Big names including ING, Microsoft, and Nasdaq have joined forces with blockchain leaders like Hedera Hashgraph, Neo, and Hyperledger in a new alliance that aims to create global standards for tokenizing real-world assets.
But, it added, “the wide-scale availability of different platform types has stalled web-scale adoption of tokenized assets. What is required is standardization at the business level, which would allow companies to be able to agree on distributed business models without choosing a platform first.”
Making a bigger impact
Changes to the status quo are badly needed according to IWA president Ron Resnick, who formerly served as executive director of another industry standards body, the Enterprise Ethereum Alliance.
A “proven, standard approach” to tokenization is needed to build trust in this burgeoning industry if it is to have any chance of making a large, lasting impact, he argued. At present, dozens of different platforms are competing for attention—overwhelming businesses and preventing tokenization from disrupting global economics.
“Companies want to be able to create token-based business models without having a platform technology in mind,” Resnick explained. “For this approach to work, standards are urgently needed around defining what a token is and how its contractual behaviors will work. The Alliance was created to serve as the organization where this essential work happens.”
“A platform-neutral alliance is critical for the entire industry,” agreed Nitin Gaur, director of IBM WW Digital Asset Labs, a founding IWA member. Open industry standards are vital “to help organizations build the token networks of tomorrow,” he added.
“The InterWork Alliance offers a way to classify tokens and contracts using a common language to describe them,” Gaur said. “The Alliance will help establish a foundation not only for technology and business but for the changing tokenization landscape as well.”
E pluribus unum
A platform-neutral forum is critical to making this happen, added Marley Gray, a principal architect at Microsoft and the InterWork Alliance’s chairman.
“Technology-agnostic tokens and contract definitions” would let firms “foster interoperability and drive widespread adoption,” Gray said.
By letting firms “focus on business outcomes rather than technology implementation details,” these definitions would be as beneficial to a company focused on unlocking efficiencies in the carbon market as they would a financial trading platform.
In time, the IWA’s aim is to offer frameworks that allow businesses to create standardized token definitions and contracts in “non-technical business terms.”
The Alliance also made an important point: its goal isn’t whittling down the number of blockchains and tokenization platforms out there, but ensuring they are all singing off the same hymn sheet, irrespective of their unique selling points. After all, banks have points of difference, but they all tend to adhere to the same principles.
In order to build a solid framework for tokenization, the IWA is focusing on three main areas. First, providing a common language so multiple parties can agree on the definition of a token. Second, creating standardized clauses that allow businesses to compose multi-party contracts that are interoperable and recognized globally.
The third, which will likely require a deft touch in the privacy-centric blockchain industry, is creating a set of rules enabling organizations to analyze multi-party contracts and share data without violating participants’ privacy. This is needed in order to take advantage of “value-add AI services and market-driven data reporting,” the IWA said.
To cut the jargon, this means looking past the individual use cases of tokenization to find and codify the attributes that they all have in common, and ensuring competing platforms are interoperable. From there, tokenized systems could become a lot less mysterious to individuals, businesses, and regulators alike.
Mark Radcliffe, co-chair of global law firm DLA Piper’s blockchain and digital asset practice said that collaborative frameworks “developed and managed by industry organizations such as the InterWork Alliance will be critical to the success of tokenization just as the Linux Foundation and the Apache Software Foundation have been critical to the success of open-source software.”