Unique Referencing and Identification in the Token Universe: Cross-Chain, Worldwide, and Fork-Resilient

Introduction

Now that cryptographic tokens are no longer a new phenomenon, the speed at which new tokens are being issued has increased significantly. With only a few lines of code needed, it has become quite convenient and affordable to deploy a new token with a smart contract. To this date, and only ten years after Bitcoin ushered in the era of tokens, an ecosystem of more than 5,100 publicly traded crypto tokens and over 245,000 Ethereum token contracts has emerged.

Short video on Youtube: The Uniform Token Locator (UTL) - A Concept to Identify Tokens Uniquely, Cross-Chain, Worldwide, and Fork-Resilient — Youtube URL: https://www.youtube.com/watch?v=oNlYOXK_wPw
Figure 1: There will be significantly more DL based tokens than assets in the traditional world.

A new identification and reference standard for the decentralized economy

Acknowledging the market‘s need for more standardization in order to grow and mature, the International Token Standardization Association (ITSA) pursues the goal of developing and implementing holistic market standards for the identification (1), classification (2), and in consequence analysis (3) of all distributed ledger (DL) based cryptographic tokens. In the forthcoming of this article we focus on (1) and outline the motivation for and concept underpinning of the International Token Identification Number (ITIN).

Figure 2: Tokens are defined by software on different DL-Protocols and digitally represent a specific asset, i.e. some form of economic value. While traditional identifiers, such as ISIN, FIGI or currency codes, focus on assigning unique codes (or names) directly to assets, the ITIN aims at unambiguously locating tokens across DLs in a fork-resilient manner.
Figure 3: Example of a token purchase agreement referring an ambiguous Ethereum address
Figure 4: Example how a token can be addressed in a paper-based contract via a QR code

Structure and origin of the UTL

The UTL conceptually builds upon the Uniform Resource Locator (URL), used to locate resources, e.g. a website, in the world wide web (WWW). We propose a novel method for using purposefully crafted URLs to identify and locate tokens on DLs. Any static website in the WWW can be uniquely accessed by a URL even if the content itself is moved from one server to another, using the Domain Name Service (DNS). In the same way, tokens can be uniquely accessed through the UTL. Just like the URL consists of different components such as (1) Protocol, (2) Subdomain, (3) Domain, (4) Top-Level-Domain, (5) Directory and (6) File Name, the UTL includes the following parts:

  1. Genesis hash — The hash of the genesis block of a blockchain.
  2. Post-fork hash (PFH) — The hash of the first finalized block complying to the protocol rules of the newest blockchain fork. This hash is generally unique.
  3. Recent hash (RH) — The newest known hash of the chain.
  4. Optional: Smart contract address — Required for non-native tokens.
  5. Optional: Token sub-address — Required for multi-token contracts.
Figure 5: Building upon the URL — ITSA’s concept of a Uniform Token Locator (UTL)
Figure 6: A real-life example for the UTL and the ITIN

Assumptions and Limitations

In developing v1 of the UTL we have made a number of assumptions. These assumptions help break down the complexity of creating a generalized approach to the identification and location of tokens across DLs and are resilient against forks but, at the same time, introduce limitations of the system.

Conclusion and Outlook

We have introduced a novel framework for the unique identification and localization of tokens. It is the first of its kind to sustainably embrace the characteristics of the fast-growing token economy and its decentralized nature. When transferring or buying a token, you have to make sure it’s the correct one on the correct chain rather than a copy on an obscure fork. Hence, it is insufficient to base the identification on e.g. the token contract address only. The token also has to be located across ledgers.

References

[1] http://bitcoinstats.com/network/dns-servers/
[2] https://github.com/Bitcoin-ABC/bitcoin-abc/tree/master/contrib/seeds
[3] https://github.com/ethereum/go-ethereum/blob/master/params/bootnodes.go
[4] https://hydra.iohk.io/build/1814197/download/1/index.html

Remarks

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  • Blockchain knowledge: We wrote a Medium article on how to acquire the necessary blockchain knowledge within a workload of 10 working days.
  • Our two blockchain books: We have edited two books on how blockchain will change our society (Amazon link) in general and the everything related to finance (Amazon link) in particular. Both books are available in print and for Kindle — currently in German and soon in English. The authors have been more than 20 well-known blockchain experts in startups, corporations and the government from Germany, Austria, Switzerland and Liechtenstein — all contributing their expertise to these two books.
Our two books: the first one on blockchain and the society and the second one on blockchain and finance

Authors

Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund, 21e6 Capital and Blockchain Founders Group — companies active in venture capital financing for blockchain startups and crypto asset investment management. The expertise of Prof. Sandner includes crypto assets such as Bitcoin and Ethereum, decentralized finance (DeFi), the digital euro, tokenization of assets, and digital identity. You can contact him via mail (m@philippsandner.de) via LinkedIn or follow him on Twitter (@philippsandner).

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Philipp Sandner

Philipp Sandner

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Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center