Business NFTs — Financial Business Documents As Tokens On Decentralized Networks

Philip Stehlik
Jul 17, 2018 · 5 min read

Combining standards for non-fungible-tokens with private off-chain business data to create unique tradable assets on decentralized networks

Update: We shared the technical paper “Privacy-Enabled NFTs” here.

The first digital revolution turned many physical goods such as books, music, or text into digital goods. The cost for storing, copying, and distributing those goods is now trending towards zero. Music can be remixed, distributed in new channels, and media can be incorporated into an endless list of digital works. Content creation became so simple and accessible that today, anyone with a digital device can record videos, write posts, share pictures, or make music.

This digitization also brings new challenges with it. For example, the verification of authenticity and the tracking of ownership of a digital asset is much harder than it was in the physical world. It was easy to track the number of vinyl discs that left the factory. But with music being a digital asset, how does an artist track the number of plays when listeners are streaming from a third-party provider? What about the plays on YouTube? What about a remix? How do you know which pieces went into a mix, how much the original authors should get paid, and what the person mixing the music should get as a reward for this new creation?

To paraphrase Naval: “The internet gave us digital ubiquity. Blockchains now give us digital scarcity.” Blockchains allow us to create unique tokens that represent a digital asset. Duplication, modification, or ownership changes of the asset and the token can be defined based on specific use-cases. It becomes possible to create relationships between the digital assets to reward contributors in a reliable way. When creating such a token on a blockchain it becomes easy to track the item’s lifecycle from creation, trade, mixing, attaching metadata, and more. The term non-fungible token (NFT) has been widely used to describe such a tokenized representation of a digital asset.

On Ethereum, a standard for NFTs (ERC-721) has emerged, giving the industry a common language to describe such assets and interact with them. For example, crypto-native projects such as CryptoKitties (collectibles) or Decentraland (virtual land parcels) are helping to establish this common language. Adhering to a standard like ERC-721 not only makes assets unique and identifiable but also tradeable on exchanges creating a whole new set of liquid markets for a wide range of digital goods.

The Case For Financial Business Documents as NFTs

In the world of the Financial Supply Chain, most documents already have a digital representation today. For example, invoices and purchase orders originate in a digital financial system and are processed in many other systems during the lifecycle of each set of data. As with the digital version of a song the problems of duplication, verification of document authenticity, or tracking of “ownership” (e.g. who should receive the money when an invoice finally gets paid) are very real challenges. We are not even scratching the surface of creating traceable, unique, certifiable derivative documents (the “mixes” of different information) based on today’s documents of the Financial Supply Chain.

Our team at Centrifuge has been working on turning these financial documents into NFTs on Ethereum with the goal to make them first-class blockchain citizens. This transformation creates a whole new set of possibilities for the interaction and processing of the documents and their unique representation. An immediate single source of truth of a document and its history become available. Documents become assignable and tradable.

We call this class of blockchain assets “Business NFTs” as a whole and “Invoice NFT”, “Order NFT”, etc. for specific document types. While we are following the ERC-721 standard for the tokenization we also combine the public on-chain data with a private, detailed representation of each asset that is only accessible by the current holder of the on-chain NFT.

Through this tokenization, the assignment of the documents to other parties (e.g. who should receive the payment for an outstanding invoice) becomes possible. Attaching metadata to documents in a verifiable way (e.g. proving that the materials used to produce a certain good were “fair-trade”) is done easily and in a verifiable, standardized way.

Combining NFTs With Private Off-Chain Data

Centrifuge OS is a system, built specifically for the Financial Supply Chain. It is using Ethereum as the public blockchain infrastructure and leverages an off-chain peer-to-peer (p2p) protocol for private document data exchange. Document updates are committed and anchored via precise proofs (Merkle trees of complex document structures) to Ethereum. This two-layered approach of the p2p-network, combined with on-chain transactions and verifiability ensures privacy and scalability of the system at large. Turning these assets into Business NFTs on Ethereum is then a simple next step, following the ERC-721 standard.

The flow of minting an Invoice NFT

The creator of a document on the p2p layer can register an NFT through the on-chain NFT registry by submitting an “ownership proof”. The NFTs themselves only hold a minimal set of the data of the original document on-chain to avoid leaking private data. The NFT metadata contains a link back to the on-chain anchor as well as a link to the private document on the p2p layer. The on-chain data is used to identify the document uniquely and allows anyone to verify the NFTs data as well as exchange the full document data privately within the network. The p2p network is operating in such a way that the current NFT holder gains access to the private off-chain information.

Decentralized Financing Of Invoices

One of the first use-cases of turning invoices into NFTs on Ethereum will be the assignment of payment obligations as well as lending against those assets in a decentralized way. Any existing lending platform on Ethereum that support NFTs as assets can be used to gain liquidity for unpaid invoices (in the form of Invoice NFTs). The payment obligations can easily turn into tradable assets on exchanges that support the ERC-721 standard. This allows Centrifuge OS users to access liquidity for previously illiquid assets in a completely decentralized way.

Call For Review

We are currently in the review-phase of a technical paper called “Business NFTs: Non-fungible tokens with private off-chain financial data”. The paper describes the implementation details of using NFTs for business use cases as outlined in this post. If you are interested in giving feedback, we would love to hear from you at or reach out to us on Twitter.

Do you like what we’re working on? Do you think B2B software is ready to move into the decentralized world? Reach out to us at If you want to work with us have a look at our currently open positions at we are always looking for smart, dedicated, nice people to join our team.


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