Since 2009, the launching of Bitcoin, we’ve seen 4 major Blockchain-related innovations taken off: Cryptocurrencies, Decentralized Finance (DeFi), NFTs (non-fungible tokens), and DAOs (Decentralized Autonomous Organizations).
All these innovations are downstream of Open Blockchains (like Ethereum) and therefore share the same underlying basic features (user ownership, immutable and self-executing applications (smartcontracts), immutable data, and native financial system) but applied to different goals.
Cryptocurrencies and Fungible Tokens are a type of record in a Blockchain, which usually represents interchangeable value (for example money and stocks), namely, they are not unique.
The first generation of Cryptocurrencies was made up of Bitcoin and several projects inspired by it like Litecoin and Zcash, whose goal was to create a single-purpose Blockchain as currency.
The second generation of Cryptocurrencies (aka cryptoassets) were created on top of the Ethereum Blockchain (and later on other App Blockchains) which are used to tokenize projects and organizations, create currencies for micro-economies and platforms, tools for voting and governance, and many other utilities.
DeFi (Decentralized Finance) are made up of financial services, like borrowing, lending, and currency exchange, provided by smartcontracts (scripts/apps) on top of a Blockchain, removing thus the bank intermediary.
The main projects are Uniswap, Aave, Compound, MakerDAO, and others.
All these projects are autonomous digital contracts (scripts on the spreadsheet, remember?) on the Blockchain with lending, borrowing, and exchanging rules. You connect your wallet to the app and interact directly with it and other users, without any intermediary.
NFTs are unique records in a Blockchain that represents not interchangeable assets, both digital and physical, such as images (e.g. art), texts (e.g. credentials), real estate, etc., which digital property is assigned to an owner.
In the same way, it’s a combination of smartcontract and data. But a very particular type of contract that allows a unique register of a given asset.
The first project that exploded was collectibles and digital art like CryptoPunks, BoredApes, and Nouns. But NFT is a digital property technology, that is, any asset can be represented as NFT, whether digital, such as an event ticket or a hotel booking, or physical, such as a real estate registry or paintings.
DAOs are digital organizations structures built on top of a Blockchain, with an open and shared balance sheet, core rules coded on-chain (smartcontracts), and collective ownership through fungible tokens.
Again, they also use the same features as everything else, but here for creating and coordinating organizations on the Internet without relying on traditional institutions (banks and legal contracts).
DAOs use Blockchain technology to create digital-native social structures.
Corporations rely on paper technologies like contracts, the traditional bank system, and laws to enforce rules, share ownership, incorporate, and make financial transactions.
And DAOs are the digitization of these properties:
Digitization of the bank system (crypto),
Digitization of rules (smartcontracts),
Digitization of ownership (tokens).
These properties allow a more decentralized and agile governance and economic alignment.
If until now everything has sounded too much abstract and confusing, let’s get practical right in the next section.