Tokenization as a Service: How blockchain will find its way into the mainstream
Blockchain has the potential to go mainstream. Jason Goldberg, CEO and founder of Simple Token tells us how this can be achieved. He also talks about his personal project, which aims to drastically simplify the utilization of blockchain technology. In short, Simple Token‘s goal is to fundamentally change the way companies use (and interact with) blockchain.
Simple Token aims to make blockchain’s journey to the mainstream easier. Jason Goldberg, an entrepreneur with 18 years of experience as a founder, has created companies such as XING, Pepo, Hem and Fab. com. Now he dedicates his time to the blockchain venture Simple Token. It follows a tokenization-as-a-service model that leverages the benefits of blockchain technology without having to invest immense resources in infrastructure development.
JAXEnter: What’s the easiest way to describe Simple Token’s project and goal?
Jason Goldberg: We believe that blockchain, with all its technological scope, has the potential to improve all facets of society, trade and the economy. Nevertheless, there is a gap between the reality of blockchain today and companies’ ability to use it effectively and seamlessly. With Simple Token, we want to close this gap and allow companies to use the blockchain technology for their own purposes and create their own ecosystems without having to worry too much about the technical aspects. Regardless of whether they are large, global brands or start-ups.
JAXenter: How does Simple Token work and what can companies do with it?
Even from a developer’s point of view, working with Ethereum is very complex.
Jason Goldberg: We enable companies to create their own branded tokens without having to implement complex ICOs or resolve regulatory issues. We are doing all this to make using Simple Tokens as natural and easy as making online payments. However, the technological aspect should not be underestimated when it comes to creating entire blockchain ecosystems and setting rules for them. Even from a developer’s point of view, working with Ethereum is very complex.
Therefore, we have developed OpenST, a special open-source protocol that allows developers to easily generate branded tokens without prior knowledge. Since the entire token network is based on the same protocol, all tokens are interoperable at the end of the process, which offers enormous added value. The additional SaaS services we will be offering in the future will further improve functionality.
There will be a complete suite to help companies manage their branded token ecosystems. With extensions to the web3 APIs, companies can seamlessly integrate their branded tokens into their consumer applications. It is available under the GNU LGPLv3 license.
Basically, branded tokens are created by using Simple Token (ST). Because we create a network of networks powered exclusively by ST, they increase their value as the network grows.
JAXenter: What is the difference between Simple Token (ST) and Branded Token and how is the respective value determined?
Jason Goldberg: Simple tokens (ST) are created by our team. They enable their owners to apply for membership of the OpenST platform and launch their own branded tokens on the market. ST could be traded on secondary markets. Branded tokens, on the other hand, are created by participating companies for use within their community, powered by Simple tokens. They work on side chains and are not freely tradable currencies. There is no secondary market for branded tokens, as they are technically not able to be traded outside the defined community. However, as far as the value of a branded token is concerned, member companies can determine the value of a branded token themselves and define it on the Ethereum Mainnet. Financial sovereignty is thus preserved.
ST was thus introduced as a freely tradable ERC-20 token on the Ethereum mainnet. They can be used as crypto assets for embossing utility tokens (Branded Token). In addition, Simple Token also functions as a basic token, which is used to calculate the gas. The OpenST protocol ultimately bridges the gap between two differently aligned blockchains. A value chain that is required to hold cryptographically secured, valuable assets and a utility chain with utility tokens in favor of which the assets are held on the value blockchain. The utility chain must support lower transaction fees and shorter transaction confirmation times.
We have formulated this condition because one of the goals of the OpenST protocol is to enable microtransactions. To establish a channel between two chains, we need a Smart Contract for each chain that follows the blocks of the other chain. When a user adds crypto assets in the value chain to the total value, he or she can expect to receive a corresponding number of utility tokens in the utility chain. While embossing utility tokens themselves, no value is generated, but only a new representation of this original value, the assets themselves are locked. In the opposite case, the verifiable owner of utility tokens may return them at any time in favor of an equivalent portion of the total value.
JAXenter: How does the model of the „Tokenization-as-a-Service“ work, from a technological perspective, compared to the common use of blockchain? On what technology is the Simple Token project based on?
Ethereum offers a strong developer community and the strongest technological platform to implement a Layer 2 network like OpenST.
Jason Goldberg: Tokenization is a challenging affair and far from the simplicity of a common consumer app. It involves high costs (over 500,000 US dollars), involves an enormous risk (law, taxes, fraud, etc.) and is highly complex in terms of development. There are no consumer protocols, Ethereum is not yet designed for high volumes, transaction costs are impractical and UX is difficult. Simple Token’s tokenization service is based on all this know-how.
For example, several open side chains allow us to scale horizontally. Depending on the scaling needs of the companies, they can operate on a completely separate or a common open and high-performance side chain. The ST works as a free-floating ERC-20 on the public Ethereum blockchain. A company can define a monetary policy for the utility token in the Smart Contract when designing the token for the purpose of its user base.
We have set the goal to provide a REST API that logically connects to the ERC-20 token interface, while the server in the background handles the signature with a hardware security module, transaction formulations or retrieval of contracts on the relevant chains. These are the basic requirements. In addition, we offer a pessimistic concurrency control to minimize the response time to the API call and ensure the final settlement at API level: The API takes the most pessimistic (lowest) result when it returns a success or error code to the caller while waiting for the final settlement. This way, the API call can react in milliseconds even if transactions take seconds to complete. Finally, the API must provide a clean assignment to Smart Contract Events and translate them back into the user area.
JAXenter: Why did you choose the Ethereum Blockchain —for this project—? Are there any technical reasons involved?
Jason Goldberg: Simple Token and the OpenST platform extend the technical and business possibilities of blockchain technology. This way, we want to make real applications possible. Given the decision to choose which established blockchain we first implement OpenST for to extend its capabilities, the choice is simple: Ethereum offers a strong developer community and the strongest technological platform to implement a Layer 2 network like OpenST. As an open protocol, we also accept implementations of OpenST for other blockchain platforms.
JAXenter: The OpenST protocol is open source and is meant to help developers generate Branded Token. How exactly can the OpenST protocol be used by developers?
Jason Goldberg: As already mentioned, the OpenST protocol is the bridge between two differently aligned blockchains: the Ethereum Mainnet and the Simple Token Side-Chain. It is available on GitHub and is licensed under the Apache 2.0 license. Smart Contracts form the core of the protocol and make it possible to map value to Ethereum and to create branded tokens on a utility side-chain in a cryptographically verifiable way. Using a stacking contract on the Ethereum Mainnet and a corresponding minting contract on the side chain, the protocol can transfer atomic tokens between the two chains and thereby generate branded tokens on the side chain by mapping ST on the Ethereum Mainnet.
In order to achieve atomicity, the protocol uses a two-stage commit, in which first of all a memorandum-proof of the participating company’s intention is transferred to the recipient chain and a single document signed by that company assures the funds for both the source and recipient chain. In addition to this minimum tool, the protocol also publishes a number of REST APIs that hide the complexity of Smart Contracts and blockchains, such as Smart Contract Method Invocation, Private Key Management, Settlement Finality, and so on.
An important point for Simple Token is the combination of a good user experience with the actual cryptographic value stored on Ethereum. We require that this connection be cryptographically secured. Although we see that the majority of end users may never want to manage their own private keys, it is important that each user can decide at any time if they want to take control of them.
While we see utility chains as a more powerful substrate on which applications can handle accounts, OpenST at protocol level ensures that there is no need for blind trust, because all values can be restored on the Ethereum Mainnet if required. Since OpenST is an open network of utility chains, each containing one or more branded tokens with a value stored on the Ethereum Mainnet, it is important that each chain can be uniquely identified and derived from the Genesis block. All transactions must ensure that they are valid only for the intended utility chain.
JAXenter: What kind of applications are to be expected for companies that generate branded tokens?
Jason Goldberg: We are already attracting a great deal of interest from companies that want to transfer various aspects of their business to blockchain. The use cases vary depending on the type of transaction, but an example can be a customer bonus or loyalty program. A company can generate branded tokens and distribute them to customers as a reward or incentive for certain behaviors.
The decisive factor here is that such a system is open, transparent and unchangeable — in contrast to the proprietary reward and loyalty programs as we know them so far. Another possibility could be, for example, a user-generated content app that uses tokens to promote and reward high-quality content. In a community app, peer-to-peer micro-transactions could be made possible, or a ride-sharing app allows users to pay exactly the part of the cost of a ride that they actually used. In the end, however, your own imagination is the limit, because the field of application is enormous.
JAXEnter: What is the advantage of Simple Token, compared to other competitors in the same field?
Jason Goldberg: We believe that we have the advantage of the “first mover” when it comes to providing users and customers with a comprehensive service, from development through infrastructure to management tools, sales, and analysis. Solutions offered by most competitors are aimed at developers, and it is a genuine expectation to believe that most companies can provide the necessary technical resources. Particularly when it comes to the immense competition for specialists and the best minds among them. With Simple Token, we want to help millions of companies manage their own token economy and we are very proud to lead the introduction of blockchain technology.
JAXEnter: What regulatory challenges are to be expected when the project starts and companies from all over world join the network?
Jason Goldberg: The regulations may vary from country to country, but we can see some similarities. In addition, branded tokens such as those generated by companies can only be traded against simple tokens. There are therefore no risks in secondary market trading. In addition, we have consulted renowned lawyers: Simple Token (ST) are compliant with all existing guidelines.
Problems would only occur if a token is a replacement for a Fiat currency. However, this is not our aim. Our network is designed to provide companies with a safe environment for creating their own safe ecosystems. At Simple Token, we strive to answer such questions transparently and in an open way. For this, we use Telegram. Anyone can join the channel and ask us their questions; developers can get help in this community quickly. It inspires me every day to see how many people respond with interest to our project and get involved in the telegram community.