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CodefiCodefi Assets

ConsenSys Codefi Launches the Universal Token for Assets and Payments

by Nicole AdarmeSeptember 29, 2020
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Expanding Ethereum Standards to Cover a Much Broader Range of Use Cases

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 key 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 a variety of 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 wider range of use cases than existing token standards and is able to 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.

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How did we get here?

For each of our projects, the Codefi team evaluates the problem at hand, the addressable markets that would benefit from a solution, the regulatory landscape, and how other innovators are trying to solve these issues (either with or without blockchain). Once the critical issue is identified, we are able to distill complex business processes into blockchain-based models that are then encoded into smart-contracts.

From the outset of our very first tokenization project, we learned that different use cases require different token features and behaviours:

  • For digital twins (or representations of real-world assets), we have to ensure any physical movement would be 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 how to make private certain data or characteristics in relation to 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 behaviours pose interesting technical challenges, particularly in terms of interoperability. One answer could have been to recreate a smart-contract for each project and have it audited each time. This however was impractical, as smart contract creation and auditing requires a significant amount of time, money, and developer resources. Instead, development of a single smart contract that works for all kinds of 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 full control of the assets they issue. This is essential in order 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 type of asset or payment instrument on the Ethereum blockchain, be it a DeFi derivative, loan or mortgage, a retail or wholesale CBDC, an invoice or warehouse receipt, any type of financial instrument, or even collectible, or gaming asset.

    Written by the expert tokenization team at Codefi Assets

Learn more about the Universal Token for Assets and Payments through our on-demand webinar.