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Alex Prut
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tokens.asciidoc

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@@ -64,7 +64,7 @@ The word "intrinsic" derives from the Latin "intra", meaning "from within".
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Some tokens represent digital items that are _intrinsic_ to the blockchain. Those digital assets are governed by consensus rules, just like the tokens themselves. This has an important implication: tokens that represent intrinsic assets do not carry additional counterparty risk. If you hold the keys to 1 ether, there is no other party holding that ether for you. The blockchain consensus rules apply and your ownership (control) of the private keys is equivalent to ownership of the asset, without any intermediary.
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Conversely, many tokens are used to represent _extrinsic_ things, like real-estate, corporate voting shares, trademarks, gold bars. The ownership of these items, which are not "within" the blockchain, is governed by law, custom and policy that are separate from the consensus rules that govern the token. In toher words, token issuers and owners may still depend on real world non-smart contracts. As a result, these extrinsic assets carry additional counterparty risk because they are held by custodians, recorded in external registries, or controlled by laws and policies outside the blockchain environment.
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Conversely, many tokens are used to represent _extrinsic_ things, like real-estate, corporate voting shares, trademarks, gold bars. The ownership of these items, which are not "within" the blockchain, is governed by law, custom and policy that are separate from the consensus rules that govern the token. In other words, token issuers and owners may still depend on real world non-smart contracts. As a result, these extrinsic assets carry additional counterparty risk because they are held by custodians, recorded in external registries, or controlled by laws and policies outside the blockchain environment.
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One of the most important ramifications of blockchain-based tokens is the ability to replace extrinsic assets into intrinsic assets and thereby remove counterparty risk. A good example is moving from equity in a corporation (extrinsic) to an equity or voting token in a _decentralized autonomous organization_ or similar (intrinsic) organization.
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