A token ledger system that leverages the simplicity of BitcoinOctober 26, 2020
This post originally appeared on Elas.Digital site and we republished with permission from the Elas team.
Until now there has been no way to be able to create a token ledger that allows for the tokenization of real-world assets in a way that has them resemble native Bitcoin UTXO transactions with zero overheads in script. This has meant that Bitcoin based token systems have always had to add data or scripting overhead as well as secondary systems in order to identify tokens and the transactions that they are in.
The Bitcoin ledger is unbounded, and with the removal of block limits and restoration of the original protocol is now growing faster than ever with throughput coming from numerous use cases in the form of different transaction types.
These transaction types range from the simplest transactions like Pay to Public Key Hash (P2PKH) to complex transactions using methods like FALSE RETURN scripts which create unspendable (hence easily pruned) data and pushdata opcodes which insert data into spendable coins.
Having tokens resembling native Bitcoin UTXOs allows them to leverage all the benefits that the Bitcoin SV network provides, making them as simple and efficient as possible without sacrificing potential utility.
Elas Digital enables this by creating self-contained token ledgers within the global Bitcoin ledger as needed by each issuing authority, allowing them to manage, issue and oversee tokens as regular bitcoin transactions without any unnecessary overheads, while still allowing the tokens to be easily identifiable and validated within the zone of the token ledger.
In an ideal implementation (not possible today due to dust rules), each token would be represented by a single Satoshi in a spendable Bitcoin UTXO, which is why we have called them Elas Satoshi tokens.
Establishing a token ledger, and many subledgers within it
Elas’ simple yet powerful management system enables you to set up a ledger as simply as with one establishment transaction that defines the purpose and rules of the ledger.
This action will reflect an instantaneous moment of real life into the ledger, forcing the main work to come before, in the establishment of the signing parties’ legal right to establish a ledger for the prescribed purpose as defined within the contract. Identities and signatures can be managed via threshold schemes or multi-signature scripts in the event that multiple issuing authorities are needed to sign the ledger into existence.
As these establishment ledger actions are created with identity and digital signatures, they can be subjected to the same legal scrutiny that is required to administer similar business actions in traditional methods where there are legal processes, structures and accountability that can be easily traced back to the issuers.
Once a token ledger has been established, it is then possible to nest sub-ledgers within it. An example use case being a nation state looking to conduct a digital transformation of their government processes and within that will require breaking down their nation’s ledger further for identity documents, currencies or by states/territories.
Within this nested structure, the token ledger and the token sub-ledgers are boundlessly expandable. It doesn’t matter how big the sub-ledgers inside the Bitcoin ledgers get, the Bitcoin ledger will always be bigger and the sub-ledgers can grow as required.
After the tokens have been created and issued, the transaction processing and validation of ownership rights is managed by nodes on the Bitcoin network. This provides full transparency and visibility of the usage within the sub-ledgers to the issuing authority without needing to check every single signature of the participants, guarding user privacy.
Elas Satoshi tokens are as efficient as Bitcoin transactions
As transactions that exchange Elas Satoshi tokens resemble and have the same properties as Bitcoin, transactions are highly space efficient once tokens are in circulation Elas Satoshi tokens do not require off-chain agents to countersign transactions or complex intelligence within the user’s wallet. This is something that can be specific to the token system itself, if needed. Keeping the token as simple as possible allows for the complexity to be externalized and made unique to each application.
Other token systems that require external layers to validate and manage tokens require data to be embedded in the transactions, making them less efficient.
Let’s take an example using the current rate of 0.5 satoshis per byte. A token requiring a 3KB transaction with data in a FALSE RETURN output script, or embedded within a spendable output would cost 1500 satoshis for fast confirmation in today’s fee market. Whilst 1500 satoshis may not seem like a lot, when added to each token transfer it becomes cost intensive and puts added weight on the mining network, creating a cost burden for users.
This gives Elas Satoshi tokens the benefit of security, cost and speed which will be in line with and will scale with the BitcoinSV network. As an added benefit, token transactions are able to be verified using SPV (Simple Payment Verification) allowing users to be sure received tokens are legitimately issued within the issuer’s own ledger deriving from the establishment transaction.
This proof of existence can be passed to the receiver’s device by the sender as a complete history of the token’s transactions since being issued. A token with 1000 transactions of history could carry less than 2MB of data, easily storable in a mobile device wallet. This means a token can be validated without contacting the mining network, while still having the security of the full aggregate proof of work of the Bitcoin blockchain.
Elas is also working on a fast response back-end which light wallets will be able to use to rapidly establish token validity without needing to handle large amounts of token history.
Elas Satoshi tokens are as fungible as traditional cash
When the dust limit is inevitably removed the default carrier of a token will become a single satoshi. In effect, Elas is using the satoshis like the paper bank notes are printed on. Satoshi tokens remove the value of Bitcoin from the equation, giving 100% of the attention to the token printed on top.
Looking at the cash bank note use case as an example, denominated outputs would be spent in the token currency, but the bitcoin ledger would simply show the exchange of a number of single satoshi coins. Using satoshis like paper allows us to create a currency that works much like the paper cash of today.
This can open up the possibility for smaller denominations to be more easily circulated into the economy. As cash money, Satoshi tokens require change to be assembled for a transaction, or even passed back to the spender from the receiver, as opposed to a conventional Bitcoin UTXO transaction that breaks larger chunks of money into pieces, which are sent to the recipients as outputs, and the spender as change.
Elas is compatible with other tokens and protocols
Thanks to its simplicity, it is possible to incorporate regular bitcoin transactions, tokens from other Elas ledgers or tokens from other tokenization protocols into transactions with Elas tokens in them. This compatibility between protocols is peace of mind for developers considering the different aspects of each token system.
For more information on Elas token ledgers and Satoshi tokens, please reach out using the contact form on our home page, www.elas.digital.
Watch Brendan Lee’s presentation at CoinGeek Live 2020 Day 2.
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