Today, I want to share a game-changer in the blockchain world, the ERC-3643 standard, also known as T-REX (Token for Regulated EXchange). This standard is transforming how we manage and transfer assets on the blockchain.
For those who are interested in seeing the ERC-3643 in action, I’ve created a simplified version of the T-REX that includes all the core features. You can check it out here. And if you want to dive deeper into the technical details of the standard, you can find it here.
Note: This article offers a simplified look at the T-REX (ERC-3643) standard, based on my experience while working at Tokeny. Some details are intentionally left out for clarity. For a full understanding and implementation, do visit the wonderful folks at Tokeny website. They're the best source for the most detailed and updated information.
What is ERC-3643?
ERC-3643 is a standard for security tokens and is set to change how we manage and transfer assets on blockchain. It’s designed to make sure all transactions follow the rules of securities laws. This makes it a powerful tool for managing Real World Assets (RWAs) on blockchain.
The Power of OnchainID in ERC-3643
One of the key features of ERC-3643 is the use of OnchainID, a decentralized identity system that is essential for the standard to work effectively. OnchainID is a blockchain-based identity ecosystem that identifies individuals, organizations, and DeFi protocols, allowing them to enforce compliance and access digital assets.
What is OnchainID?
OnchainID is a self-sovereign identity system aggregating certified information and enabling multi-wallet management. It also provides a universal login for websites and DeFi protocols. It’s a powerful tool that already manages $8.5 billion of digital assets owned by OnchainID owners.
How does OnchainID work with ERC-3643?
An OnchainID can hold claims like KYC (Know Your Customer) checks, proof of residence, and more. These claims are essential for ensuring compliance in transactions involving tokenized real-world assets.
For example, if an investor wants to buy tokens representing a piece of real estate, their OnchainID would need to hold a claim showing that they have passed a KYC check. This ensures that the investor is eligible to participate in the transaction and that the transaction complies with securities laws.
ERC-3643 vs ERC-20: What’s the Difference?
ERC-3643 shares the same interface as the popular ERC-20 standard, which is used a lot for creating tokens on the Ethereum blockchain. This means that any app that supports ERC-20 tokens can also support ERC-3643 tokens without any extra work. This is a big plus, as it lets ERC-3643 tokens be easily used in the existing Ethereum ecosystem.
But, ERC-3643 goes a step further than ERC-20 by adding features designed for tokenizing real-world assets. These include checks for compliance, managing identities, and the ability to represent a part of an asset.
Why the Difference is Important
The difference between ERC-20 and ERC-3643 is very important. While ERC-20 tokens are great for creating digital currencies and utility tokens, they don’t have the features needed to effectively represent real-world assets on the blockchain.
For example, if you’re turning a real estate property into tokens, you need to ensure that eligible investors only buy and sell the tokens following securities laws. This requires identity checks and compliance features that are not present in the ERC-20 standard.
ERC-3643 fills this gap by adding these features, making it possible to turn real-world assets into tokens in a compliant and regulated way. This opens up a whole new world of possibilities for blockchain technology, allowing it to disrupt traditional industries and create new forms of value.
The Impact of ERC-3643 on Finance
The financial industry is one of the areas that stand to benefit the most from the ERC-3643 standard. By enabling the tokenization of real-world assets, it opens up new possibilities for managing assets and investments.
For instance, imagine a real estate property that’s been tokenized on the blockchain. With ERC-3643, investors can buy and sell tokens representing a part of that property. This means that they can invest in real estate with a much lower entry barrier and without the need for traditional middlemen like banks or brokers.
Moreover, the standard’s compliance features ensure that these transactions are carried out following existing securities laws. This makes it a viable and attractive option for institutional investors, who can leverage the efficiency and transparency of blockchain technology without compromising on regulatory compliance.
How Does ERC-3643 Work?
The architecture of T-REX is built around several key parts, each playing a vital role in ensuring the compliant transfer and management of security tokens.
- Identity Contract: Each user has an Identity Contract, which manages their identity and holds all related claims. This contract complies with the ERC725 standard, ensuring interoperability and security.
- Claim Topics Registry Contract: This part manages the different claim topics that can be added to an identity. It’s like a library of potential claims, providing a structured way to add and manage these attributes.
- Claim Issuers Registry Contract: This contract manages the entities that are authorized to issue claims. It’s like a whitelist of trusted claim issuers, ensuring that only verified entities can confirm a user’s identity.
- Basic Compliance Contract: This contract checks the compliance of an identity. It verifies if an identity is compliant based on the claims it holds, acting as a gatekeeper to ensure that only compliant identities can participate in transactions.
- Identity Registry Contract: This contract keeps track of all the identities in the system. It’s like a phonebook of identities, providing a central place to look up and verify users.
ERC-3643 and Real World Assets (RWAs)
The ERC-3643 standard is particularly impactful when it comes to managing Real World Assets (RWAs) on the blockchain. Using this standard, RWAs, such as real estate, commodities, and even intellectual property, can be tokenized and managed on blockchain.
As noted in a recent report by Binance Research, “The ERC-3643 standard allows for the creation of a unique identity for each real-world asset on the blockchain. This identity can then be used to manage and transfer the asset in a secure and compliant manner” (Binance Research, 2023).
Conclusion
The ERC-3643 standard is more than just a technical specification. It’s a powerful tool that unlocks new possibilities in the world of asset management. Ensuring compliance and security in token transactions it’s paving the way for a future where real-world assets can be managed and transferred with the same ease and efficiency as digital assets.
As one of the authors of this standard, I can confidently say that the ERC-3643 is a significant step forward in the world of blockchain technology. It’s a testament to the power of innovation and the endless possibilities that blockchain technology holds for our future.