 Hello, everyone. My name is Michael Klein, and I'm from Accenture. What I'd like everyone to do is forget about NFTs. We want to talk about token economies. And the fact that token economies are going to change the way organizations, people, and society exchange value in the future. This is beyond what we've thought about in the traditional Web 2 and platform-based ecosystems and moving towards Web 3 and the metaverse and how value will be exchanged in the future. So you might say, wait, this guy is going to talk about tokens without talking about NFTs. Not quite true, but if you give me just a moment, I want to take you on a little bit of a journey of how I started to understand what tokens are and the value they could provide. So let's get started. On my journey, I started back in 2017 when I started looking into blockchain. Now, at the time I was leading an emerging technology group focused on health care. And I was really trying to understand how blockchain could provide value to solve business problems for a health care industry. And I'd heard about Bitcoin and Ethereum and some of these new things, but I didn't know what it was. And I didn't know where the value was. So I did what any good consultant would do. I consulted Google. I said, hey, what is this thing? I got some definitions of what blockchain is. And so here's one of those definitions. A blockchain is a distributed database that's shared amongst nodes of a computer network. OK, haven't solved any health care problems yet. I'm starting to understand that it's a distributed database and you share data. OK, great. I'm coming along the learning curve here. And then I did more, more googling. Another definition here. This one takes us a little bit further. Blockchain is shared immutable ledger for recording transactions and tracking assets and building trust. OK, health care. We need trust. We need to figure out how these things are used. Still not quite understanding what makes blockchain unique. Why are we doing this? So fast forward a little bit. Remember, we're still in 2017. So six months later or so, I've done my research and I effectively came up with my own definition. I realized what truly makes blockchain unique. You'll notice one more thing here. I didn't mention anything about tokens in any of these definitions on blockchain. Talking about blockchain, we're talking about sharing data. Where are the tokens? So my own definition started with, let's start with this idea of a distributed database. What is a distributed database? Well, distributed database is a database which allows shared, read, and write across multiple writers where the owners of those nodes, those multiple nodes of the distributed database have autonomy over their own infrastructure. So if you want to share data between multiple organizations and each of those organizations wants to control their own database, you can do that with a distributed database. You do not need a blockchain. This has existed well before blockchains existed. Distributed data problems have existed for quite some time. So then what makes a blockchain or distributed ledger unique? Why is it different than a distributed database? And that word ledger that was in the prior definitions and also here is really that key unique piece. And I was a health care guy. I didn't know what a ledger was. So all ignorance at the time, I didn't really understand what that ledger word meant. And what makes a blockchain unique or a distributed ledger unique is that word ledger. And the fact that it allows you to custody tokens, so essentially you have to be able to own tokens and then it'd be able to prevent double spend of those tokens within a distributed network. This is groundbreaking. This effectively means this is the first time in history we can own assets. Never before in a distributed system could we own assets and also prevent the double spend problem. That was what makes blockchain truly unique. So fundamentally, the thing that makes blockchain distributed ledger unique is the tokens. Yet I don't feel like we've talked enough about what tokens are and how they impact business and society in the future. So a lot of you may say, wow, 2017, you just figured out that blockchain's about tokens. You'd be right. A lot of you probably knew about this well before I did. But I will tell you my parents and my family hadn't heard about tokens and NFTs until just this past year. We've seen with the word NFT and its rise amongst the zeitgeist of popular culture today is that it's actually known. And people are talking about tokens in new and different ways. And this is exciting. So what we've seen is a massive shift towards the acceptance of tokens and token economies in the ecosystem. So 90% of executives agree that a new trustworthy digital economy is critical to growth. We have $550 trillion in assets potentially convertible to digital assets. The opportunity is out there, and the market is realizing the potential. And now people are actually talking about tokens. So this is an exciting time. And furthermore, we're seeing the rise of some new use cases in real production coming to market today. Stablecoin transactions are coming real, and we're starting to see regulation around them. We're starting to see that the actual challenge of the established networks and seeing the rise of more economies. I'll also point out digital payment and crypto exchanges are starting to become banking institutions. They're starting to apply for their banking licenses in order that they can transact within these new digital economies. So fundamentally, what's happening is this is real. It's becoming real today. So I said, if you joined me at the very beginning here, said I'm not going to talk about NFTs. Well, this is where I'm going to talk a little bit about NFTs. I gave a little fib there at the beginning. But talk a little bit about NFTs because that's what people are talking about in the world today. That's what my parents and grandparents, that's what they're talking about. So how do we help them understand what an NFT is and how it relates to this new thing that we're calling the token economy? So again, going back to Google, top three search results for the definitions of what an NFT are. I'm not going to read all of these, but the first one here. An NFT is a digital asset that represents real-world objects like art, music, or in-game videos. Bought and sold online, generally encoded with some underlying software as many cryptos. One more definition. In simplest terms, NFTs transform digital works of arts and other collectible into one-of-a-kind verifiable assets. They're easy to trade on a blockchain. Now, these definitions are partially correct, but they only partially touch the surface about what an NFT or a non-fungible token really is. And so again, I'm not really happy with the definition here. So just like I did back at my initial engagement with blockchain, I said, what is non-fungible and why is this different? So a little segue here to talk about the inter-work alliance. So the inter-work alliance, or IWA, is part of the Global Business Blockchain Council. They are focused on creating standards that are platform agnostic, so not specific to any technology, around tokenized standards. There's some other things they're working on, but one of their core work products is called the Token Taxonomy Framework. So the Token Taxonomy Framework is focused on classifying tokens and defining the properties and behaviors and how those properties and behaviors of the tokens actually differentiate tokens. Now, who here is familiar with ERC standards or token standards? A few people said ERC. I know this is the business track, but I figured we'd get a few people who know some of the technical standards. So ERC 721, what is that? Speak up. NFT. That's what most people call the NFT standard. If you actually go out and look there, what's the standards for NFTs? You will almost universally get back the answer as ERC 721 or ERC 1155, which are token standards from the Ethereum ecosystem. So it's Ethereum specific. And while I'll also point out is it's not actually a token standard. That's a little controversial to say, but the reason why I'm saying it is because it's actually a smart contract standard that implements the token definition. So it's not truly a token standard. And it's extremely generic. It's effectively a token smart contract that points to an asset outside of the ledger. Effectively what it is. And so that is not really a great thing for a business to be built on. It's not very specific to a business context and the use of the tokens. So that's what the token taxonomy framework is trying to fill the gap. It's actually trying to get to business use of the tokens and agree on the business behaviors and properties across platforms. So it's not platform specific. So through the IWA, they've already tried to answer some of these questions of what is fungible and what is non-fungible. Now the first thing they did is consult the dictionary. And the dictionary says a fungible asset is something that is of such a nature that one part or quantity may be replaced by another part or quantity and pay a debt or settling an account or capable of mutual substitution. In one word, interchangeable. I've often hear, if I ask someone for a definition of what an NFT is and why it's different from a fungible token, the answer I normally get is it's unique. An NFT is unique. What if I told you you can have a unique fungible token? So most people do not understand that you can have a unique fungible token. And that's causing people to fundamentally rethink what they mean by the word fungible. So IWA started with this definition and then said, well, how do we define fungible versus non-fungible? And that's actually the hardest question to answer is that specific question, what is fungible versus non-fungible? What's better to do is actually ask about questions about the outcome or the behaviors or function of the tokens and see if those behaviors or functions represent fungible or non-fungible behavior. So instead of asking, is this asset fungible? Ask, does every instance of what I'm talking about have precisely the same value and the same financial properties? If so, it might be fungible. Do all instances have precisely the same form or fit properties, essentially making them indistinguishable? Does every single instance exhibit the exact same built-in or native natural behavior? Again, these may be fungible. So I'm guessing for some people, this is a little theoretical and academic right now, which it is. Let's try to do some examples together, OK? So let's start with printed currency from the room. Is this fungible or non-fungible? Fungible, that's generally the consensus. OK, so what I'm going to walk through here is, is it fungible or is it non-fungible? So right now, the financial value of printed banknote is fungible, right? The value of a $1 bill is a $1 bill no matter what dollar bill you hold in your hand. It is interchangeable in value. What about the serial number on it? Every banknote has a serial number on it, making it unique, making it traceable. And that traceability is necessary behavior of a central bank. Is it still fungible? Yes, OK? We have some people who are advanced token experts here in the room. But yes, you can have a unique fungible token. And so not everything that you want to be represented uniquely needs to be a fungible, be a non-fungible token. That's sort of the point. Let's take people from the room. What are people? Non-fungible or fungible? Oh. I think I gave some people some to think about on the last one. I mean, we're all unique, right? We're all unique people. We all have unique DNA, for the most part. Even twins, when they have the same DNA, have unique distinguishing traits, right? So generally, people are considered unique. And we would say they're not interchangeable. I would hope, for the most part, we think about people as having autonomy and agency and not being interchangeable. But what about when we're counting votes? We want all votes of people in a democracy to be treated equally. And therefore, the votes of people would be fungible. Hopefully, you're starting to catch a theme and giving these examples that objects themselves are not natively fungible or non-fungible. It's their use and behavior, how you are representing these things, and how you're using them within an economy or market is truly what makes them fungible or non-fungible. OK, last example, discrete manufactured items, whole category here. But I'm going to choose iPhone. So the iPhone, is it non-fungible or fungible? I heard a fungible. Anyone else want to vote? Non-fungible. This is another great example of the point I'm trying to illustrate through these examples, as it could be both. Within a skew, so a specific model, number of a or even batch level, you're going to have many iPhones that are indistinguishable. Within that batch, they may be fungible. Just like the dollar bill, they all have a unique serial number. But within that batch, they're all equal. They have equal financial value. They're sold the same way. They're treated the same way. So the iPhone itself could be fungible or unique fungible via the serial number on it. But you could also look at it differently and say, no, it's truly non-fungible because it's owned by a person. And we are actually going to extend the definition of the iPhone beyond just the object itself, but also its use and its representing a person's use of that device. Therefore, you may want to treat it more as non-fungible. So this goes back to not all physical things are non-fungible. All physical things may be represented fungibly or non-fungibly. And that is fundamentally the point. So I've had this conversation with a lot of people. And sometimes there's disagreements here. But I think what we've always been able to agree upon when I have these conversations is it's always going to be a hybrid world. Just from those examples alone, you should be understanding that it's not the object itself that determines if it's fungible or non-fungible, but how you use it within a market. And then also understand that it's not just one thing. You may layer multiple tokens together to actually represent an entire workflow, business process, or economy. So you can link tokens together is the fundamental point. Or even the token itself can exhibit behaviors that are both fungible and non-fungible in nature. So that's the fundamental point. This is really hard to figure out. And so back at the very beginning, I said we're not going to talk about NFTs. I just spent a lot of time talking about NFTs and fungible tokens as well. But the fundamental point here is we shouldn't be talking about these tokens as much as we should be talking about the marketplaces that we want to build. So sorry. One last note here. I interjected this because I touched on the token taxonomy framework, but didn't do it justice at all. It's much more detailed. There's a VS Code extension. If you want to install it in VS Code, you can actually design your own tokens. It's all open source. It's all freely available. I invite you, if you want to spend some time and truly understand tokens, go dive in. This is just to illustrate there's a lot more there. OK, back to the point. It's not about NFTs or fungible tokens. It's about building markets. When I say that, a lot of people are like, what do you mean by markets? I mean it in its most basic definition. A market is where you connect buyers and sellers to exchange assets. And those markets are going to require some fundamental principles, characteristics. They're going to require liquidity in order to match buyers and sellers together and actually move the market. The buyers and sellers will need to discover price of the assets. Buyers and sellers will need to have a clearing and settlement system. Oftentimes, there may not be settlement available directly within the market itself. And you need to do the payments outside on a separate rail. There's government and regulation as well in the space. So you need to consider if it will be regulated in the future. Some of these markets are not that you're defining. Some are already regulated. So what we want to think about is, first, what's the market you want to make? If you're a brand, if you're a manufacturer, what is the market that you want to make for these digital assets and tokens to be a part of? You can make it or join it. But fundamentally, what are these characteristics you want of that market that you want to engage? That's step one. Step two is realize it's not just one market. When we think about the market that you want to make, you'll think about the primary market typically that you want to mint in or that you want to create these assets in. But we've seen a lot of brands make some short-sighted mistakes about when they go and mint in NFT. All they think about is that drop and the NFT drop and the press release they can announce along with that drop. And they don't think about the long-term value of the token and how it will be used over time. If you truly want to create a market, you need to be thinking about the use of that token within a business process, within a market over time. How are you going to re-engage the owners of those tokens? Why does this token have value over time? And how will people use it? So you can't just think about the drop and how the NFT auction is going to work. You need to be thinking about the long-term value and how the market will respond to changes in that economy over time. And then it's not just the first order market. What about the second, the resale market of those tokens? Do you want to enable that? Do you want your brand to participate in the secondary market of your assets? There's a lot of talk about having secondary markets and having loyalty associated in the second team or royalties paid back through a secondary market sale. If you want to participate in that secondary market as a brand, you need to be thinking about that from the beginning or you will not enable those loyalty payments, those royalty payments back from the secondary market into the primary. I think this is super, super important that everyone understands that it's not about the first market. It's about the markets of markets and how will you be engaging over time and thinking in terms of not just the network or the market I'm going to engage with at first, but how am I going to enable consumers to work across multiple markets? And that gets, if you're around, you're going to hear a lot about interoperability here at Global Forum, right? I believe that's a key reason why people are talking about interoperability because you need that interoperability to move between markets, okay? So last, I'll give you some sort of, talked a lot about markets. I wanted to just give a high level strategic view of the capabilities you want to think about when you're building a token economy. So at the very top, let's work, the token marketplace, that is where you engage. That's the user interface for the token economy. Oftentimes people think about a token economy or a marketplace as open sea. That is just the open, that's just this top level right up here. That's just the user interface by which you're able to participate in the market and users can buy and sell tokens. You have all these other boxes you need to consider as well. What's the network and ecosystem in which it's going to participate and enable people to interact with? What's going to be the issuing a minting strategy, going back to what I mentioned before, about how will you be minting? You need to think about custody and storage. This is a really, really big item. Are people going to self-custody their assets, meaning they're gonna manage their assets all on their own? I will tell you, my parents would not be capable of that. Or will you be providing institutional custody of some sort? And where will that custody extend? Will it only extend to the primary market? Or will it extend into those secondary markets and tertiary markets and so on? Will they bring a monetization strategy of the initial token itself, the network or DeFi built on top of it? Are you gonna encourage those strategies or are you gonna try to keep your token purely around the asset itself? You have to be thinking about, like I mentioned before, the long-term value of the market. How will you enable and continue to enrich the market and make sure it grows versus, becoming not lacking liquidity and effectively closing down? How will you exchange value in and out of the market? How will you bring fiat currency into a native crypto market? How will you extract money out? Who will provide those exchange functions? And then lastly, as always, we need to be thinking about governance and regulation, both existing today and regulated markets today, but also the future and keeping an eye on what's coming likely for regulation in various jurisdictions, which is all across the board. Cryptocurrencies are illegal in some jurisdictions to adopt it as central bank digital currency and others. So it is across the board in a challenging landscape. So know the jurisdictions and what you're operating and the laws and regulations that apply within those jurisdictions. Okay, I covered a lot here. So what I'll leave you with is, again, forget about the NFTs and what's fungible or non-fungible and focus more on what the token economies are that you're trying to build within your companies and brands and how you can take that to market. And I would invite any questions over the last remaining time I have. Yes, go ahead. The issue that we have right now, how are you best going to market with these initiatives for building token economies when clients come to your questions? It seems like a foundational. So how are we going to market when someone says we wanna build a token economy or most of the time they come to us and say, do we want to launch an NFT? First, we start with a strategy. So what is that long-term value you're trying to create within a market? So that's where we start. And then we work backwards to, well, what would be the levers that would drive that value? So how would you unlock that value? And then we would start going back to this slide and start really thinking about the characteristics of the market that we wanna build and assess this. This is all non-technical in nature. And then eventually we get to the actual tokens and their definitions and their standards. Does that address the question? Yes? The starting point for building a consortium of interested parties in an industry, like an industry that's kind of stuck in its ways and you wanna introduce this technology? There's a lot of ways. So consortium and consortium building, the easiest way to start with an existing consortium, where you already have a central player that's acting on behalf of a group of organizations, obviously, to build one from scratch is hard, right? If anyone's ever had to deal with a multilateral contract before, it's never easy. And so the best way I can sort of describe is focusing on value, right? Those that are going to go after an industry tend to struggle to form actual solutions until they can lock in on a use case or a specific value pool out there in the market that's on tap that this consortium is gonna come together and rally behind and they all see value in that use case. Industry-wide adoption is very difficult and they tend to become industry associations that talk a lot about blockchain or about solutions instead of actually implementing them. So both are valuable. I'm not saying industry associations aren't valuable, but if you truly wanna build a solution, I would really focus on the mutual value across organizations as the North Star and then you have all the conversations and agreements and laying the correct governance around how decisions are made to go unlock that value. Any other questions? Let's go ahead. So to go back to your point about NFTs, so it was really, I mean, I think NFTs got an initial, people kinda recognize them based upon where they started and everyone thinks crypto kitties are digital art, but in the case of where any case of blockchain where tokens exist that have some value, but they're not purely fungible, are those considered NFTs as well? I guess going back to is it just the definition that needs to be changed? That how is the inter-work alliance kind of thinking of helping to change the definition of terms or are you coming up with new terms? Well, generally NFT when it's used today, at least every time I've, it's used correctly. Like the things that are called NFTs are NFTs. I don't see it's using correctly. It's just it's been used narrowly instead of being expanded to see more and more of the opportunities in tokens. So again, I find that it's just not useful to engage at a detailed level until you're really designing the token at a very detailed level to engage in the fungible, non-fungible discussion because it's such a detail. And you can see lots of times you end up being hybrid. And so getting locked up in these debates over semantics and definitions of the word don't necessarily get you to solutions. And I'm not a standards guy. I'm not the one who likes to debate those definitions personally. So maybe I'm not the right person to be answering that question, but for me it's all about getting to value. And if you wanna get to value, don't start with the definition, focus on the value, focus on the market that you wanna engage. So there's been some starts and stops around the use of NFTs in the marketplace for digital assets and such. Where do you think that it will go in the future as far as the future value using what it was intended for? So I'm not sure, the premise of the question, I'm not sure if I fully understand. So if you're saying that we're seeing less adoption of NFTs. Right, because of certain noise in the marketplace. Okay. But the value of the technological value of having stamping some digital property of something to be unique has value in the marketplace. And yet it's being held up by its current usage and certain tainting in the marketplace. Yeah, I mean if I could snap my fingers and address the market in general, I would love for us to stop using the word NFT. And I mean it, we're actually using NFT as a word, not as an acronym today, to mean typically works of art that are converted into digital medium. Like that's what most people understand NFTs to be. And there's been a lot of issues with those that were created, the intellectual property rights behind them, are they truly owning those artworks or not? There's a lot of fraud in the market as well as there is in a lot of crypto. And so it's made some people be concerned, right? And I think we've seen the dip in prices of a lot of NFTs and there's been some challenges in the market. I think that's effectively what you're saying. Again, that's a very narrow definition of what an NFT is. And so if we could just lose the word NFT and focus on the broader opportunity in tokens, when I turn and start talking about tokens, like the slide with all my stats, right? That is a market that I'm not hearing anyone disagree with. And so I don't think there's a need to change the perception of the token market. I think there's a need to shift our language away from NFT and maybe talking more about the tokens and less about works of art that may be fraudulent in some cases. It's not the majority, but that is dipping and taking the home, like tainting the definition of the word NFT, I guess. Any other questions? Oh, I did not personally do it. Let me jump back to that slide. And my slides are posted as well. I think I have the source. You can barely read it. The sources are there. And you can read the actual slides. I didn't do it myself. A coin is typically referring to a fungible token. But I think you'd have to go to definitions. Most coins are tokens even in physical or digital form. Right? So if you have a coin in your pocket right now, that is a fungible token of currency. The token is a broader class of coins. So coins would be a subclass of token. Slide that you showed that had the taxonomy. Is that coming from the work, the work alliances? Yeah, yeah. And that's not actually the taxonomy to be clear, is I couldn't find a good picture that showed all the work. So I'd invite you to go to the website and explore more about what's being done. That was the complicated slide to let you know that there's more out there to explore and understand. A lot of the initial standard that they've created as part of the IWA is actually a carbon focus. I believe, if I remember correctly, there's an ecological project token and then a carbon tracking token or offsets, or I'm not completely 100% on that, but they're two carbon related standards that they produced as part of the sustainability working group in IWA. And so again, those are non-platform specific standards. They're meant to be business standards and then could be adopted by any technology platform. Yeah, Craig? Yeah, so sorry for missing the start. Does the taxonomy cover when a token is designed not to be exchanged? So when it's designed to be issued to someone and then kept completely, sorry if you've covered it. I didn't cover it because I didn't go into any of the details of the taxonomy. There is a behavior called non-transferable, which would be a non-transferable token. Just for fun, I sometimes ask the question, is a non-transferable token effectively a credential? If you wanna go to some of the identity work that's done in Hyperledger as well, is a non-transferable token, essentially a credential? It's a good question, I haven't explored it in detail, but yeah, you can have a behavior of either a fungible or non-fungible token in the taxonomy, you can assign the behavior of non-transferable. Any other questions? Think that's a wrap, actually, I'm a little over, so thanks for all the questions, it was great. Pleasure to have this conversation. Thank you.