Solv Protocol About Token Standards
Solv Protocol introduced article Why are there different token standards & why are they needed?
With all new developments in any industry, there is an impetus to introduce new standards that allow for these developments to work smoothly.
If you go to have lunch and you buy soup, you are required to use a spoon. If you buy soup and you grab a couple of pieces of toast that you want to butter, you need to grab both a spoon and a knife. If you get soup, toast and a bowl of noodles, you need a spoon, knife and a pair of chopsticks.
Each of these utensils serves a different purpose within this scenario.
It’s the same for DeFi. The technology associated with DeFi and the possibilities of DeFi are constantly evolving. As more complex assets become available through decentralized finance, it’s important that companies providing tokens stay abreast of these demands.
One key space for development that is continuously in flux is in the nature of token standards available on DeFi. Tokens, in essence, are decentralized finance applications that allow the user to work on the blockchain, while mirroring key concepts from traditional financial services, for example, lending, trading assets and earning interest.
With the concept of tokens feeding the developments that have happened within the sector over the past year, the scrutiny of new token standards that have been introduced has also heightened, as we seek to deal with relatively new concepts such as non fungible tokens.
What token standards are we currently working with then?
While an ERC-20 token is the industry standard, there are certain limitations to what it can do. It allows users to work with fungible tokens, i.e. tokens that are exactly the same. Obviously the ERC-20 token has its utility, but it is quite limited.
Meanwhile, an ERC-721 token is the standard for a non-fungible token, i.e. a token that generally represents a photo, a piece of art, audio, video etc. NFTs are unique and not interchangeable, meaning that the value can rise and fall based on a variety of criteria.
As you can see, each of these different token standards serve different purposes for the user. For each standard, the user is making a different type of financial transaction, and therefore there is a need for different technologies that allow users to make those financial transactions. They are the utensils in this scenario.
For Solv, the introduction of a new token standard, called the vNFT, that allows users to fractionalize non fungible tokens is imperative to the continued expansion of decentralized finance. By using the vNFT, people can buy a portion of an NFT, rather than buying the whole thing. This utility allows casual users or people who want to make smaller investments to add liquidity to the market, which in turn adds validity to the market. It also allows a user to combine a portion of one of the tokens with another portion of a token, before selling it on the market.
With Solv, the introduction of vNFT represents a new utility for DeFi, it’s a new way of providing utility and liquidity to the marketplace.
What is Solv Protocol?
Solv is a DeFi protocol which has created the first ever vNFT token standard, designed for the future of DeFi & Financial NFT’s.
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