IOTA plans to support NFTs, tokenized assets

The central theses

  • The IOTA team hopes to achieve tokenization with a new digital assets framework.
  • Developers can now create new tokens over the network.
  • The framework will introduce colored coins, a way to customize coins by embedding data.

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IOTA adds support for tokenized assets through a new framework based on colored coins.

IOTA aims at tokenization

IOTA is taking a step towards NFTs and other tokenized assets.

IOTA’s new feature known as the Digital Assets Framework hopes to enable developers to issue new tokens. The team’s announcement of the update was specific to NFTs.

The new framework will enable tokens through an innovation known as colored coins – a method of embedding data in coins on a UTXO-based blockchain.

Colored coins were first introduced for Bitcoin many years ago to spend real assets on the blockchain.

The UTXO model initiated in the Chrysalis Phase 2 update made this function possible for IOTA. The team said:

“With IOTA Digital Assets we are laying the foundation for the cross-network asset swap, with IOTA acting as a callous bridge currency”

IOTA also announced the update on Twitter, referring to “the biggest upgrade in IOTA’s history”.

The biggest upgrade in #IOTA history will bring exciting new opportunities. With the #DigitalAssets Framework on IOTA you can tokenize any asset with the same level of security, scalability and (without) fees as the IOTA token. https://t.co/DI1TC0cPt2#tokenization pic.twitter.com/iJZKk7Zr2l

– IOTA (@iota) February 18, 2021

The team says using the digital asset framework to dispense assets through colored coins would also create a bridge to other cryptocurrencies.

Additionally, colored coins on IOTA would improve the ability to create non-fungible tokens (NFTs) on the network. In a GitHub post, IOTA wrote:

“A color is a globally unique property of an embossed token. So if only one token was minted with that particular color, it becomes an NFT. ”

The team will be the framework during the Chrysalis migration in March the most complex upgrade in the history of the project.

The move towards tokenized assets like NFTs was undoubtedly inspired by one of crypto’s leading projects, Ethereum. In addition to easing the NFT boom, the number two blockchain is also the leading smart contract platform. IOTA only recently started accepting smart contracts and oracles.

The project has drawn a lot of criticism over the years, especially after a major wallet hack in February 2020. Critics pointed to the lack of security and innovation on the Tangle.

Questions have also been raised about whether IOTA has sufficient funds to continue operations; it was one of many that suffered during the ongoing crypto bear market after 2017. In December, the project announced that the IOTA Foundation would part with its founder David Sønstebø, citing “Actions”. [that] did not correspond to what the foundation stands for. “

Disclosure: The author did not hold any crypto mentioned in this article at the time of publication.

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