Over the past few years, our industry has built an incredible amount of infrastructure. New L1s and L2s, embedded wallets, and novel middleware protocols have given developers unprecedented tooling and abstractions. Gone are the days of seed phrases and crippling gas fees. Getting onchain is now as simple as downloading an app on your phone, signing up, and onramping funds. Crypto has never been more accessible.

However, while the enabling infrastructure has hit an inflection point, apps have struggled to utilize it. An all-too-common pattern is for a new app to launch with a bang, only to fizzle within a few weeks. Users attracted by the app's novelty – and often its token – churn once the novelty wanes or the token begins to slide. 

Tokens are rocket fuel for apps; they accelerate apps in their current direction, but severely reduce their maneuverability. For too many apps, token launches muddy their capacity to discern product-market fit, and restrict their ability to iterate towards it.

It’s clear to us that (1) we need more high-quality apps, and (2) the token is an obvious lever on an app’s success (or failure if poorly executed). Yet surprisingly, token implementations themselves have scarcely changed. For example, ERC20 and ERC721 have been around for 10 and 7 years, respectively. Though new standards are proposed from time to time, none have replaced them as the default. But that may be about to change.

Apps Need Apptokens

Apptokens are a new token standard developed by the Limit Break team. It supports both fungible and nonfungible tokens (named ERC20C and ERC721C, respectively) and offers full backwards compatibility with the classic 20 and 721 interfaces. Apptokens give developers unprecedented flexibility and control over the tokens they create. ERC721C has already become a giant in the space, finding early adoption among the largest NFT exchanges as a way to enforce creator royalties.

Apptokens have 4 main components:

1. Creator token standards – Developers can create ERC20C or ERC721C tokens with restrictions on how they can be transferred. This includes options for whitelists, blacklists, and whether smart contracts can receive them.
2. TokenMaster – The TokenMaster protocol enforces trading rules defined by the creator. It can include settings for how a token price changes, the rules for buying and selling, and gives holders the ability to spend their tokens.
3. Payment Processor – For ERC721C, Payment Processor is a peer-to-peer NFT trading protocol that offers creators choices no other exchange protocol does, like min/max pricing, payment method constraints, and royalty enforcement. 
4. Trusted Forwarder – Creators can optionally use the trusted forwarder to add attribution of transactions to the app from which it originated, which could be the basis for an onchain referral or affiliate mechanism.

Collectively, these primitives radically expand the design space for tokens and their corresponding apps. Here are some of our favorite examples of what can be built with Apptokens:

1. Spend-only tokens – Developers can create tokens that cannot be transferred or sold and therefore lack a market price. They could then specify how the token can be used within their app. For example, a creator could reward fans for engaging with their content with spend-only tokens for exclusive use inside their creator store.
2. Branded stablecoins – Online stores can create their own branded stablecoins. Users who pay in those stablecoins can have their loyalty rewarded with discounts or spend-only tokens, while the business can monetize their stablecoin’s float. 
3. Trading-constrained tokens – Developers can place constraints on how tokens can be traded. For example, they can restrict an Apptoken to only be traded with a certain token pair or on a specific set of DEXs. They can also set fixed ratios for token prices (like trading 4 wood for 1 brick). Another possibility is to give tokens range values, where their price can fluctuate within a given range but with a fixed floor and ceiling price. 
4. Expiry-tokens – Developers can launch tokens that are only usable for a period of time. For example, a game could launch a seasonal $SNOW token that is only spendable during the winter season. After that point, it becomes unusable. 
5. Compliant tokens – Compliance standards can be built into a token to define how it can be traded and transferred. For example, tokenized securities can be launched that are accessible to US accredited investors and usable within DeFi protocols, but are restricted for other parties like those from OFAC-sanctioned jurisdictions.
6. Client-bound tokens – Tokens can be bound to a given client-interface such that they can only be used inside that client environment. This combines well with action-gating, where rewards can be unlocked after completing certain user flows, like finishing onboarding or completing a game level. Restrictions on how the token can be used outside the app protect it from unwanted influence.

Many of these options are especially powerful for game designers, but the standard can empower any app. We believe Apptokens can drive a renaissance in token design. In doing so, they not only help teams channel their rocket fuel, but also equip them with new tactics for bringing crypto to the masses.

Conclusion

Apptokens could revolutionize crypto by stabilizing apps, unlocking new business models, and driving sustainable growth. We’re excited about their future, and have already begun partnering with teams leveraging them. A deeper dive into Apptokens can be found here. 

If you’re interested in building a novel crypto app leveraging Apptokens, please reach out. We’re nick@standardcrypto.vc and alok@standardcrypto.vc.

Thanks to the Limit Break team for feedback on this post.