Centrifuge

[SchmittLea]

dap: #5
project name: Centrifuge
main site: http://www.centrifuge.io/
author: Lea Schmitt (@SchmittLea), Lucas Vogelsang (@Lucasvo), Philip Stehlik (@pstehlik)
discussions-to: <URL>
status: Draft
created: <2018-09-24>

Simple Summary

Centrifuge OS is an open decentralized protocol to exchange documents of the financial supply chain and tokenize these assets to create new ways to access liquidity.

Abstract

Centrifuge OS is a decentralized platform for the financial supply chain. Users exchange private data (invoices, purchase orders, company master data, etc.) verifiably and securely while supporting on-chain document validation and decentralized access to document data. Documents are exchanged in an off-chain protocol implemented on a scalable & secure P2P network while relying on Ethereum as the public blockchain infrastructure for corporate identities and tokenization of the off-chain assets.
Assets are represented as NFTs using ERC-721 registries that allow users to mint tokens for their off-chain documents. A token can be minted by anyone who can prove their claim to a document. The document then receives all of the benefits of standard on-chain NFTs, while an off-chain location holds the verifiable private data. One of the first use-cases is allowing Centrifuge users to mint NFTs for invoices and use them as collateral for decentralized trade finance.

Resources

Links to your sites, code, and developer tools

• Site - http://www.centrifuge.io/
• Code - http://github.com/centrifuge
• Dev Tools - Precise-proofs: a library to generate merkle proofs of complex, nested data structures. Used to allow on-chain verification of off-chain assets.
  Example implementation of a privacy-enabled NFT registry
  `
• Dev Tools: pending release end of October

Motivation

Centrifuge OS is a decentralized open source platform for businesses to tokenize their business documents (such as invoices, purchase orders, etc.) to access new means to obtain liquidity. We are working towards establishing business NFTs as a standard to tokenize and exchange these assets. As a layer 2 solution, we are providing an essential building block for third-party business financing solutions. Our mission is to foster economic opportunity everywhere and enable any business to participate in an open, decentralized financial system.
We want to contribute to an open dialog and support the open finance community, particularly in the realm of new forms of decentralized financing of the global supply chain. Our team is eager to learn from fellow DeFi projects and foster knowledge sharing. We believe in the decentralization of finance and by collaborating with others in this nascent space we can improve access and efficiency which will be beneficial for everyone.

Specification

• Comprehensive Centrifuge OS white paper
• Technical white paper on the underlying mechanisms to mint on-chain NFTs with off-chain, private data in a decentralized way
• Precise-proofs: An introduction to field level merkle trees that are used to prove a subset of fields in a private off chain document on chain

Rationale

Off-chain, private, peer-to-peer document exchange:
Business documents are exchanged between users in a privacy-preserving peer-to-peer network. The network utilizes libp2p for discovery and connectivity between users, paired with on-chain identities of the participants. Documents are treated similar to multi-party state-channels and are updated according to a simple consensus algorithm between the involved users. Only the (final) status is anchored to Ethereum in form of a Merkle root. The content of the documents and the nature of any updates is handled completely off-chain in a private manner between the users. This ensures (1) data privacy which is essential to businesses and (2) plays well with scalability.

Alternatives:

• Generalized state channels / Problem: actors and sequence of updates needs to be known;
• IPFS / Problem: data would have to be encrypted with complex encryption schemes and document consensus is hard to achieve
• Storing all data on chain: Problem: no privacy, expensive
• Storing/transacting data in a DLT with centrally managed access/keys: well… centralized, not open, we want anyone to be able to join the network

On-chain Contracts:
On-chain representation of off-chain assets:
One major goal of Centrifuge is to foster an ecosystem of applications for the decentralized financial supply chain. Keeping that in mind, a standardized on-chain representation of the assets is required to allow for DApps to make use of them, to allow for completely new ways of financing the supply chain, and more. We achieve this by offering Users a way to mint NFTs that represent the off-chain assets, provided they can supply a proof of ownership and document accuracy in form of a Merkle proof.

Alternatives:

• keep all data off-chain: no way to integrate with other projects easily, missing the ecosystem.
• Implement own Centrifuge-specific chain to register assets: Not easily part of the Ethereum ecosystem.

On-chain business representation:
An on-chain representation of a user of Centrifuge allows for resolution of participants on the peer-to-peer network as well as creating ways for DApps and users of Centrifuge to identify businesses as valid, trustworthy participants of the Centrifuge network. The Centrifuge business representation is not a generalized identity - Centrifuge relies on other projects to provide KYCed or otherwise verified identities. However, the business representation can be owned by a verified on-chain identity, thus providing businesses, or business owners a way to claim their “business information” and provide it to other applications (such as credit rating, etc.)

Alternatives:

• Build a complete“identity solution” for businesses: Centrifuge is not an identity provider. We focus on bringing businesses and their data to the decentralized financial supply chain.

Various supporting on-chain contracts