the blockchain community. Lots of great companies with disruptive ideas were born out of the great success of the Initial Coin Offerings (ICOs). TradeStars is strongly influenced by two of the most distinguished of those new ideas: The release of the Bancor Protocol and the creation of the ERC-721 token standard.
Continuous Token Models and Bancor Smart Tokens
Ideas about continuous token models were out there for long before the Bancor public launch in early 2017; Theoretically explored to be applied on different scenarios such as continuous ICOs, Token Curated Registries (TCR), Prediction Markets, and many others where users would have economic incentives to engage in the creation of value around a specific community.
The Smart Tokens concept of the Bancor protocol was a leap forward in the crypto community though. With the release of their platform, they suddenly enabled decentralized conversion of any ERC20 token helping to resolve the illiquidity problem that existed within the cryptocurrency market.
The liquidity of a token is determined by the consistent presence of buyers and sellers. This means that token with high liquidity is one that you can easily acquire or sell at any particular moment in time, and the opposite is true for tokens with low liquidity. But, with no need for matching buy and sell orders between users like in a traditional exchange, they created decentralized transparent markets with automated token liquidity based on a set of rules supported on Smart Contracts.
ERC-721 Token Standard
The second idea TradeStars was born out of is related to a new type of digital token standard that many companies started researching around later that year.
After the great success of the fungible ERC-20 standard and the great hype for the ICOs in 2017, several initiatives started working on a new proposal that could represent something unique and scarce on a public digital ledger. This digital asset, a non-fungible asset, univocally owned, non-interchangeable and capable of holding intrinsic value took form with the ERC-721 token standard the first months of 2018.
A Non-Fungible Token, or NFT, is a special type of cryptographic token which represents something unique, not interchangeable and with verifiable digital scarcity.
The great success of this type of tokens came with the public release of CryptoKitties in December 2017. Their non-fungible digital kitties gathered a lot of attention from the industry, generating a huge amount of transactions and millions of dollars in revenue. This event sort of changed the blockchain gaming industry and paved the way for many other companies who would later try to capitalize great ideas based on the ERC-721 standard.
TradeStars Fractionable NFT
The digital scarcity nature of this token would soon lead these assets to become more popular and costlier, increasing difficulty for ordinary investors to own them. It seemed natural that the need for owning fractions of these non-fungible digital assets would soon arise.
So, what if a non-fungible token could be partially owned?; How would the representation of this idea be on a blockchain?, and more interesting; What if these non-fungible digital assets could set the price and sell amount of its own fractions with automated liquidity by itself?
This would be a new type of Non-Fungible Token (NFT). A "Fractionable NFT".
We came out with the idea of using the ERC-20 standard to represent the NFT fractions, and provide the capability for the NFT to set the price and circulating supply of these shares as a function of the market supply and demand. This could potentially have many interesting uses among the blockchain ecosystem, for example, real or virtual assets tokenization.
The tokenization of real-world assets
On top of the exclusive ownership of digital assets that has led to the popularity of blockchain as a secure way of storing value, the tokenization of real-world assets (represented by tokens on the blockchain) is another breakthrough and disruptive use case for this technology.
This arrangement enables anyone, anywhere, to buy or invest on virtually illiquid assets as if you were buying groceries from your favourite e-commerce store.
By tracking and representing through a Fractionable NFT the real life performance of any given event, we can set up Fractional NFT markets and economic incentives for investing or holding shares of that NFT. This is, with rewards based on real life events’ outcomes!.