Unique Referencing and Identification in the Token Universe: Cross-Chain, Worldwide, and Fork-Resilient
The token economy has gained significant momentum. As of today, an ecosystem of more than 5,100 publicly traded crypto tokens and over 245,000 Ethereum token contracts has emerged. However, due to the lack of holistic market standards, this wave of new tokens may confront market participants with ambiguity and uncertainty, exposing retail investors to avoidable risks and deterring institutional funds. Acknowledging the market‘s need for more standardization in order to grow and mature, ITSA has developed the International Token Identification Number (ITIN) as a unique identifier, which covers all DLT-based cryptographic tokens, regardless of their status as security, their fungibility or tradability. But any identifier needs a strong foundation that copes with the particularities of the ecosystem it is intended for. To build a strong and sustainable foundation for the ITIN and to consider the characteristics peculiar to the decentralized world, ITSA is introducing the Uniform Token Locator (UTL). The UTL is a novel identification and referencing standard capable of uniquely identifying all types of tokens across different ledgers and is resilient to chain splits. Just like information on the WWW is identified by a Uniform Resource Locator (URL), tokens are identified and located through the UTL. ITSA maintains a register on how to map UTLs to ITINs. Other organizations can also use the UTL and map it to their shortened identifier. — Authors: Philipp Sandner, Johannes Pfeffer, Constantin Ketz, Nils Bundi, Thomas Faber
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.
A critical precondition for a sustainable and economically beneficial growth of the token ecosystem is the ability to uniquely identify all prevalent tokens. This is especially relevant against the backdrop that we are still in the early days of the token economy. Security Token Offerings (STOs), fungible tokens and non-fungible tokens including tokenized intellectual property, industrial goods, real estate, art, vehicles or machinery will grow dramatically. Figure 1 illustrates how tokenized assets will outnumber traditional financial securities and instruments.
However, the flood of new tokens, some of them very obscure, brings its own problems. Today, cryptographic tokens can confuse market players with ambiguity and uncertainty. This is caused for example, by coincidentally similar token names or ticker symbols, but also by intentionally creating confusion as part of scams. Sometimes, different tokens carry the same ticker symbol even across legitimate exchanges (e.g. Bitcoin Gold and the now inactive project BitGem, which were both using BTG). Sometimes, one and the same token carries different ticker symbols across exchanges (e.g. Bitcoin, which is to be found under XBT or BTC). Sometimes, a token is renamed but the old ticker symbol is kept, and sometimes, a token receives a new ticker symbol while still keeping its old name (e.g. Bitcoin Cash, which was first to be found under BCC and is now listed under BCH since the nowadays inactive project BitConnect was already using BCC before). Any service that neglects to maintain unique references is contributing to corrupt the entire subsequent ecosystem relying on its data. Due to strong network effects, the overall negative impact on the market grows exponentially, exposing retail investors to unexpected and avoidable risks and deterring institutional funds.
In this new ecosystem of the decentralized economy, token creators choose their own symbols, inevitably leading to duplicates across both legitimate and scam projects. The ICO model of raising capital for new blockchain projects often involves a token swap from an ICO token (typically on the Ethereum chain) to the final project token, usually known by the same symbol (EOS, TRX). Blockchain forks can split one token into multiple tokens sharing the same original symbol, and the associated community debates can sometimes change an instrument’s commonly used symbol (Bitcoin Cash). Market participants such as exchanges independently decide on what symbol to use, leading to ambiguity as the same token may be referred to by multiple symbols (Bitcoin represented by BTC and XBT). Last but not least, there may even be ambiguity between crypto tokens and traditional equities or securities. For example ETH can refer to Ether, the Ethereum-native token, or to the stock of Ethan Allen Interiors.
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).
Unique identifiers for commodities, products, or assets, have been used on international markets for a long time. For example, currencies are identified through internationally recognized ISO currency codes (e.g. EUR for Euro), and financial securities and instruments are identified by means of the International Securities Identification Number (ISIN) or the Financial Instrument Global Identifier (FIGI) . The need for a new approach on the identification of tokens arises from the fact that these digital representations of the referenced asset are defined by software on a DL-Protocol that serves as shared infrastructure. This software, let’s refer to it as the token contract, then not only captures details of the token such as the current holdings by participants but also offers logic e.g. to transfer tokens from one participant to another. This is fundamentally different from traditional market infrastructure where securities are administered by central agents which record current holdings as well as transfers in their proprietary systems.
The implications for appropriate identification are obvious: In the latter case, a unique identification code or name, respectively, is sufficient in order to administer and update securities holdings by participants through the central agents in their proprietary systems. On the other hand, for software-defined tokens it is of utmost importance to unambiguously locate the respective token address across DL-Protocol in order for the participants to make sure that a token considered for sale or purchase indeed references the intended asset. This is similar to the problem of locating resources, like a website, in the world wide web (WWW) for which the Uniform Resource Locator (URL) has been created.
Hence, ITSA has developed the ITIN as a unique identifier that is conceptually similar to the URL and serves as an unambiguous means of locating cryptographic tokens across DL protocols and in a fork-resilient manner. Thereby, the ITIN can be used for identification of all DL-based cryptographic tokens, regardless of their economic features such as status as security, their fungibility or tradability.
Figure 2 shows the relationship between cryptographic tokens and the assets they represent and the scope of the ITIN using three layers. The Asset Layer captures the referenced assets which essentially carry some form of economic value. For Bitcoin this can be the utility of the Bitcoin token as the unit of payment in the Bitcoin network or it can be its utility as a store of value as perceived by some. For securities like Apple shares the economic value may be derived from future dividend payments or the voting rights associated with holding it while for physical assets such as industrial machinery it is the value of the machinery itself. In the token economy, cryptographic tokens are created to represent these assets. Therefore, different DL-Protocols are used which is reflected by the Protocol Layer. Important to notice here is that a variety of DL-Protocols exists. Adding to this complexity, new protocols may emerge dynamically as forks from existing ones. Hence, a universal and resilient token identifier needs to take into consideration all these aspects. Finally, the Token Layer represents the token addresses located on a specific DL-Protocol and defines the cryptographic tokens. As a result, at a minimum locating cryptographic tokens requires identifying the respective DL-Protocol and the token address on that protocol. Note again that traditional identifiers such as ISIN and FIGI focus on the identification of the referenced financial securities directly while the ITIN provides a means to unambiguously locating the cryptographic tokens across DL-Protocols and types of referenced assets.
To build a strong and sustainable foundation for the ITIN and to consider the particularities of the decentralized world, ITSA has introduced the Uniform Token Locator (UTL), a novel identification and localization standard that accurately reflects the current and future requirements of the token industry while ensuring transparency and security across marketplaces.
The workings and value of the UTL will be explained using the following example: Person A (buyer) buys shares in a public limited liability company from Person B (seller). In the traditional world, a purchase agreement for the shares is concluded and notarized. Afterwards, the result is centrally documented in the private company’s shareholder register (often a simple Excel file). Things are different when shares are not sold directly but in a tokenized manner. In this case, Person A does not buy shares but buys tokens from Person B that digitally represent the ownership of the shares. Person A and B also sign a purchase agreement for the tokens in exchange for money. However, in this case the shareholder registry is not maintained by the company in a regular database but through a token contract on DL. Hence, in order to prove ownership and transfer the shares or tokens, respectively, the token contract has to be identified (i.e., the token contract address) and located (i.e., what blockchain? what fork?) on that DL. Figure 3 shows an excerpt of a token purchase agreement (TPA) that uses the Ethereum smart contract address as an identifier.
This is problematic because the token address (e.g. smart contract address or Stellar address) alone is neither fork-resilient nor can interpreted in a seamless way (e.g. by machines or algorithms) is and therefore not suitable for the discussed case of the tokenized share sale or for practical, comfortable use in general. In other words, it is not sufficient to identify the token contract carrying the tokens to be transacted through its address but it also needs to be located on the respective DL. To solve these issues, ITSA has developed the UTL. By using the UTL, the above purchase agreement can simply be signed digitally with a PDF tool and the details can be viewed by scanning the QR code in the appendix with a mobile phone, leading to the ITSA interface that cleanly displays the relevant token and transaction information.
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:
- Genesis hash — The hash of the genesis block of a blockchain.
- 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.
- Recent hash (RH) — The newest known hash of the chain.
- Optional: Smart contract address — Required for non-native tokens.
- Optional: Token sub-address — Required for multi-token contracts.
ITSA maintains a table to map the PFH to addresses of reliable network nodes of the respective blockchain network. Such nodes are generally used by networks’ discovery protocols for the detection of peers after initial connection to the network. For example, for the Bitcoin network such nodes can be identified through DNS Seeds, special DNS servers that return the IP addresses of available full nodes,  and similarly for Bitcoin Cash , Ethereum  and Cardano (testnet) . So with the input of a post-fork hash, ITSA supplies information on how to find the node and a canonical name of the network (e.g. Ethereum vs. Ethereum Classic). The Genesis hash (1) is used to quickly check whether this information is available in a database.
With the post-fork hash (2) and smart contract address (4) combined most tokens can be identified. Non-fungible tokens can also be addressed by adding a token sub address (5). The optional recent hash can be added as a metric for the reliability of the UTL. As new forks in a blockchain can occur at any time after issuance of the UTL, including the most recent hash available (3) helps assessing the UTLs ambiguity.
As we have seen with website URLs, they can become quite long and cumbersome to type. URL shorteners such as bit.ly have emerged to solve this problem. They map long URLs to unique but very short addresses. The components of ITSA’s UTL can become very long, too because of the long hashes and addresses used to identify a token. A UTL shortener comparable to those existing for URLs helps make UTLs usable. This part is covered by the ITIN. ITSA maintains a register on how to map UTLs to ITINs. Other organizations can also use the UTL and map it to their shortened identifier. Figure 5 illustrates this concept:
An example (unshortened) identifier for the Ethereum based DAI token can be seen in Figure 6.
Our token resolve service means one can just take some information from a blockchain and will get back the ITIN (“reverse lookup”). The above UTL will always be resolved by ITSA servers to the short ITIN URL (see Figure 6). And from the ITIN page one can always generate an up-to-date UTL.
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.
We currently assume a blockchain with blocks that have a block hash as a unique identifier. The chain shall be linear as defined by the protocol, as opposed to concepts such as tangles or hashgraphs. Chain splits are considered to create a separate blockchain of its own right. We also assume that forks can be observed and that reliable seed node IP addresses can be retrieved.
A known limitation of the current version of the UTL specification is that its ambiguity increases over time. At creation time the UTL is unambiguous. As the blockchain progresses and possibly unobserved forks occur, the ambiguity increases. Thus, UTLs need to be refreshed periodically.
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.
That is the fundamental idea on which ITSA has built the UTL. In analogy to a URL in the World Wide Web that consists of different elements such as a protocol and a domain, the UTL encompasses the post-fork hash (PFH), the token contract address as well as a token subaddress in case of non-fungible tokens. With the combination of these components, all tokens can uniquely and easily be identified and localized. We have exemplified this based on a token purchase agreement for company shares. To transfer the tokens and prove ownership, the token contract has to be identified (e.g. the token contract address) and located (what blockchain? what fork?). With the UTL, the contract could be signed digitally with a PDF tool. The reliable token and transaction details could then be viewed in an ITSA interface by scanning a UTL-representing QR code in the appendix with a mobile phone.
As known with URLs, ITSA’s UTL can become quite long and are difficult for human beings to read. Therefore, the ITIN is taking on the role of a UTL shortener that is also inline with ANNA/ISIN and international financial market standardization endeavours. ITSA maintains a register on how to map UTLs to ITINs. Other organizations may map any UTL to their own shortened identifier.
ITSA will soon provide (1) PFH-2-node routing table, (2) including reference/metadata, (3) ITIN/URT mapping table and APIs, (4) Governance guidelines how routing table according to (1) will be adjusted.
For UTL v2 we’re working on generalizing the specification to cover DL that are not block-based, such as hashgraph or IOTA. In the next version we’re also looking at making the ambiguity of UTLs less time-dependent.
If you like this article, we would be happy if you forward it to your colleagues or share it on social networks. More information about the International Token Standardization Association (ITSA) e.V. can be found on the Internet, on Twitter or on LinkedIn.
Prof. Dr. Philipp Sandner is head of the Frankfurt School Blockchain Center (FSBC) at the Frankfurt School of Finance & Management. In 2018, he was ranked as one of the “Top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. Further, he belongs to the “Top 40 under 40” — a ranking by the German business magazine Capital. The expertise of Prof. Sandner in particular includes blockchain technology, crypto assets, distributed ledger technology (DLT), Euro-on-Ledger, initial coin offerings (ICOs), security tokens (STOs), digital transformation and entrepreneurship. You can contact him via mail, via LinkedIn or follow him on Twitter.
Johannes Pfeffer is co-founder and CTO of atpar, the team behind the ACTUS Financial Protocol (AFP) — a blockchain based protocol that allows managing all kinds of digital financial assets along their entire lifecycle (issue, service, trade, analyze, reporting). You can contact him via email or LinkedIn.
Constantin Ketz is co-initiator and vice chairman of the International Token Standardization Association (ITSA). Next to his research on token markets and the applications of Distributed Ledger Technology (DLT) in the financial industry at the Frankfurt School Blockchain Center (FSBC), he works as consultant for DLT and financial technology solutions with a focus on debt capital markets and asset securitization. Mr. Ketz holds a B.Sc. in Economics from the University of Mannheim as well as a Master in European Public Affairs from Maastricht University and the European Institute of Public Administration (EIPA). You can contact him via email or via LinkedIn.
Nils Bundi is co-founder and CPO of atpar, the team behind the ACTUS Protocol — a blockchain based protocol that allows managing all kinds of digital financial assets along their entire lifecycle (issue, service, trade, analyze, reporting). As core-team member of the ACTUS Financial Research Foundation Nils has shaped the first algorithmic standard for financial contracts and currently chairs the ACTUS User Forum. Previously, he led the development of core-banking and financial analytics technology and consulted financial services providers in a wide range of projects at the interface of financial data, mathematics, and technology. You can contact him via email or LinkedIn.
Thomas Faber is a research fellow at the Frankfurt School Blockchain Center and a project manager at the International Token Standardization Association (ITSA). His areas of interest include distributed ledger technology (DLT), security tokens (STOs), crypto-assets as well as blockchain ethics and blockchain-related sustainability issues. Mr. Faber holds a B.Sc. degree in Management, Philosophy & Economics as well as a M.Sc. degree in Management with a focus on digital business models from the Frankfurt School of Finance & Management. You can contact him via email and LinkedIn.