The Ethereum blockchain has emerged as a foundation for a trusted digital transactional network powering novel solutions across commerce and finance. Critical to these new solutions is the process of asset tokenization, which involves converting assets (or the rights/claims over an asset) into a natively digital representation, “ a token.”
Tokenization is one of the critical innovations of Ethereum technology. Many blockchain-based products rely on tokens to model financial instruments, represent real-world assets, or create incentive structures that improve network coordination and governance.
Over the last several years, ConsenSys has tokenized billions of dollars in value through various asset types. Including assets that power new business designs —such as Activate’s Proof-of-Use Feature— and assets issued by more established industries —such as Mata Capital’s real estate investment instruments.
Today, we are excited to introduce the Universal Token for Assets and Payments, an entirely new token standard designed by ConsenSys Codefi. The Universal Token was developed by the teams behind ConsenSys’ most advanced tokenization projects after three years of blockchain learnings.
This product is designed to power a much more comprehensive range of use cases than existing token standards. It can represent any asset or payment instrument on the Ethereum blockchain. It is compatible with existing most popular Ethereum standards like the fungible, non-fungible, and hybrid tokens standards.
How did we get here?
The Codefi team evaluates the problem at hand for each of our projects. Once the critical point is identified, we can distill complex business processes into blockchain-based models that are then encoded into smart contracts.
These addressable markets would benefit from a solution, the regulatory landscape, and how other innovators solve these issues (either with or without blockchain).
From the outset of our very first tokenization project, we learned that different use cases require additional token features and behaviors:
- For digital twins (or representations of real-world assets), we must ensure that any physical movement is seamlessly linked to the digital realm.
- For financial instruments, tokens need the ability to be held or transferred following existing regulations and business workflows.
- For most assets, we have to think about making private specific data or characteristics concerning certain network members. We also have to ensure cross-ledger interoperability.
- For decentralized finance use cases, we have to limit issuer control over the asset, decentralize compliance, and ensure the asset would remain interoperable with all other DeFi protocols and smart contracts.
All these particular behaviors pose interesting technical challenges, particularly interoperability. One answer could have been to recreate a smart contract for each project and have it audited each time. It, however, was impractical, as smart contract creation and auditing require a significant amount of time, money, and developer resources. Instead, developing a single smart contract that works for all use cases and assets was the more efficient, scalable, and secure choice.
Over the last three years, we have adjusted, measured, and refined the same smart contract, over and over. Today we are confident it will effectively fulfill most requirements across both centralized and decentralized finance use cases.
An Evolution in Ethereum Token Standards
With the Universal Token for Assets and Payments:
- Institutions can retain complete control of the assets they issue. This is essential to keep track of token holder identities, prevent blocklisted actors from accessing certain assets, and ensure transfers are always compliant. In the future, should these institutions choose to interact with DeFi protocols, they will also be able to either remove or decentralize these controls and benefit from DeFi networks’ composability.
- Enterprises and developers are empowered to issue any asset or payment instrument on the Ethereum blockchain, a DeFi derivative, loan or mortgage, a retail or wholesale CBDC, an invoice or warehouse receipt, or any financial instrument or even collectible or gaming asset.
Source: https://consensys.net/blog/codefi/
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