2.8.1 Web3 Token Issues

A fundamental objective of OAE is to align Web3 standards with legal norms, fostering an understanding of the legal nature of tokens. It's essential to recognize that both fungible tokens and non-fungible tokens (NFTs) function as digital manifestations of 'rights' rather than direct representations of tangible assets. This distinction is critical for their role in the digital economy.

NOTE: When you hold the fungible or non-fungible token, it’s hard to tell what you actually hold, but in most cases, you’ve been led to believe that there will be some monetary value or profit attached to it - sadly most token issuers made this promises illegally, resulting in issuance of unauthorized securities or equities.

The rights associated with a particular token typically hinge on the intentions set forth by the issuer, whether a company, group, or individual, or the product linked to the token. Often, these intentions imply the potential for future profit through formation of a liquidity market, where tokens can be exchanged for stablecoins and, subsequently, fiat currency.

This model has propelled the DEFI economy for the last 4 years. However, we argue that it should be discontinued due to its misalignment with global standards and legal frameworks concerning ownership and financial industry. For a deeper analysis of our stance and forecasts on the evolution of this model, please see Appendix C: Rise of AssetChains and its associated theses.

Understanding tokens as 'rights to something' rather than tangible assets necessitates recognizing limitations and inherent risks related to web3 tokens.

• Fungible Tokens: May represent a collective right to partake in the governance of a smart contract or a share in future profits. Possession of such a token equates to owning that specific right, which however is not subjected to any legal framework, and can be freely adjusted based on the will of individual, company or the group that controls smart contract based on which token have been issued.

• Non-Fungible Tokens (NFTs): can carry unique metadata, including access credentials, embedded tokens, or links to digital content. It's crucial to underline that NFTs, unless explicitly recognized as symbols of ownership over specific assets, primarily signify ownership rights to the token itself.

This distinction means that "owning" an NFT equates to holding a particular association with some digital data linked to that NFT, rather than possessing the digital content outright. For example, countless NFTs might feature the digital image of the Mona Lisa. The creation of an NFT with this image doesn't grant ownership rights to the artwork itself; it simply denotes control over the token that represents this digital image. In this context, NFTs function similarly to JPG files, which can be shared via email or messaging platforms.

The key difference with NFTs is their transfer mechanism on the blockchain, which reassigns the current "holder" of the token. This process is akin to changing the owner of a file on a cloud storage service, but it doesn't confer exclusive ownership of the digital content or prevent the existence of numerous copies elsewhere.