The Importance of Chain-Agnostic Asset Identifiers in the Multi-Chain Future
Starting in 2023, ITSA will adopt two new standards for identifying chains and assets on any DLT infrastructure. The CAIP-2 (Chain Agnostic Improvement Proposal — 2) defines a way to identify chains, while the CAIP-19 allows for the identification of different types of assets. These standards are developed by the Chain Agnostic Standards Alliance (CASA), an open-source collaboration of various actors in the blockchain space, including MetaMask, WalletConnect, Ledger, and many others. The new identifiers will be implemented in Q1 2023 with the latest ITC1.1 update. In this article, ITSA will explain why this is an important step for the future of blockchain technology and its potential to support a multi-chain ecosystem.
Authors: Valentin Seehausen, Prof. Dr. Philipp Sandner, Valentin Kalinov, Christian Viehof
The emergence of a multi-chain world in recent years has been driven by several factors. Firstly, the growing popularity of blockchain technology has increased the number of different blockchain networks, each with its unique features and capabilities. This has created a need for interoperability and collaboration between different chains in order to support the development of more complex and powerful decentralized applications. Secondly, the rise of decentralized finance (DeFi) has also contributed to the growth of multi-chain systems, as DeFi applications often require the use of multiple chains in order to function properly. Finally, the development of new layer-2 solutions, such as roll-ups and sidechains, has made it easier and more efficient to implement multi-chain architectures. Overall, these factors have contributed to the emergence of a multi-chain world in recent years. The near future is expected to see an increase in the use of roll-ups on Ethereum, as well as the growing importance of other chains like Polkadot, COSMOS, and even public chains for central bank digital currencies (CBDCs).
One of the challenges in a multi-chain world is the difficulty of clearly identifying assets and chains. In a single-chain system, it is relatively straightforward to track assets and transactions, as they are all recorded on the same ledger. However, in a multi-chain system, assets and transactions may be spread across multiple chains, making it more difficult to track and manage them. This can lead to confusion and complexity, especially for users who are not familiar with the various chains and their specific characteristics. Additionally, the use of multiple chains can make it harder to ensure the security and integrity of assets, as there is a greater potential for errors and fraud. Overall, these challenges highlight the need for effective solutions to clearly identify assets and chains in a multi-chain world.
To address this issue, the Chain Agnostic Standards Alliance (CASA) was formed. CASA is an open-source collaboration of various actors in the blockchain space, including MetaMask, WalletConnect, Ledger, and many others. As a member of CASA, ITSA will adopt the first finalized standards, the CAIP-2 (Chain Agnostic Improvement Proposal — 2) and CAIP-19, which provide a way to identify chains and assets, respectively. These standards will be implemented in Q1 2023 with the latest ITC1.1 update.
By using these standards, ITSA and other institutions can improve the clarity and simplicity of asset and chain identification in a multi-chain world. This will help to reduce confusion and complexity for users and make it easier to track and manage assets across multiple chains. It will also improve the security and integrity of assets, as the use of standardized identification will make it easier to detect and prevent errors and fraud. Overall, the adoption of the CAIP-2 and CAIP-19 standards by ITSA and other institutions is an important step towards realizing the full potential of blockchain technology and the multi-chain future.
How standards can improve the user experience in crypto
Standards serve the important purpose of enabling different machines and systems to communicate with each other. In the world of crypto, this is essential for improving the user experience. Currently, different wallet clients are required to connect to different blockchain networks. This can be confusing and inconvenient for users, as they need to use multiple wallet clients to interact with different chains.
By developing and implementing standards for identifying chains and assets, the Chain Agnostic Standards Alliance (CASA) is working to create a more seamless and user-friendly experience in the world of crypto. The CAIP-2 and CAIP-19 standards, which will be adopted by ITSA in Q1 2023, will provide a common language for different wallet clients to communicate with each other and with different blockchain networks. This will make it easier for users to interact with multiple chains and improve the overall clarity and simplicity of the crypto ecosystem. Additionally, the use of standardized identification will improve the security and integrity of assets in the crypto world. By providing a clear and consistent way to identify and track assets and transactions, these standards will make it easier to detect and prevent errors and fraud. Overall, the adoption of the CAIP-2 and CAIP-19 standards by ITSA and other institutions is an important step towards realizing the full potential of blockchain technology and the multi-chain future.
The CAIP-2 and CAIP-19 standards are designed to be simple and versatile and can be applied to any type of asset or chain. The CAIP-2 standard provides a way to identify chains using a simple set of rules, while the CAIP-19 standard allows for the identification of different types of assets. Together, these standards provide a clear and consistent way to track and manage assets and transactions across multiple chains. ITSA is committed to supporting the development and adoption of these standards and will be working closely with the CASA community to ensure their success. By adopting the CAIP-2 and CAIP-19 standards, ITSA hopes to send a strong signal to other institutional actors and encourage them to follow suit. The adoption of crypto depends on cooperation between different parties, and standards are an important building block for this cooperation. By working together and adopting these standards, we can pave the way for the widespread adoption of tokenized and other digital assets.
Why do we think that the CAIP-2 and the CAIP-19 standard will become the standard to identify assets and chains in the multi-chain future?
The ITSA developed a standard to identify chains two years ago (Uniform Token Locator — UTL), but it has since been deprecated in favor of the new CAIP-2 and CAIP-19 identification standards. The ITSA is one of the first institutes to adopt these standards, which are expected to play a major role in the coming years.
There are several reasons why the CAIP-2 and CAIP-19 standards will likely become the leading standards for identifying assets and chains in the multi-chain future:
- The CAIP-2 and CAIP-19 identifiers are simple and versatile, providing a standardized way to identify all chains and assets.
- The CASA, which is responsible for developing the standards, is supported by developers from influential players in the blockchain space, such as MetaMask and WalletConnect. This means that the standards are being developed by a large community, which can help overcome the challenge of achieving widespread adoption.
- The standards are flexible, allowing each community around each chain to agree on how to arrive at an identifier that meets the standards. This means that new chains can easily adopt the standards, while still retaining the ability to adapt to their specific needs.
- The standards include a “tokenId” that is used to identify non-fungible tokens (NFTs). This allows for the standardization of NFT identification, which is an important aspect of the broader adoption of these types of assets. The “tokenId” can also be used for other purposes, such as subaddresses of a token, allowing for further iteration and customization of the standards.
By adopting the CAIP-2 and CAIP-19 standards, the ITSA hopes to encourage other institutional actors to do the same, in order to promote the adoption of tokenized and other digital assets. Cooperation and the adoption of standards are key to the success of the crypto industry, and the ITSA hopes that its adoption of these standards will help drive further progress in this area.
How ITSA will use the CAIP-19 asset identifier along with the ITIN
The ITSA will use the CAIP-19 asset identifier in conjunction with the ITIN (International Token Identification Number) to map digital assets. While we will still use the traditional smart contract address, the CAIP-19 identifier will provide an additional access point to our Tokenbase.
As partner of WM Datenservice, a provider of identifiers for financial assets, ITSA will enable financial actors in the DACH region to access the identification data of digital assets using the CAIP-19 identifier. By the beginning of 2023, all financial institutions in the DACH region will use the CAIP-19 identifier to identify DLT assets.
We hope that other institutions will follow our lead so that a multi-chain future becomes feasible and easy to navigate for users and investors. Starting in Q1 2023, the ITIN will map to the asset identifier of an asset. For example, you could say “USDC on Polygon” and send a short ITIN (6XQ7-Q9N1–2), which would map to the long asset identifier. With the ITIN, using the CAIP-19 identifier is as easy as using the ISIN for traditional assets.
For more information on how the asset identifier is composed, please read our previous article.
The adoption of the CAIP-2 and CAIP-19 standards by ITSA and other institutions is an important step towards realizing the full potential of blockchain technology and the multi-chain future. As the saying goes, “a standard is only as good as its adoption,” and the success of these standards will depend on the willingness of the broader community to embrace them and put them into practice.
ITSA is committed to supporting the development and adoption of these standards and will be working closely with the CASA community to ensure their success. By adopting these standards, ITSA hopes to send a strong signal to other institutional actors and encourage them to follow suit. The adoption of crypto depends on cooperation between different parties, and standards are an essential building block for this cooperation. By working together and adopting the CAIP-2 and CAIP-19 standards, we can pave the way for the widespread adoption of tokenized and other digital assets.
The International Token Standardization Association (ITSA) e.V.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 internationally associated founding members from various interest groups. In order to increase transparency and safety in global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
- The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
- The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
- ITSA’s Tokenbase currently holds data on over 10000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.
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Valentin Seehausen is an economist and blockchain developer. His main job is being a project manager at the Frankfurt School Blockchain Center and programming DeFi protocols. He advocates privacy in CBDC and the mass adoption of tokenized securities. He is a board member of the Digital Euro Association and CTO of the International Token Standardization Association. He leads the Smart Contract Development Module of the Master in Blockchain & Digital Assets at the Frankfurt School of Management and Finance.
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 (email@example.com) via LinkedIn or follow him on Twitter (@philippsandner).
Valentin Kalinov is an Executive Director at International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He has over five years of experience working at BlockchainHub Berlin in content creation and token analysis as a project manager at the Research Institute for Cryptoeconomics at the Vienna University of Economics and token analyst at Token Kitchen. You can contact Valentin via firstname.lastname@example.org and connect on Linkedin if you would like to further discuss ITSA e.V. or have any other open questions.
Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via email@example.com and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.