Dusk Network News

Release Cycle Update #26 is out now!

Development is continuous, as is our GitHub documentation of each point of progress!

Our Release Cycle Updates detail what the #Dusk development team has been working on over the past 3 weeks.

https://dusk.network/news/release-cycle-update-26/

By: Hein Dauven | Rotterdam - Netherlands

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Leveraging its unique Confidential Security Token (XSC) contract and Citadel digital identity protocol, Dusk allows physical and intangible assets to be tokenized with compliance in mind, thus enhancing their tradeability, accessibility and lifecycle management cost.

This article is part one of a multipart series, explaining and exploring all aspects of Real-World Assets:

• What RWAs and why they’re important
• What are the challenges of tokenizing traditional assets and why do they requires a combination of approaches
• How Dusk is uniquely well-placed to deliver these requirements
• Case studies of what it would look like to tokenize traditional, real world assets

Real-World Assets (RWAs) encompass an extensive array of both tangible and intangible assets that have value in the physical world. This includes not only physical properties like real estate, infrastructure, and commodities such as gold and oil, but also financial instruments like bonds, equities, derivatives and even cash.

In addition, intangible assets are also considered RWAs, which range from intellectual properties such as patents, copyrights and trademarks, to more abstract concepts like company’s brand value, customer relationships, or even future cash flows.

In the world of blockchain and Distributed Ledger Technology (DLT), RWAs also extend to any off-chain asset that has been tokenized and brought onto a blockchain. These can include tokenized versions of all aforementioned assets and can also include newer asset classes like carbon credits, or even tokenized art and collectibles, as highlighted in Binance’s report on “Real-World Assets: State of the Market”.

RWAs play a vital role in the global economy. They are often used as collateral in the lending process, and supporting a vast number of business operations and transactions. Bank of America, in their 2023 report “Beyond Crypto: Tokenization”, highlighted the importance of collateralizing these assets for economic growth, enabling businesses to secure loans and gain the benefits of digitization.

Many of these assets are characterized by their illiquidity, often tied up in large investments that are hard to divide or trade. By tokenizing these assets, we can make them more liquid, accessible, and tradeable, fundamentally transforming how we interact with them.

Tokenization enables the fractionalization of large assets, drastically reducing the ticket sizes for investment and making them more accessible to a wider range of investors. Moreover, when consolidated onto a public, permissionless DLT platform like Dusk, these assets become part of a larger, more liquid marketplace. This democratization of access to investment opportunities can lead to a significant influx of capital and liquidity into markets that were previously hard to reach.

Quantifying the global market of RWAs can be challenging due to its sheer vastness. It includes virtually all physical and intangible assets, from real estate and commodities to financial instruments and intellectual property.

In terms of intangible assets, the World Intellectual Property Organization and Brand Finance reported in 2022 that their estimated value grew to an astonishing $74 trillion in 2021, up from an estimated $6 trillion in 1996. This extraordinary rise underscores the growing importance of intangible assets in today's digital and knowledge-based economy

According to the Bank for International Settlements, the global derivatives market was estimated to be worth over $600 trillion in 2022, highlighting the scale of just one segment of the financial instruments that constitute RWAs.

The World Bank estimated that the global stock market capitalization reached nearly $95 trillion in 2022, and the global bond market was even larger according to Visual Capitalist, valued at around $130 trillion in 2022.

Adding these figures together provides a glimpse into the size of the RWA market, and it's clear the potential for tokenization is immense. The Binance report suggests that tokenization of these assets could unlock trillions of dollars in capital, leading to new opportunities in the world of finance and blockchain. This vast market is ripe for disruption and innovation, and Dusk is positioned at the forefront of these transformations to tokenize the next trillion plus in RWAs.

Tokenizing RWAs presents a unique set of challenges that must be addressed to fully unlock the potential of this vast market. These challenges span a variety of areas, including legal and regulatory compliance, technological complexity, market acceptance, and the unique characteristics of each asset class.

1. Legal and Regulatory Compliance: This is arguably the most significant challenge. Tokenization involves translating legal rights to an asset into a digital token, and this process needs to adhere to the laws of the jurisdiction where the asset is located. Moreover, the global nature of blockchain platforms brings additional complexity as transactions may involve parties from different jurisdictions, each with their own set of rules and regulations.
2. Technological Complexity: Tokenizing a real-world asset involves a lot more than just creating a digital token. It requires an infrastructure that can manage the entire lifecycle of the token, including issuance, trading, settlement, redemption and voting. Furthermore, the technology needs to facilitate the enforcement of legal rights, compliance with regulatory requirements and the ability to handle disputes.
3. Market Acceptance: For tokenization to reach its full potential, it needs to be accepted by market participants, including investors, asset owners, regulators and intermediaries. While some parties may be quick to adopt new technologies, others may be hesitant due to concerns about security, privacy and the potential for fraud.
4. Asset Specificity: Each asset class has unique characteristics that need to be addressed in the tokenization process. For instance, real estate has physical properties and are subject to local property laws, whereas intangible assets like patents and copyrights are subject to intellectual property laws. Moreover, some assets, like arts and collectibles, may require expert appraisal and authentication to determine their value and validity. This also needs to be factored into the tokenization process.

These challenges present significant barriers to entry. However, they also represent opportunities for innovative platforms that can effectively address these issues. Dusk is uniquely positioned to overcome these challenges and unlock the vast potential of the RWA market with its compliant confidential securities contract, privacy features and self-sovereign identity protocol Citadel.

Missed yesterdays #AMA?

The recording is now available on YouTube (https://www.youtube.com/watch?v=cP4eJrvet5M)!

Just looking for the highlights?

The written summary is available here

https://dusk.network/news/road-to-mainnet-ama-recap/

#Roadmap #Dusk #Discord

We strongly believe in the power of #community, and we are always thankful for help in finding bugs and vulnerabilities.

0xTeam notified us of an old domain with an issue. We solved it and hereby share our gratitude.

https://dusk.network/news/infrastructure-vulnerability-fixed/

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And our brand new Roadmap!

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#Dusk #Newsletter #Roadmap

https://layerfi.markets

🚀 Road to Mainnet Unveiled! 🚀

We're delighted to announce our updated roadmap to mainnet!

Keep an eye out for explainers, deep-dives, demos, and more content that we'll be rolling out in the months to come.

Dive in! 🔍

https://dusk.network/news/path-to-mainnet-dusk-roadmap/

#Dusk #Mainnet #Roadmap

The 25th edition of our Release Cycle Update is out now!

Development is continuous, as is our GitHub documentation of each point of progress!

Our Release Cycle Updates detail what the #Dusk development team has been working on over the past 3 weeks.

https://dusk.network/news/release-cycle-update-25/

By Jade Doherty | August 22, 2023 - London

One comment I’ve noticed come up on posts is about our approach to privacy and KYC, with the feedback essentially being how can we be for this both?

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In this post, let’s look at Dusk’s approach to privacy and KYC and why we think they can (and should, and do, and will!) go hand-in-hand.

To start with, what exactly is KYC?

KYC stands for “Know-Your-Customer” and is a set of requirements placed on institutions to verify the identity of their customers. There are other requirements including AML (Anti-Money Laundering) and CFT (Countering the Financing of Terrorism) checks too.

Any “official” accounts you have, like bank accounts, will have a KYC process where you will have had to prove your identity, likely through government documents and bills.

Performing KYC on every customer, and then storing and protecting their data is incredibly costly for institutions, and acts as a high barrier to entry for smaller institutions who simply can’t afford the cost of making sure their customers aren’t doing anything illegal.

You can read more about the costs and requirements of compliance here.

Next up, what is privacy?

This is obviously a favorite topic of ours and one that we’ve spoken about a lot. We believe that privacy is not only a requirement but a right.

For us, privacy is not a feature in and of itself, but rather a means to an end, with the end being to tokenize regulated assets and to bring them to everybody’s wallet. That privacy is not the goal in and of itself and that we want to interact with regulated assets greatly influences our approach to both privacy and regulation.

When speaking about privacy we have to consider two things (check table in Link): https://dusk.network/news/kyc-x-privacy/

What we find in the crypto space is pseudonymity, with all transactions being public but the addresses that made those transactions being a pseudonym, typically a 0x address or a name someone has given to their wallet. The what is public, the who is an address or pseudonym (unless that wallet gets doxxed!).

The second consideration with regard to privacy is “from whom”? From whom is something being kept private?

Your banking transactions, for example, are kept private from the public at large, cannot be accessed by “just anyone” at your bank, but are available to be viewed by people with permission at your bank.

Does this mean they are not private because some people could access them?Maybe. Maybe not.

Many blockchains and protocols speak about privacy as a feature or service (wen Privacy-as-a-Service narrative?), with their goal being to make on-chain private.

From “tumbling” funds and obscuring the address they’re sent to all the way to zero-knowledge proof cryptography, there are many ways to achieve a version of privacy.

For us, privacy is not the service, tokenizing real-world, regulated assets is the service, and this naturally influences the way we approach things like KYC. If we had no interest in regulated assets, we’d have no need for KYC, but because we do it has been necessary to meet the requirements of regulators so that we can start to interact with regulated assets in the same way as we interact with digital ones.

As it currently stands there is not a KYC service provider that meets our standards or requirements. All current approaches are off-chain, centralized, slow, clunky, and not fit for purpose. That is why we had to create our own KYC protocol, to perform KYC in a way that was compatible with blockchain, privacy, and regulations.

Regulated, real-world assets are subject to real-world regulations, whether they are traded on-chain or off-chain. This includes KYC/AML requirements, and as such we have had to create the protocol in a way that supports this.

Our goal is to bring regulated assets to everyone’s wallets. This means complying with regulations and building our own KYC tool solution that can support this. You can read more about Citadel, our KYC tool, here.So, that is why we are for privacy and KYC, and why both are important to our overall goals.