New Paradigm for Asset Lifecycle: Understanding Smart Layer and Executable Assets in One Article

Introduction

Recently, Polygon published an article on Platform X, introducing “Smart Cat Loot.” This is the first asset-backed xNFT issued by Smart Layer on Polygon, which sold out within 4 hours of its launch.

What is an xNFT? Its full name is Executable NFT, meaning it is not only an asset but also contains built-in executable code. Compared to traditional NFTs, it offers higher utility and greater extensibility. Similarly, there are Executable Tokens, which possess the same characteristics.

The “Smart Cat Loot” uses an innovative “Burn and Return” mechanism and a dynamic pricing strategy. NFT holders can burn their NFTs at any time to recover the minting cost. Additionally, as trading volume on the secondary market increases, the recovery price correspondingly rises.

These are the asset-side features of Smart Cat Loot. This toy xNFT can also interact with Smart Cats issued by Smart Layer to earn points and unlock community rewards. This interaction does not require users to visit a new website or download additional DApps; it can be executed directly within the wallet.

The Smart Cat Loot feature is implemented based on the Ethereum standard ERC-5169 and TokenScript. ERC-5169 allows tokens to be linked to external scripts, transforming them into multifunctional assets. TokenScript, on the other hand, is a programming interface for tokenization, abstracting token information, access methods, and UI presentation. It offers a higher level of interface, significantly enhancing the circulation and integration capabilities of tokens. Additionally, TokenScript enables developers to define the characteristics and operations of their tokens, such as transferability, aiding in the interoperability between tokens without needing to update DApps or smart contracts.

In summary, Smart Layer’s introduction of Executable Token/NFTs through ERC-5169 and TokenScript technology greatly enhances asset scalability. This not only improves user experience but also brings a new paradigm in asset development, distribution, and application. It aims to revolutionize the paths of production and consumption in DeFi, brand Loyalty, and Web3 gaming.

A new asset paradigm, a new application experience

The new answer to application distribution and management

In typical Web3 scenarios, end-users often face a variety of DApps, especially when transitioning to new chains or dealing with new asset types. Throughout the entire cycle, users encounter a series of issues:

• Assets are merely mediums for payment and circulation, and the circulation events themselves often require additional applications and markets. These DApps need to be developed towards assets and usually require high customer acquisition costs to distribute to users. For example, recent niche inscriptions can only be traded manually through OTC, requiring double collateral and paying a service fee of 1% -3%, which is extremely costly.

• For new applications, users must incur search and learning costs. Especially now, with frequent phishing sites on Google and imposter accounts on various platforms, inexperienced users are easily deceived by phishing scams.

• Users face post-management issues, including the management of assets themselves and the prevention of security risks. When users have assets on dozens of chains, and each chain requires at least one Swap, lending, and cross-chain application, the management cost increases exponentially. Moreover, with frequent attack incidents in the Web3 domain, each application is at risk of being hacked, requiring users to exert effort in vigilance and verification.

For instance, the rise of the OKX Web3 wallet in 2023 is fundamentally due to solving the aforementioned information and management cost issues between users and DApps. It reduces information costs by directly connecting project parties with users, and lowers learning costs by collaborating with projects on multi-end adaptation. The aggregated platform itself serves as an endorsement of security.

Executable Token/NFT represents another, more cost-effective and direct approach to solving these problems:

• By directly embedding basic needs like Earning, Swap, and even more distinctive functions into the assets, users are naturally connected with applications, significantly reducing information costs.

• Applications no longer need to adapt to multiple ends, as users can directly execute required operations in their wallets, simultaneously reducing development and learning costs.

• Moreover, embedding programs written by project parties in the assets means users no longer need to verify the accuracy of DApps or manage them in bulk. What you see is what you get, ready to use at any moment.

The New Paradigm of Assets Led by Executable Tokens

In the earliest era of blockchain, various chains and tokens could only perform one function - transferring assets. Project teams would gather miners to issue assets and facilitate transfers, with each chain supporting just one asset. As the market matured, there emerged needs beyond the medium of exchange - programming needs. This led to the birth of some hardcoded smart contract projects, which couldn’t be upgraded online; each upgrade required a miner fork.

Ethereum then emerged, introducing smart contracts with Turing completeness, ensuring sufficient flexibility. Developers could implement complex computations on it, not just simple asset transfers. After the ICO era and the summer of DeFi, smart contracts have become an indispensable and standard part of the blockchain world.

However, the existing blockchain systems are more focused on financial aspects. Each ecosystem has built its own trading and lending system, which operates in a self-consistent cycle within the system. As blockchain becomes more regulated and the demand for mass adoption increases, new scenarios beyond transfers and finance are emerging. The old technical systems are insufficient to meet these needs, leading to new foundational demands.

What revolutionary demand does Web3 bring? The most important aspect is information ownership. Under the Web2 model, user data is monopolized by platforms, leading to information isolation and high friction costs. Users need to repeatedly fill in personal information when switching platforms, and platforms have to build user profiles from scratch to ensure precise service delivery. On the other hand, users are concerned about the leakage of their personal privacy information, and platforms hover on the edge of building data barriers and acquiring information through grey methods. In summary, Web3 thrives by breaking data silos and integrating information, but its development is limited due to the lack of security and privacy protection.

Therefore, Smart Layer has created a unique solution - Executable Token, based on TokenScript technology. This can address the challenges of integration, privacy, and trust in the digital environment. Executable Tokens not only carry information representing a wide range of assets and rights, but also have rich features, enabling complex interactions with other tokens and systems (as mentioned earlier, the Executable Token/NFT features).

Let’s experience the charm of Executable Tokens through an official case study:

• Users can create Tokens for specific cars based on the unique identification of vehicles in various countries, representing ownership of the car.

• Users with usage rights can unlock corresponding functions of the car, such as using a digital key to start and lock the car, accessing the car’s location and condition data, among other real functionalities.

• For third-party companies, they can access relevant open information about the vehicle. For example, insurance companies can more accurately and cost-effectively determine a user’s need for car insurance, reducing customer acquisition costs and communication expenses with users.

• Regarding ownership, users’ transaction methods can become highly standardized. Developers can integrate users’ most concerned car attributes into the Token design from the start, making online purchase decisions more effective. Similarly, transaction events can be integrated into official systems (like the DMV), eliminating the time to complete various procedures.

• Likewise, using Executable Tokens to digitize vehicle ownership allows for various operations on the blockchain, such as borrowing funds on NFT lending platforms, or splitting ownership through fragmentation protocols, greatly enhancing the practicality and efficiency of asset utilization.

Take the hot concept of RWA (Real World Assets) in 2023 as an example. RWA projects involve creating special purpose vehicles (SPVs) for assets like real estate, securities, stocks, etc., and then distributing them through tokenization.

For bond-like products, the revenue model and data are relatively simple. Traditional ERC 20 can be used to link assets and distribute earnings. However, more complex underlying assets like real estate require entirely different technical implementations. For instance, each property has different operational revenues and costs, and asset buyers need to understand complex data like location, condition, and operational status. Moreover, assets involve multiple taxation issues. If still relying on manual, off-chain coordination, management, and calculation, the costs would be prohibitive, defeating the purpose of RWA. However, through ERC-5169 and TokenScript, integrating technologies like edge computing can ensure real-time, accurate, and effective reconciliation of off-chain and on-chain data.

In conclusion, Executable Tokens offer a new asset development and application model, providing the underlying technical foundation to fully leverage the characteristics and advantages of Web3.

Reshaping the Path of Production and Consumption for Brands and Consumers

As previously mentioned, the unique solutions provided by Smart Layer break down information silos, reshaping the relationship between brands and consumers, fundamentally changing their production and consumption pathways:

• It solves the challenge of accurately finding consumers. The consumer’s purchasing journey is clearly visible, allowing brands to conduct precise business analysis based on accurate data, and match their services with targeted consumers.

• An open, permissionless approach means that project teams will focus more on product quality. On a clear consumer base, only superior services can attract consumers, especially under the Web3 model, where users have low switching costs. Only projects that continuously and proactively provide outstanding value can maintain user loyalty.

• For instance, the ‘vampire attack’ by SushiSwap on Uniswap and LooksRare on OpenSea. The former once threatened Uniswap’s status, forcing it to undergo significant changes and development. However, the latter’s products and services failed to disrupt OpenSea and declined rapidly after a period of success.

• Smart Layer’s implementation of ERC-5169, which links assets to external scripts, eliminates the problem of chain operations being too expensive for some users, facilitating broader adoption.

• This transformed relationship is known as Open Loyalty, aiming to further leverage Web3 advantages to promote new narratives and developments in the market.

New Avenues and Experiences for Game Acquisition

• Executable Game NFTs can include various mini-games and interactive tasks, allowing users to interact with these elements in their wallets before the full game is built. Its fundamental feature is the integration of assets and DApps, changing the path of acquiring customers for mini-games. Users do not need to install an additional DApp, but instead, receive an asset with game functions and interact with it. This can be likened to a WeChat mini-program, significantly increasing user acceptance by shortening the path between users and applications.

• On the other hand, Executable Tokens/NFTs are not just on-chain game assets but can also integrate with real-world actions, adding new layers to gameplay and player interaction. By linking with external information through scripts, and combining AR, VR, and even AI technologies, it exponentially expands the realm of possibilities.

Conclusion

• The Executable Token/NFT introduced by Smart Layer brings a new asset paradigm, reshaping the entire lifecycle of assets from production and distribution to operation. Its extensibility, through integration with various new technologies, scenarios, and processes, offers limitless potential for the development of assets.

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