Internet Engineering Task Force V. Ramakrishna Internet-Draft IBM Research Intended status: Informational T. Hardjono Expires: 29 October 2023 MIT 28 April 2023 Secure Asset Transfer (SAT) Use Cases draft-ietf-satp-usecases-00 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. Status of This Memo This Internet-Draft is submitted in full conformance with the provisions of BCP 78 and BCP 79. Internet-Drafts are working documents of the Internet Engineering Task Force (IETF). Note that other groups may also distribute working documents as Internet-Drafts. The list of current Internet- Drafts is at https://datatracker.ietf.org/drafts/current/. Internet-Drafts are draft documents valid for a maximum of six months and may be updated, replaced, or obsoleted by other documents at any time. It is inappropriate to use Internet-Drafts as reference material or to cite them other than as "work in progress." This Internet-Draft will expire on 29 October 2023. Copyright Notice Copyright (c) 2022 IETF Trust and the persons identified as the document authors. All rights reserved. This document is subject to BCP 78 and the IETF Trust's Legal Provisions Relating to IETF Documents (https://trustee.ietf.org/ license-info) in effect on the date of publication of this document. Please review these documents carefully, as they describe your rights and restrictions with respect to this document. Code Components extracted from this document must include Revised BSD License text as described in Section 4.e of the Trust Legal Provisions and are provided without warranty as described in the Revised BSD License.   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, . [IFT] IBM, "IBM Food Trust – Blockchain for the world’s food supply", 2022, . [ISO] ISO, "Blockchain and distributed ledger technologies- Vocabulary (ISO:22739:2020)", July 2020, . [MP] Marco Polo Network Operations (Ireland) Limited, "Marco Polo Network: Blockchain Enabled Supply Chain & Payment Solutions.", 2022, . [NIST] Yaga, D., Mell, P., Roby, N., and K. Scarfone, "NIST Blockchain Technology Overview (NISTR-8202)", October 2018, . [R3C] R3, "Corda: A Technical White Paper", August 2019, . [SATA] Hardjono, T., Hargreaves, M., Smith, N., and V. Ramakrishna, "Secure Asset Transfer (SAT) Interoperability Architecture, IETF, draft-ietf-satp-architecture-00.", April 2023, . [SATP] Hardjono, T., Hargreaves, M., Smith, N., and V. Ramakrishna, "Secure Asset Transfer Protocol, IETF, draft-ietf-satp-core-00.", April 2023, . [SKYC] Michael Curry, "Blockchain for KYC: Game-changing RegTech innovation.", September 21, 2018, . [STN] Stellar Development Foundation, "Stellar – Access your universe of opportunities", 2022, . [TL] TradeLens, "TradeLens: Supply chain data and docs.", 2022, . [WET] IBM, "we.trade.", 2019, . 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, . [Abebe21] Ermyas Abebe, Yining Hu, Allison Irvin, Dileban Karunamoorthy, Vinayaka Pandit, Venkatraman Ramakrishna, Jiangshan Yu, "Verifiable Observation of Permissioned Ledgers", ICBC 2021, May 2021, . [ABCH20] Ankenbrand, T., Bieri, D., Cortivo, R., Hoehener, J., and T. Hardjono, "Proposal for a Comprehensive Crypto Asset Taxonomy", May 2020, . [BVGC20] Belchior, R., Vasconcelos, A., Guerreiro, S., and M. Correia, "A Survey on Blockchain Interoperability: Past, Present, and Future Trends", May 2020, . 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Yang, "A Taxonomy of operational security of manufacturer installed keys and anchors. IETF draft-richardson-t2trg-idevid-considerations-01", August 2020, . [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