The Future of Token Utility: Programmable Rights and Obligations

Today's tokens are mostly dumb bearer assets. Their utility is fixed at issuance, forcing protocols to deploy new tokens for new features, fragmenting liquidity and governance.

• No native logic for revenue sharing, access control, or compliance.
• Governance is manual, requiring off-chain coordination and multi-sig execution.
• Value accrual is indirect, relying on secondary market speculation rather than embedded cash flows.

Embed executable logic directly into the token standard itself. Think ERC-20s with built-in hooks for revenue distribution, voting power delegation, or KYC checks.

• Automatic yield routing to holders via ERC-4626-like vaults.
• Time-locked or conditional transfers for vesting and compliance (see ERC-5484).
• Modular upgrade paths allow utility to evolve without migration, akin to EIP-2535 Diamonds.

Shift from simple token transfers to fulfilling user intents. Tokens become agents that seek optimal outcomes across DeFi rails, paying for service.

• Tokens auto-stake to the highest yielding validator or liquidity pool.
• Cross-chain actions are abstracted; a token on Base can seamlessly pay gas on Polygon via layerzero or Axelar.
• Solver networks (like UniswapX, CowSwap) compete to execute obligations, creating efficient markets for token utility.

Native tokens are inert bearer assets. They cannot natively enforce royalties, tax logic, or time-based vesting, forcing protocols to build complex, fragile off-chain systems.

• Problem: Creator royalties are a social contract, easily bypassed by new marketplaces.
• Solution: Programmable tokens like ERC-5218 (Non-Transferable Tokens) or ERC-6956 (Asset-Bound Tokens) bake rules into the asset itself.

DeFi and governance suffer from sybil attacks and mercenary capital. Reputation and credentials must be non-transferable to have meaning.

• Problem: DAO voting power is just another tradable commodity, disincentivizing long-term alignment.
• Solution: ERC-5484 (Soulbound Tokens) and projects like Gitcoin Passport create persistent, non-financialized identity primitives for sybil-resistant governance and undercollateralized lending.

Static tokens cannot adapt to real-world conditions. The future is assets whose behavior changes based on oracle inputs or on-chain events.

• Problem: A loan collateral token cannot automatically liquidate itself; it requires an external keeper network.
• Solution: ERC-3475 (Multi-Callable Bonds) and programmable note systems like Teller enable debt instruments with embedded call/put options and automated settlement logic.

Tokenizing real-world assets fails without enforceable legal rights and regulatory compliance coded into the digital wrapper.

• Problem: Holding a tokenized stock doesn't grant shareholder rights; it's just an IOU from a custodian.
• Solution: Protocols like Ondo Finance and Maple Finance build legal frameworks and transfer restrictions directly into the token's logic, creating programmable compliance for RWAs.

Monolithic token contracts are inflexible. Upgrading permissions or adding features requires risky migrations or complex proxies.

• Problem: A DAO's utility token cannot easily add new staking mechanics or role-based permissions post-deployment.
• Solution: ERC-7504 (Dynamic NFTs) introduces a modular registry system, allowing tokens to inherit and update permissions, traits, and behaviors from external modules without changing the core contract.

User intents (declarative statements of desired outcomes) are the natural abstraction for programmable obligations, moving execution complexity off the user.

• Problem: Users manually manage complex DeFi loops (e.g., yield harvesting, cross-chain bridging) with high failure rates and costs.
• Solution: UniswapX, CowSwap, and Across Protocol use intent-based architectures where solvers compete to fulfill user-specified outcomes, creating a market for obligation execution.

Most tokens sit idle in wallets or CEXs, representing wasted utility and governance potential. They are one-dimensional assets in a multi-dimensional financial world.

• Unlocked Utility: Idle tokens don't vote, earn, or power applications.
• Governance Inertia: Low participation plagues DAOs like Uniswap and Aave.
• Capital Inefficiency: Billions in TVL is non-composables.

Embed logic directly into token standards (beyond ERC-20) to automate rights like voting, revenue share, and access. Think ERC-20 + IFTTT.

• Automated Governance: Tokens can auto-delegate or vote per pre-set rules (see ERC-5805).
• Dynamic Cash Flows: Program revenue splits for holders (e.g., ERC-4626 vaults).
• Conditional Access: Tokens become keys to gated services or data.

Traditional finance uses legal contracts for obligations (loans, vesting). On-chain, these are either non-existent or rely on fragile, centralized oracles.

• Credit is Impossible: No native framework for enforceable debt.
• Vesting Leakage: Founders can often bypass poorly coded locks.
• Oracle Risk: Real-world conditions require trusted data feeds (Chainlink, Pyth).

Encode penalties and conditions directly into the token's transfer logic, creating self-enforcing agreements. This is the foundation of on-chain reputation.

• Slashing Conditions: Tokens can be programmatically burned for non-performance.
• Time-Locked Transfers: Built-in, non-circumventable vesting schedules.
• Cross-Chain Enforcement: Protocols like LayerZero and Axelar can make obligations chain-agnostic.

Staking tokens for yield (e.g., Lido, Rocket Pool) removes them from governance. Providing liquidity in DEX LP pools does the same. Users must choose between yield and influence.

• Governance Dilution: Liquid staking derivatives (LSDs) like stETH do not carry full voting power.
• Voter Apathy: The hassle of un-staking/re-staking to vote kills participation.
• Protocol Risk: Delegating voting power to node operators centralizes control.

Separate token rights into composable layers (security, governance, cash flow) that can be independently staked, delegated, or traded. This is the thesis behind EigenLayer and Cosmos interchain security.

• Restaking for Security: Use staked ETH to secure other protocols, earning additional yield.
• Delegatable Governance: Rent out your voting power to experts via platforms like Snapshot or Tally.
• Yield-Bearing Governance Tokens: Protocols like Aura Finance embed yield directly into the governance token.