Internet DRAFT - draft-ramakrishna-sat-use-cases
draft-ramakrishna-sat-use-cases
Internet Engineering Task Force V. Ramakrishna
Internet-Draft IBM Research
Intended status: Informational T. Hardjono
Expires: 29 September 2023 MIT
28 March 2023
Secure Asset Transfer (SAT) Use Cases
draft-ramakrishna-sat-use-cases-02
Abstract
This document describes prominent scenarios where enterprise systems and
networks maintaining digital assets require the ability to securely
transfer assets or data to each other.
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1. Introduction
Business networks, built on both centralized and decentralized models,
have emerged to manage cross-organization assets and workflows. The scope
of such workflows and the assets they govern, as well as the set of
participating organizations within a network, have been quite limited,
partly for security, privacy, and scalability reasons, and partly because
organizations have been reticent to moving large portions of their pre
existing workflows to such networks. We see this especially in the areas
of trade, finance, supply chain logistics, and property management. Yet
the workflows managed by these networks are naturally interlinked in the
real world, and therefore cannot afford to remain isolated from each
other technologically, which would diminish the value of their assets. At
the same time, a network, once built, has institutional staying power,
and it is therefore impractical to assume that they will expand or merge.
Interoperability is therefore an imperative in this fragmented business
network ecosystem. This comes in different flavors, namely the ability to
move an asset from one network to another, interlinking workflows to
share asset state with proof of authenticity from one network to another,
and swapping assets in different networks as part of a business
transaction, as listed in the SAT Architecture Specification [SATA]. The
purpose of this document is to describe prominent examples of these modes
that have been encountered by enterprises and business consortiums and
identified as challenges to be overcome.
2. Terminology
There following are some terminology used in the current document.
We borrow terminology from NIST and ISO as much as possible,
introducing new terms only when needed:
o Asset network (system): The network or system where a digital
asset is utilized.
o Asset Transfer Protocol: The protocol used to transfer (move) a
digital asset from one network to another using gateways.
o Origin network: The current network where the digital asset is
located.
o Destination network: The network to which a digital asset is to be
transferred.
o Data sharing: The process, using the Asset Transfer Protocol, by which
one or more units of verifiably authentic data are communicated from
an Origin network to a Destination network, either voluntarily or upon
request.
o Asset Transfer: A fail-safe process of moving an asset from one
network to another, with the destruction of the asset in the Origin
network and its recreation in the Destination network occurring as a
single atomic action.
o Asset Exchange: A fail-safe process of exchanging (or swapping) assets
held by a pair of owners, each asset being maintained in a different
network, with the two in-network transfers occurring as a single
atomic action.
Further terminology definitions can be found in [NIST] and [ISO].
3. International Trade and Supply Chains
3.1. Trade Finance and Logistics
There are several real-world examples of consortium networks managing
different aspects of international trade. Networks like We.Trade [WET],
built on Hyperledger Fabric [HLF], and Marco Polo [MP], built on R3 Corda
[R3C], manage trade finance workflows by connecting exporters, importers,
and financial institutions (primarily banks). Other networks like
TradeLens [TL], built on Hyperledger Fabric, manage trade shipping and
documentation logistics, by connecting exporters and shipping carriers.
As an example, consider a system of two networks as illustrated in Figure
1: (a) a trade finance network managing letters of credit business
lifecycles from application to fulfilment, and (b) a trade logistics
network managing shipping consignment creation and dispatch documents
like bills of lading.
+------------+
| Exporter’s | +----------+ +---------------------+
| Bank | | Exporter | | Exporter |
+------------+ +----------+ +---------------------+
| | | | | |
3 | | 5 | 4 1 | | 2 | 4
Approve | | Request | Upload Book | | Create | Accept
L/C | | Payment | B/L Consignment | | Consignment | B/L
| | | | | |
V V V V V V
+-------------------------------+ +-------------------------------+
| Trade Finance Network | | Trade Logistics Network |
+-------------------------------+ +-------------------------------+
˄ ˄ ˄ ˄
2 | | 1 5 | | 3
Propose | | Request Dispatch | | Upload
L/C | | L/C Consignment | | B/L
| | | |
+------------+ +----------+ +-------------+
| Importer’s | | Importer | | Carrier |
| Bank | +----------+ +-------------+
+------------+
(a) (b)
Figure 1
An exporter who belongs to both systems must produce a valid bill of
lading in the trade finance network to enforce a payment from the buyer
to fulfil the terms of the letter of credit. But this bill, which serves
as evidence of a shipping consignment’s dispatch via a carrier, lies in
the other, i.e., trade logistics, network. The two networks must
therefore be interoperable in such a way that the logistics network can
share a bill with the finance network along with independently verifiable
proof of authenticity. Otherwise, the trade finance network’s workflow
must trust that the exporter is acting in good faith and supplying
genuine bills of lading, which adds insecurity. This interoperation,
which involves sharing of network data, can be extrapolated to other
scenarios involving the two networks. The trade logistics network can
require an exporter to produce a valid letter of credit from the trade
finance network before permitting a consignment record creation. Both
these cross-network data sharing instances are illustrated in Figure 2.
+----------+ 1 Agree on +----------+
| Exporter |<------------------>| Importer |
+----------+ Purchase Order +----------+
+------------+
| Exporter’s | +----------+ +---------------------+
| Bank | | Exporter | | Exporter |
+------------+ +----------+ +---------------------+
| | | | |
4 | | 12 5 | | 7 | 9
Approve | | Request Book | | Create | Accept
L/C | | L/C Consignment | | Consignment | B/L
| | | | |
| | | | |
| | |¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯| | | |
| | | 11 Share B/L | | | |
V V V | V V V
+-------------------------------+ +-------------------------------+
| Trade Finance Network | | Trade Logistics Network |
+-------------------------------+ +-------------------------------+
˄ ˄ | ˄ ˄ ˄
| | | 6 Share L/C | | |
| | |____________¬¬___| | |
| | | |
3 | | 2 10 | | 8
Propose | | Request Dispatch | | Upload
L/C | | L/C Consignment | | B/L
| | | |
+------------+ +----------+ +-------------+
| Importer’s | | Importer | | Carrier |
| Bank | +----------+ +-------------+
+------------+
Figure 2
Asset transfers among trade networks: In the preceding example, letters
of credit and bills of lading represent portions of state of the larger
export-import workflow. But these documents are also digital assets in
their own rights.
A bill of lading can serve as title to the consignment of goods being
shipped, and hence can be traded as a security or used as collateral
against debt obligations in the financial market. Hence, Step 11 in
Figure 2 may well be embodied by the transfer rather than the sharing of
state of a bill so that it ceases to remain on the Trade Logistics
Network ledger and instead belongs to the Seller’s Bank on the Trade
Finance Network’s ledger.
A letter of credit may also assume the properties of a digital asset in
certain situations. Consider the case of an importer who wishes to move
their business to a different trade finance network and maintain their
records on that network’s ledger. We can assume that the banks and the
exporter participate in the second trade finance network as well, which
exists to serve a different clientele. The importer needs to be able to
move its letter of credit state to the other network and resume the trade
workflow after migration. This requires the ability to transfer the
letter in the form of a digital asset from one trade finance network to
another.
3.2. Tracking Food Shipments
The use case linking a trade finance network with a trade logistics
network can be augmented by adding a food tracking network like the IBM
Food Trust [IFT] to the mix. Such a network connects producers,
suppliers, manufactures, and retailers, who participate in food supply
chains. Purchase orders, like those negotiated between producers and
retailers, and which are illustrated as negotiated between exporter and
importers in Figure 2, are recorded in this network’s ledger. For quality
control, its business workflow will track at periodic intervals the state
(e.g., temperature and humidity) of containers carrying, for example,
produce from farm to source port and from destination port to warehouse.
The trade logistics network handles documentation and dispatch but does
not track the location or condition of a consignment outside of a
carrier’s purview. Clearly, these networks play complementary roles in a
supply chain. The logistics network should be able to get the state and
history of a container before dispatch from the food tracking network, as
should the latter from the former after the carrier has delivered a
consignment. End-to-end supply chain visibility and effectiveness relies
on the interoperability of these two networks, or to be precise, their
ability to share verifiably authentic data with each other. Further, such
interoperation also enables the trade finance network to allow the
creation of a letter of credit only after verifying the existence of a
valid purchase order in the food tracking network. Figure 3 illustrates
the links between these networks.
+-------------------------------+
|¯¯¯¯| Food Tracking Network |¯¯¯¯¯¯¯¯¯¯|
| +-------------------------------+ |
Share | ˄ | Share
Purchase | | Share | Shipment
Order | |¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯| | Shipment | State
| | Share B/L | | State |
V V | | V
+-------------------------------+ +-------------------------------+
| Trade Finance Network | | Trade Logistics Network |
+-------------------------------+ +-------------------------------+
| ˄
| Share L/C |
|____________¬¬___|
Figure 3
3.3. Supply Chain Management
To complete the picture, we can add a payments network to the mix, which
maintains currency accounts for clients in different countries and
enables cross-border payments, an example being the Stellar network
[STN]. After goods have been dispatched, and optionally after
verification of the delivery and proper condition of a shipment, payment
is due from an importer to an exporter. The trade finance network can
record a payment obligation on its ledger but it will rely on the
payments network to process and confirm the actual transfer of funds. The
former shares data about the obligation to the latter, which shares data
about a successful (or otherwise) payment in return, as illustrated in
Figure 4.
+-------------------------------+
|¯¯¯¯| Food Tracking Network |¯¯¯¯¯¯¯¯¯¯|
| +-------------------------------+ |
Share | ˄ | Share
Purchase | | Share | Shipment
Order | |¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯| | Shipment | State
| | Share B/L | | State |
V V | | V
+-------------------------------+ +-------------------------------+
| Trade Finance Network | | Trade Logistics Network |
+-------------------------------+ +-------------------------------+
| ˄ | ˄
Share | | Share | Share L/C |
Payment | | Payment |____________¬¬___|
Obligation | | Fulfilment
| |
V |
+----------------------+
| Payments Network |
+----------------------+
Figure 4
Addendum: we can add yet another network to the mix, one that manages
regulatory compliance. (E.g., proof-of-concept systems have been built to
bring banks and corporations on a single distributed ledger and smart
contract platform to share KYC information in privacy-preserving ways
[BKYC] [SKYC].) Now issuances of letters of credit in the trade finance
system will be dependent on valid KYC records being maintained as assets
in the regulatory compliance system.
4. Financial Instruments and Currency Exchanges
4.1. Currency Transfers
Central Bank Digital Currencies, or CBDCs for short, have garnered
significant interest in governmental circles recently as an efficient and
transparent mechanism to enforce monetary policy and to enable
transactions at scale as a substitute for legacy payment mechanisms. CBDC
systems can come in different varieties, with a 2-tier model as
illustrated in Figure 5 gaining recent popularity. In the higher tier lie
wholesale CBDC networks, built on distributed ledger and smart contract
platforms, bringing together central or reserve banks and various
commercial banks. Commercial banks hold reserve currency deposits with
the reserve bank, which has the special power to mint currency and issue
CBDC and also enforce regulatory compliance. In the lower tier lie retail
CBDC networks for commercial banks and their customers, built on similar
technologies, enabling seamless, efficient, and transparent payments
using CBDCs. A retail CBDC network may involve a single commercial bank
or multiple commercial banks, depending on the market caps of those banks
and their purposes for joining such a network.
+----------------------------------------+
| |
| Wholesale CBDC Network |
| |
| +----------------+ |
| | Central Bank | |
| +----------------+ |
| |
| +------------+ +------------+ |
| | Commercial | | Commercial | |
| | Bank A’s | | Bank B’s | ...... |
| | Account | | Account | |
| +------------+ +------------+ |
| |
+----------------------------------------+
˄ ˄
| |
| |
V V
+----------------------------+ +----------------------------+
| | | |
| Retail CBDC Network | | Retail CBDC Network |
| | | |
| +------------+ +---------+ | | +------------+ +---------+ |
| | Commercial | | Central | | | | Commercial | | Central | |
| | Bank A’s | | Bank | | | | Bank B’s | | Bank | |
| | Account | +---------+ | | | Account | +---------+ |
| +------------+ | | +------------+ |
| | | | .......
| +----------------+ | | +------------+ |
| | Client Account | ....... | | | Commercial | |
| +----------------+ | | | Bank C’s | |
| | | | Account | |
+----------------------------+ | +------------+ |
| |
| +----------------+ |
| | Client Account | ....... |
| +----------------+ |
| |
+----------------------------+
Figure 5
Here we will encounter scenarios where a given commercial bank maintains
digital currency accounts in a wholesale CBDC network as well as one or
more retail CBDC networks. To inject liquidity into a retail CBDC
network, this bank will need to transfer currency from its reserve
account in the wholesale CBDC network. Or it may need to transfer
currency from one retail CBDC network to another bank in another retail
CBDC network. In the world of decentralized finance, or DeFi for short,
currency cannot afford to remain siloed in any single CBDC network.
Hence, these networks must be interoperable in order to facilitate secure
transfers of currency among themselves, as illustrated in Figure 5.
4.2. Delivery vs Payment of Securities
In Decentralized Finance, or DeFi for short, investors and financial
institutions will form networks to manage the creation and purchase of
securities. As a simple example, we can consider a network consisting of
the Treasury, which issues bonds, and commercial banks, which purchase
and trade bonds. We can also consider a payments network of the kind we
saw in Section 3.3 (or a retail CBDC network of the kind we saw in
Section 4.1), which allows CBDC transfers between commercial banks’
accounts. In the securities network, banks may wish to transfer bonds to
each other but only in exchange for compensation. But such compensation
can be made only on a payments network where the two maintain currency
accounts (e.g., in CBDC). Therefore, the securities and payment networks
must be able to interoperate in such a way that two banks can carry out a
delivery-vs-payment transaction spanning these two independent networks.
Such a transaction must be atomic, i.e., either both bond and CBDC tokens
get transferred in their respective networks or neither gets transferred.
Figure 6 illustrates this exchange.
+-----------------------------------------------------------------------+
| Bond Network |
| |
| +----------+ Issue +---------------------------+ |
| | Treasury |------------------>| Commercial Bank A’s | |
| +----------+ Bond | Portfolio | |
| +---------------------------+ |
| | |
| | Transfer |
| | Bond |
| V |
| +---------------------------+ |
| | Commercial Bank B’s | |
| | Portfolio | |
| +---------------------------+ |
+-----------------------------------------------------------------------+
˄
∥
∥
V
+-----------------------------------------------------------------------+
| Payment Network / Retail CBDC Network |
| |
| +-----------+ +---------------------------+ |
| | Central | | Commercial Bank A’s | |
| | Bank | | Account | |
| +-----------+ +---------------------------+ |
| | |
| | Transfer |
| | Currency |
| V |
| +---------------------------+ |
| | Commercial Bank B’s | |
| | Account | |
| +---------------------------+ |
+-----------------------------------------------------------------------+
Figure 6
5. Transferal of Digital Art and Payments across National Borders
There is currently growing interest within many artist communities of
developing and selling digital-only artwork, in which the artwork
consists of a file in a well-known (e.g. JPEG, MPEG) format that is
created by an artist. The artists seek to sell copies of the digital-only
artwork on the global marketplace, allowing anyone in the world to
purchase a copy and consume (e.g. display offline) the artwork at the
buyer’s discretion. Currently, the most popular technological vehicle to
achieve this goal is through the tokenization of the copies of the
artwork coupled with digital encryption/signature technologies to
transfer control (and thereby legal ownership) of the digital-only
artwork to the buyer.
Although there are a number of technical and legal challenges (e.g.
copyright enforcement) to completing such a sale, one key issue pertains
to the sale and payment for digital-only artwork across national borders.
Many nations enforce taxation upon the sale of any asset, including that
of artwork generally both domestically and internationally. Thus, when
the control/ownership of a tokenized digital-only artwork is transferred
to a new owner in a foreign nation and payment is received, taxation must
be obtained at the point-of-sale (which could be an online platform) and
proof of delivery must be traceable to ensure that no taxation-avoidance
occurs. A secure asset transfer protocol between systems that can be
built on distributed or shared ledgers via gateways with designated legal
authority is necessary to enforce governmental regulations and provide
accountability.
6. Interoperation Protocol Considerations
The use cases provided as examples serve to illustrate instances of
general phenomena that the Secure Asset Transfer Protocol [SATP],
with a limited number of variations, is designed to handle. The data
sharing examples in Section 3 can be extrapolated to any kinds of data
that need to be shared between networks running arbitrary workflows. The
asset transfer example in Section 4.1 and the asset exchange example in
Section 4.2 similarly can be extrapolated to any kinds of digital assets
lying within any kind of network. Considerations for the interoperability
protocol, or SATP, can therefore be limited to standard distributed
systems issues like integrity, fault tolerance, and liveness, while
completely disregarding the nature of the assets, networks, and
workflows, which can all remain opaque to the protocol.
7. References
7.1. Normative References
[BKYC] Kumar Bhaskaran, Peter Ilfrich, Dain Liffman, Christian
Vecchiola, Praveen Jayachandran, Apurva Kumar, Fabian Lim,
Karthik Nandakumar, Zhengquan Qin, Venkatraman Ramakrishna,
Ernie GS Teo, and Chun Hui Suen, "Double-Blind Consent-Driven
Data Sharing on Blockchain." First IEEE Workshop on Blockchain
Technologies and Applications (BTA) 2018, Co-located with 2018
IEEE International Conference on Cloud Engineering (IC2E),
Orlando, FL, April 17, 2018.
[HLF] Elli Androulaki, Artem Barger, Vita Bortnikov, Christian
Cachin, Konstantinos Christidis, Angelo De Caro, David
Enyeart, Christopher Ferris, Gennady Laventman, Yacov
Manevich, Srinivasan Muralidharan, Chet Murthy, Binh Nguyen,
Manish Sethi, Gari Singh, Keith Smith, Alessandro Sorniotti,
Chrysoula Stathakopoulou, Marko Vukolic, Sharon Weed Cocco,
and Jason Yellick, "Hyperledger Fabric: A Distributed
Operating System for Permissioned Blockchains", EuroSys 2018,
<https://dl.acm.org/doi/pdf/10.1145/3190508.3190538>.
[IFT] IBM, "IBM Food Trust – Blockchain for the world’s food
supply", 2022,
<https://www.ibm.com/blockchain/solutions/food-trust>.
[ISO] ISO, "Blockchain and distributed ledger technologies-
Vocabulary (ISO:22739:2020)", July 2020,
<https://www.iso.org>.
[MP] Marco Polo Network Operations (Ireland) Limited, "Marco Polo
Network: Blockchain Enabled Supply Chain & Payment
Solutions.", 2022,
<https://marcopolonetwork.com/>.
[NIST] Yaga, D., Mell, P., Roby, N., and K. Scarfone, "NIST
Blockchain Technology Overview (NISTR-8202)", October
2018, <https://doi.org/10.6028/NIST.IR.8202>.
[R3C] R3, "Corda: A Technical White Paper", August 2019,
<https://www.r3.com/reports/corda-technical-whitepaper/>.
[SATA] Hardjono, T., Hargreaves, M., Smith, N., and V. Ramakrishna,
"Secure Asset Transfer (SAT) Interoperability Architecture,
IETF, draft-hardjono-sat-architecture-00.", June 2022,
<https://datatracker.ietf.org/doc/draft-hardjono-sat-
architecture/>.
[SATP] Hardjono, T., Hargreaves, M., Smith, N., and V. Ramakrishna,
"Secure Asset Transfer Protocol, IETF,
draft-hargreaves-sat-core-00.", May 2022,
<https://datatracker.ietf.org/doc/draft-hargreaves-sat-core/>.
[SKYC] Michael Curry, "Blockchain for KYC: Game-changing RegTech
innovation.", September 21, 2018,
<https://www.ibm.com/blogs/blockchain/2018/09/blockchain-for-
kyc-game-changing-regtech-innovation/>.
[STN] Stellar Development Foundation, "Stellar – Access your
universe of opportunities", 2022,
<https://www.stellar.org/>.
[TL] TradeLens, "TradeLens: Supply chain data and docs.", 2022,
<https://www.tradelens.com/>.
[WET] IBM, "we.trade.", 2019,
<https://www.ibm.com/case-studies/we-trade-blockchain>.
7.2. Informative References
[Abebe19] Ermyas Abebe, Dushyant Behl, Chander Govindarajan, Yining
Hu, Dileban Karunamoorthy, Petr Novotny, Vinayaka Pandit,
Venkatraman Ramakrishna, Christian Vecchiola, "Enabling
Enterprise Blockchain Interoperability with Trusted Data
Transfer", Middleware 2019 - Industry Track, December 2019,
<https://arxiv.org/abs/1911.01064>.
[Abebe21] Ermyas Abebe, Yining Hu, Allison Irvin, Dileban Karunamoorthy,
Vinayaka Pandit, Venkatraman Ramakrishna, Jiangshan Yu,
"Verifiable Observation of Permissioned Ledgers", ICBC 2021,
May 2021, <https://arxiv.org/abs/2012.07339>.
[ABCH20] Ankenbrand, T., Bieri, D., Cortivo, R., Hoehener, J., and
T. Hardjono, "Proposal for a Comprehensive Crypto Asset
Taxonomy", May 2020, <https://arxiv.org/abs/2007.11877>.
[BVGC20] Belchior, R., Vasconcelos, A., Guerreiro, S., and M.
Correia, "A Survey on Blockchain Interoperability: Past,
Present, and Future Trends", May 2020,
<https://arxiv.org/abs/2005.14282v2>.
[Clar88] Clark, D., "The Design Philosophy of the DARPA Internet
Protocols, ACM Computer Communication Review, Proc SIGCOMM
88, vol. 18, no. 4, pp. 106-114", August 1988.
[Gray81] Gray, J., "The Transaction Concept: Virtues and
Limitations, in VLDB Proceedings of the 7th International
Conference, Cannes, France, September 1981, pp. 144-154",
September 1981.
[Herl19] Herlihy, M., "Blockchains from a Distributed Computing
Perspective, Communications of the ACM, vol. 62, no. 2,
pp. 78-85", February 2019,
<https://doi.org/10.1145/3209623>.
[HLP19] Hardjono, T., Lipton, A., and A. Pentland, "Towards and
Interoperability Architecture for Blockchain Autonomous
Systems, IEEE Transactions on Engineering Management",
June 2019, <https://doi:10.1109/TEM.2019.2920154>.
[HS2019] Hardjono, T. and N. Smith, "Decentralized Trusted
Computing Base for Blockchain Infrastructure Security,
Frontiers Journal, Special Issue on Blockchain Technology,
Vol. 2, No. 24", December 2019,
<https://doi.org/10.3389/fbloc.2019.00024>.
[HTLC21] "Hash Time Locked Contracts", Bitcoin Wiki
<https://en.bitcoin.it/wiki/Hash_Time_Locked_Contracts>.
[IDevID] Richardson, M. and J. Yang, "A Taxonomy of operational
security of manufacturer installed keys and anchors. IETF
draft-richardson-t2trg-idevid-considerations-01", August
2020, <https://tools.ietf.org/html/draft-richardson-t2trg-
idevid-considerations-01>.
[SRC84] Saltzer, J., Reed, D., and D. Clark, "End-to-End Arguments
in System Design, ACM Transactions on Computer Systems,
vol. 2, no. 4, pp. 277-288", November 1984.
Authors' Addresses
Venkatraman Ramakrishna
IBM Research - India
Email: vramakr2@in.ibm.com
Thomas Hardjono
MIT
Email: hardjono@mit.edu
