Issued Assets: Blockstream’s Game Changing Tokenization Solution

Siamak Masnavi

On Monday (2 July 2018), Blockstream officially introduced an asset tokenization feature called "Issued Assets" (IA) that allows Liquid users (crypto exchanges) to issue custom tokenized assets that can be transferred between users quickly, securely, and confidentially.

Liquid, which was Bitcoin's first production sidechain, was launched by Blockstream on 12 October 2015. The original mission was to allow users of the Liquid network—exchanges, brokerages, and major institutional traders—to quickly transfer bitcoin (in under two minutes). 

Using Liquid for bitcoin transfers has these advantages compared to ordinary bitcoin transfers (i.e. without using a 2nd layer solution):

  • Faster Trading (high speed transfers allow users to more easily take advantage of arbitrage opportunities)
  • Enhanced Efficiency (since it allows market makers to reduce the balances they hold across multiple exchanges)
  • Better Privacy (since the Confidential Transactions feature allows bitcoin transfers that hide the amounts being transferred)

Although this new Issued Assets feature was demoed around Mid May at the Consensus 2018 conference in New York City, it was not officially announced at that time. Now, via its latest blog post, Blockstream is saying that this feature will go into production within the next few weeks.

According to Blockstream, the assets you can tokenize with IA "can represent existing financial instruments like tokenized fiat, crypto assets, attested assets (e.g. gold coins), or completely new assets." What's more, using Liquid's concept of Confidential Assets ("a scheme in which a single blockchain-based ledger may track multiple asset types" and which extends the concept of Confidential Transactions to hide not only amount but asset type from everyone except the sender and receiver), it is possible for users to transact privately/confidentially.

For Consensus 2018, what Blockstream did to show off the power of IA was to create five separate Issued Asset types representing gifts such as Blockstream t-shirts, stickers, and hoodies. It issued each of these asset types in a quantity that matched the real world inventory equivalent. These assets were then randomly sent out to hundreds of paper wallets that had been distributed to the conference attendees. Each transfer to one of these paper wallets could be used for gifting to the owner of that wallet one or more asset types, e.g. just a t-shirt, or a t-shirt and a hoodie. Owners of these paper wallets would then  come forward to claim the real world assets represented by the tokens, which would cause the digital asset to be destroyed since its physical representation had been redeemed.

Blockstream says that this demo showcased several interesting features of Issued Assets on Liquid:

  • "Issuing a new asset in any quantity"
  • "Sending a single transaction with several assets"
  • "Transacting privately using Confidential Transactions"
  • "Destroying quantities of an asset"

Using these features, one could tokenize fiat, reward points, virtual collectibles, and many other asset types.

Since Liquid also supports atomic swaps, users can "trade one asset for another without the need for a trusted third party." Because "Issued Assets and bitcoin can each be inputs and outputs of a Liquid transaction", "a bitcoin/asset swap can be completed in a single transaction." Of course, if you have Issued Assets representing other cryptocurrencies, you could create a single Liquid transaction that can contain several different cryptocurrencies.

Blockstream believes that although there are other asset tokenization solutions in the market, Liquid's Issued Assets offer several benefits over them:

  • "Built on a secure, Bitcoin-backed sidechain"
  • "Ability to transact with amounts and asset types hidden"
  • "Transaction finality in under 2 minutes"
  • "Ability to transact with amounts and asset types hidden"
  • "Easier technical integration with one platform containing all digital asset representations"

On Twitter, user "patmillertime", a Bitcoin miner and HODLer, expressed his excitement about Issued Assets with the following tweet:

Twitter user "brucefenton", the CEO of Chainstone Labs, was also impressed:

Featured Image Credit: via the Blockstream website