In the last blog post, we discussed three (3) examples of companies that are using NFTs as “representative documents” like IDs, deeds & receipts. In this latest blog post, as the title suggests, we are going to be discussing 3 examples of how tokens – both fungible & non-fungible, can be used as financial assets. According to Investopedia (2021) “a financial asset is a liquid asset that gets its value from a contractual right or ownership claim”. We will be discussing asset backed tokens via Mehen/USDM, synthetic assets as tokens via Indigo Finance and revenue sharing represented as an NFT via Goophy Gophers Mining Club.

Fiat Backed Stable Coins
As the name suggests, fiat backed stable coins are tokens issued on a blockchain that are meant to mirror the value of a traditional currency like the US dollar. The claim is that these tokens are backed by a reserve of liquid assets in-real-life. In some cases, assets are backed one for one, ie. 1 US Dollar for 1 token.
The fiat backed stable coin we’ll be discussing in this blog post is Mehen Finance’s $USDM. The “contractual right” in the case of $USDM is that each token is backed 1 for 1 with the US Dollar. This financial asset/innovation is beneficial because it allows for blockchain users to store value on chain in a non-volatile way – which one may decide to use to take profit, manage risk or keep their “dry powder” nimble in the event on chain opportunities present themselves. This financial innovation is also beneficial because it typically allows for users to generate more yield than traditional banking interest – this is due to the fact that many protocols are young & looking to bootstrap/incentivise traction.

Synthetic Assets
A synthetic asset is a digital representation of real-world assets often used for trading, investing, and hedging. This idea is that this financial instrument will simulate the value of the underlying asset without purchasers having to hold the underlying asset itself.
The Synthetics protocol we’ll be discussing is INDIGO finance and its “iAssets” like iETH & iBTC that are built on Cardano. The value proposition is just as discussed earlier – these tokens get the same price effect as the underlying assets themselves. This is beneficial because as a user, it removes the friction of having to get “set-up” on other blockchains while still exposing them to the price action of other major layer 1 tokens. This financial innovation is also beneficial as it presents unique opportunities for arbitrage in the event that token prices de-peg from their underlying asset’s price.

Revenue Assets
As the name suggests, revenue assets are tokens issued on the blockchain where funds earned from the protocol or any attached business venture is split up and shared with the holders of said token. This mirrors securities that pay a dividend where the “contractual right” is that the protocol shares its fees or earnings with its community.
The revenue asset we’ll be discussing in this blog post is Kingdom Trust’s Goophy Gophers. The Kingdom Trust/Goophy Gophers runs a mining facility where they essentially use their computing power to provide a service to blockchains to keep the ledger secure. The “contractual right”, just as was discussed earlier is that what is earned from the mining facility after expenses ought to be split with the community that bootstrapped and participated in the endeavour. This offers users the opportunity to gain exposure to a mining facility with on chain payouts.

So you see, just as how you can have currencies, synthetics and dividend paying securities in-real-life, you can have them on the blockchain as well – all while gaining new efficiencies as it’s a new pool of liquidity, markets never close, otherwise illiquid assets can gain some notion of liquidity & its built on decentralised infrastructure which carries benefits such as radical transparency, censorship resistance & immutability. In the next blog, we will discuss 3 specific examples of NFTs being used as in-game assets.