Key Takeaways:
ERC3643 is the first tokenization standard by Ethereum, developed by Tokeny and later open-sourced.
ERC standards are protocols for creating and implementing smart contracts on Ethereum, ensuring consistent interoperability.
ERC3643 manages permissioned tokens for real-world assets (RWAs) while ensuring compliance and secure asset representation.
Existing standards lack on-chain compliance and ownership verification, which ERC3643 provides.
ERC3643 uses smart contracts to manage asset details and compliance, verifying ownership with hashed credentials.
ERC3643 offers enhanced security, streamlined efficiency, increased liquidity, fractional ownership, interoperability with DeFi, and upgradability without altering contracts.
ERC3643 unlocks global investor access and simplifies asset management, driving business growth.
Schedule a demo to see how ERC3643 can benefit your business by simplifying the creation and management of digital tokens.
The Ethereum community recently approved ERC3643 as the first tokenization standard. It was proposed in 2021 and originally developed by Tokeny and later open-sourced.
It has a huge potential considering the growth of RWA sectors as projected by renowned institutions like BCG. From $0.6 trillion in 2023 to 16 trillion by 2030 is estimated to be the business opportunity for tokenizing global illiquid assets. ERC3643 is huge because it introduces a tokenized standard for compliant RWAs within the public blockchains.
What are ERC Standards ?
ERC (Ethereum Request for Comments) standards are protocols for creating and implementing smart contracts on the Ethereum blockchain. They ensure tokens, whether fungible or non-fungible, follow consistent rules for interoperability across decentralized applications. Key standards include ERC-20 for fungible tokens, streamlining transfers and approvals, and ERC-721 for non-fungible tokens (NFTs), ideal for unique digital assets. These standards have driven the widespread adoption of blockchain technology, promoting secure, efficient, and transparent asset tokenization.
What is ERC3643?
The ERC3643 Association is a non-profit organization dedicated to advancing the ERC3643 standard. Their mission is to create a standardized, secure, and compliant tokenization framework, fostering innovation and inclusivity in the financial world. By promoting ERC3643, they aim to unlock the full potential of tokenization and revolutionize global asset management.
ERC3643, formerly known as the T-REX protocol, is an open-source set of smart contracts. It facilitates the creation, management, and transfer of permissioned tokens, ensuring compliance and control even on public blockchains. This standard enables the creation of digital tokens representing real-world assets like stocks or physical gold, with the added security of controlling who can buy and sell these assets.
Why We Need ERC-3643
ERC-3643 is needed because current token standards like ERC-20 and ERC-721 can't handle on-chain compliance, ownership guarantees, and audit trails. ERC-3643 solves these problems by building in these features, making it easier to verify identities on the blockchain. This allows for the smooth exchange of real-world assets (RWAs) because it meets all the compliance and regulatory requirements that the older standards couldn't. With ERC-3643, trading RWAs becomes possible and straightforward.
How ERC3643 Standard Works
ERC-3643 establishes a programmable agreement for assets on the Ethereum blockchain, enabling the minting, management, and trading of real-world asset (RWA) tokens. By utilizing Ethereum smart contracts, ERC-3643 includes essential information such as ownership details, legal conditions, and compliance guidelines through components like on-chain IDs, identity registries, and a permission token interface.
Prior to ERC-3643, validating asset ownership was challenging due to the lack of a verifiable on-chain ID. ERC-3643 solves this by creating hashed/anonymous credentials that verify ownership and facilitate exchanges between parties.
For example, if Hussien and Zeina have completed the necessary legal documentation (e.g., KYC) to invest in an RWA, but Aya has not, ERC-3643 would enable a transaction between Hussien and Zeina while excluding Aya, ensuring compliance with all rules.
Key Benefits of ERC3643
The ERC3643 Association believes their system offers significant improvements over older methods, being more secure, efficient, and user-friendly. They plan to develop tools and educational resources to promote responsible use within the industry.
Enhanced Security: Traditional asset management methods are prone to fraud and errors. The ERC3643 system uses blockchain technology, which offers a secure way to track and manage digital asset ownership through a tamper-proof, decentralized ledger. This greatly reduces the risk of fraud. Example: Investing in a digital token representing a company's share is safer with ERC3643, as the ownership record on the blockchain cannot be counterfeited or altered.
Streamlined Efficiency: The ERC3643 standard can simplify the buying and selling of digital assets. It can automate many processes that are currently slow, reducing costs and speeding up transactions. Example: Buying stocks traditionally involves a lot of paperwork and a settlement process that takes days. With ERC3643 tokens, transactions could be settled almost instantly, reducing administrative burdens.
Increased Liquidity: A standardized system could increase liquidity for digital assets by making it easier for platforms and institutions to recognize and trade ERC3643 tokens, expanding the pool of potential buyers and sellers. Example: Owning a digital token for a rare piece of art could be easier to sell with more participants in the ERC3643 network, making such illiquid assets more marketable.
Fractional Ownership: The ERC3643 standard allows for digital tokens representing fractional ownership of an asset, making high-value investments accessible to more people. Example: Instead of buying an entire property, investors can purchase tokens representing fractions of the property, democratizing access to real estate investments.
Interoperability with DeFi: Built on the Ethereum blockchain, ERC3643 tokens can integrate with the Decentralized Finance (DeFi) ecosystem, enabling new use cases for digital assets. Example: Owners of digital tokens representing company shares might be able to lend them or use them as collateral for loans within DeFi applications, unlocking new investment opportunities.
Upgradability: ERC-3643 allows for easy token upgrades without needing to migrate to a new smart contract. For instance, if you have an application that facilitates the exchange of ERC-20 tokens and you want to add new features like compliance checks, identity management, and asset representation, ERC-3643 makes this possible without altering the original smart contract. This greatly simplifies and accelerates migration and deployment processes.
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