The Enterprise Ethereum Alliance (EEA) today announced the formation of the blockchain-neutral Token Taxonomy Initiative to address the need to universally define tokens to better understand how their use and implementation can occur interchangeably across all token-enabled blockchain platforms.
While some form of tokens and tokenization have existed throughout time, blockchain-derived tokens have the potential to transform business models for goods and services offered by distributed or decentralized applications – even if they are built on top of different blockchains. The purpose of this initiative is to clearly define a token in non-technical and cross-industry terms using real-world, everyday analogies so that anyone can understand them.
Over the past few years, digital tokens have become a multi-billion-dollar market. Starting with Bitcoin, and accelerating with Ethereum, blockchain-based tokens provide a revolutionary way of representing and recording value and ownership on a distributed ledger. Recently, the concept of tokenization has gone mainstream and has spread to many other platforms, particularly those with an enterprise focus.
Tokens have the potential to disrupt global economics and radically change how commerce will be transacted. The Token Taxonomy Initiative will define a standard taxonomy and accelerate its adoption by making it easier for all to create tokens to serve their respective business use cases. While various implementations and taxonomies exist for tokens, the industry is currently lacking a venue for all participants to work together to describe how tokens can eventually interoperate across the multiple and disparate systems that make up a typical enterprise infrastructure.
“Standardizing tokens to work anywhere could hold the key to one of the greatest economic opportunities in modern history. Just like standards that led to the rise of e-commerce on the internet, applying standards to tokenization will enable the enterprise to use tokens to serve as, or provide access to, a set of goods, financial assets, securities, services, value or content through enterprise blockchain applications.”
On a blockchain, tokens enable users to trade assets – from cash to securities to plane tickets and unique artwork – without using native blockchain currency. Today, developers are required to navigate multiple token standards and write code for every conceivable blockchain platform to ensure a single use case interoperates across all blockchain platforms. To scale tokenization worldwide, a digital security token on one blockchain network will need to follow a similar standard as a cash leg token on another network, which, in turn, should follow a similar standard as a collateral management token implemented on yet another network, for example.
The group’s mission will be to develop a clear definition and scope of the token concept, including use cases, taxonomy and terminology, and a specification. Marley Gray, EEA board member and principal architect, Microsoft, will be the Token Taxonomy Initiative Chair. Members of the initiative include Accenture, Banco Santander, Blockchain Research Institute, Clearmatics, ConsenSys, Digital Asset, EY, IBM, ING, Intel, J.P. Morgan, Komgo, Microsoft, R3, and Web3 Labs, among others.
“As blockchain adoption accelerates, it’s important to work together to develop a common understanding of the token model, provide a common set of definitions, and assure interoperability through best practices and standards,” said Gray. “With a standardized global approach, the Token Taxonomy Initiative will form the foundation of critical standards in tokenization that could streamline the way entire industries and ecosystems work on a blockchain.”
The Token Taxonomy Initiative will lay the important groundwork, based on real-world customer use cases and requirements, working to create a common set of tokens and control capabilities, including:
- Clearly define a token in non-technical and cross-industry terms
- Establish a common set of terms and definitions for use by business and technical participants
- Create a Token Taxonomy Framework (TTF) that is simple to understand; educate and collaborate with structured Token Definition Workshops (TDW) to define new or existing tokens
- Define meta-data using the TTF syntax and grammar to be able to generate visual representations, such as a token hierarchy or token design in tools that understand the taxonomy and be extensible for mapping TTF definitions to token solutions, implementations or source code for any platform
The Token Taxonomy Initiative will address the need to develop common definitions and scope for a business-grade standard for tokens with interchangeable currency-like properties or unique assets such as plane tickets. Also, the group will explore ways a standard business application may need to manage multiple token types, including any combination of fungible tokens, non-fungible tokens or other hybrid configurations.
The Initiative’s work will be independent of the ongoing EEA standards work, which enables the EEA’s global member base to work together to produce informational specifications for use in the EEA’s standards-based testing and certification process. Companies interested in learning more about the Token Taxonomy Initiative can reach out to [email protected]