A Deeper Look Into Microsoft’s Stack to Bring Tokenization to Enterprise Blockchain Applications

Jesus Rodriguez
Nov 6, 2019 · 6 min read

Tokenization is one of the most fascinating trends in the blockchain ecosystem. The idea of representing physical or digital assets as blockchain tokens enables programmable ownership transfer and accountability dynamics that are brutally hard to accomplish with other technologies. In its short history, tokenization has inspired movements such as utility tokens, the initial coin offering(ICO) madness of 2017, the security token phenomenon and the new iteration of ICOs known as initial exchange offerings(IEOs). Recently, the idea tokenization started making inroads in the enterprise space. This week, Microsoft unveiled a major milestone in this journey with the release of Azure Blockchain Tokens, a native Azure service for the issuance and management of digital tokens across different blockchain stacks.

To understand the value of tokenization in the enterprise think about establishing a layer of ownership transfer as a fundamental construct of modern applications. Just like databases enable data access or identity management stacks allow user’s identity representations. Enterprise applications typically include the representation of assets that can be physical like a building or a store’s inventory or digital such as invoices or the storage in a cloud computing instance. While creating a digital representation of those assets is fundamentally trivial, the idea of enabling programmable transfer of ownership in an efficient and secure way requires three fundamental elements:

1) The Ledger: A distributed ledger that maintains immutable records of the ownership structure and history of an asset.

2) Smart Contracts: Constructs that encapsulate the business logic related to the agreement between different parties exchanging assets.

3) Tokens: That represent a transferable, digital unit of ownership of a specific asset.

If you need to select a single benefit of tokenization in enterprise application that would be programmability. While there are many ways to create digital representations of assets, making them programmable requires a smart contract layer. Programmability enables all sort of side-benefits like fractionalization, composition, minting or burning of tokens which are simply not possible with other asset digitalization strategies. From that perspective, tokenization is really a vehicle to bring your assets as programmable artifacts in your applications. Despite its value proposition, the idea of tokenization has been mostly constrained to public blockchains. Bringing tokenization to enterprise application will require to enable similar capabilities in permissioned blockchains.

TTF and Azure Blockchain Tokens

Azure Blockchain Tokens is an Azure-native implementation of the token taxonomy framework(TTF) championed by the Enterprise Ethereum Alliance(EEA). Microsoft has been an early adopter of the EEA specifications but the group includes other relevant vendors in the enterprise blockchain ecosystem such as IBM, Banco Santander or R3. Understanding Azure Blockchain Tokens is understanding TTF. The core principle of TTF is to establish the core constructs that enable the definition of tokens that can be used consistently on and across different blockchain runtimes.

In order arrive to a common definition, TTF relies tries to abstract the types, properties and behavior of a token. To achieve that, TTF relies on a three layer model that includes the following constructs:

Two key components of the TTF definition of a token are its type and behavior. The token type abstracts the fundamental groups of tokens based on its capabilities. The TTF specification and the Azure Blockchain Tokens implementation focus on three fundamental token types:

· Fungible: Fungible tokens have interchangeable value with each other as long as they are in the same class or series. One token has the same value as another token or a given quantity of tokens has the same value as another equal quantity.

· Non-Fungible: Non-fungible tokens are not interchangeable with other tokens of the same type as they typically have different values. For example, a property title is a non-fungible token.

· Hybrid: Hybrid tokens are tokens that have components of both fungible tokens and non-fungible tokens. A hybrid token is a base token type that owns a class of the other token type.

The second component of a token template is based on its behavior. Conceptually, token behaviors are capabilities and restrictions containing logic and properties that can be common across token types. The current implementation of Azure Blockchain Tokens includes a diverse number of behaviors represented in the following figure:

In order to control the aforementioned behaviors, TTF relies on a series of control messages that obviously draw inspiration from Ethereum’s ERC family of standards.The current definition of control messages is based on protocol buffers which enable its usage across platforms

message TransferRequest {
MessageHeader header = 1;
string token_id = 2;
string to_account_id = 3;
bytes quantity = 4;
}
message TransferResponse {
MessageHeader header = 1;
string token_id = 2;
string to_account_id = 3;
bytes quantity = 4;
TransactionConfirmation confirmation = 5;
}

TTF abstracts the definition of the capabilities of a token using a pseudo-mathematical syntax.

In addition to the core TTF specs, Azure Blockchain Tokens also include some interesting additional capabilities. Among those, account management allow the definition of access control policies for tokens based on accounts and groups.

Azure is not the first blockchain as a service platform to include tokenization concepts. Kaleido incorporated similar ideas into its platform as part of their Spring release earlier this year. However, Microsoft’s entrance in the space certainly represents a strong validation for the principles of tokenization in enterprise applications. While still in early stages, the TTF specification and the Azure Blockchain Token implementation are important experiments in order to streamline the adoption of tokenization techniques.

Get Best Software Deals Directly In Your Inbox

Coinmonks

Coinmonks is a non-profit Crypto educational publication.

Sign up for Coinmonks

By Coinmonks

A newsletter that brings you week's best crypto and blockchain stories and trending news directly in your inbox, by CoinCodeCap.com Take a look.

By signing up, you will create a Medium account if you don’t already have one. Review our Privacy Policy for more information about our privacy practices.

Check your inbox
Medium sent you an email at to complete your subscription.

Jesus Rodriguez

Written by

CEO of IntoTheBlock, Chief Scientist at Invector Labs, I write The Sequence Newsletter, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

Coinmonks

Coinmonks

Coinmonks is a non-profit Crypto educational publication. Follow us on Twitter @coinmonks Our other project — https://coincodecap.com

Jesus Rodriguez

Written by

CEO of IntoTheBlock, Chief Scientist at Invector Labs, I write The Sequence Newsletter, Guest lecturer at Columbia University, Angel Investor, Author, Speaker.

Coinmonks

Coinmonks

Coinmonks is a non-profit Crypto educational publication. Follow us on Twitter @coinmonks Our other project — https://coincodecap.com

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store