Binance Research on New Tokenization Report: Too Early to Rule Out Blockchains Competing with Ethereum

In a new comprehensive report on tokenization on the blockchain, Binance Research assesses how tokens have brought significantly higher utility for the blockchain industry as a whole.

Binance Research, the market research and analysis arm of Binance, has published a comprehensive report on tokenization and the key factors considered to evaluate and develop on-chain token economies. In the report, titled “The World of Tokenization,” Binance Research stated that in spite of the current Ethereum’s dominance, it is too early to rule out any potential competing blockchains

The report recognizes the role Ethereum (ETH) has played in spurring the tokenization of the blockchain universe. Ethereum is currently the most used blockchain worldwide for developers to issue new tokens. Specifically, there are hundreds of thousands of tokens already issued on Ethereum, along with many token standards either fully developed or in progress. 

And while there are dozens of token standards already on the Ethereum blockchain, scalability constraints on Ethereum have given the opportunity for competing programmable blockchains to support their own token standards, either natively or constructed, according to Binance Research.

“In the long-run, a wide variety of programmable blockchains will likely coexist if interoperability solutions across chains develop and prove to be secure and usable,” Binance Research stated.

In the expanding tokenization of assets, Binance Research identified the several factors on which competition occurs between different blockchains, such as:

• DApp availability or growing use cases: the more applications a blockchain has, the greater the value proposition is.

• Transactions and pace: the faster a blockchain is, the more appealing it generally becomes. On-chain transaction frequency also reflects the popularity of a network.

• Blockchain fees: the lower on-chain and token issuance fees are, the higher the incentives to interact within the on-chain ecosystem.

• Easiness to build: elements like a test-net, EVM-compatibility & number of smart-contract languages play a key factor in attracting users.

• Security and blockchain development: general activity on the blockchain, reflected by the number of improvement proposals or the count of developers on layer 1, is generally an accurate measure of the health of a blockchain. In addition, blockchain security remains essential with vector attacks and past attacks being focal points.

• (De)centralization: the degree of centralization impacts the value proposition of a chain, particularly from the perspective of potential token stakeholders. 

“Yet, ‘impossible trade-offs’ remain, which ultimately stem from the blockchain triangle (i.e., scalability, security, and decentralization cannot be achieved simultaneously). As a result, key drivers such as on-chain metrics, level of adoption, or the size of the developer pools remain as some of the core factors to consider,” according to Binance Research.

Read the full report here. 

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About Binance Research 

Binance Research provides professional, data-driven insights and analysis for investors in the crypto space to increase the level of transparency and improve the quality of information within the current crypto ecosystem. The team consists of professionals with a background and experiences in blockchain engineering, investment banking, strategy consulting, academic research and data science. For more information, visit: https://research.binance.com/