Tokenization without smart contracts

In most blockchain ecosystems, issuing tokens usually requires deploying smart contracts. Ethereum is a typical example, where users must use Solidity language to write and deploy contracts to create tokens. Mintlayer simplifies this process by embedding tokenization directly into the protocol, eliminating the need for smart contracts.

The Mintlayer technology architecture allows tokens to be issued as part of the Unspent Transaction Output (UTXO) model. In this system, tokens are represented by TokenId in the output. When a token is issued, the transaction that creates the token defines its basic parameters, such as total supply, name, and permissions. This simple approach makes token creation easier and reduces the cost of deploying contracts.

Mintlayer relies on a UTXO architecture similar to Bitcoin, providing higher scalability and efficiency. As tokens are represented in the form of transaction outputs, the overhead of managing smart contracts is completely eliminated. This design not only reduces complexity but also enhances security by reducing the risk of contract-based vulnerabilities commonly found in other ecosystems.

MLS-01: The Homogeneous Token Standard of Mintlayer

MLS-01 is Mintlayer's standard for homogeneous tokenization. These tokens are similar to Ethereum's ERC-20 tokens and support the creation of financial instruments such as stablecoins, utility tokens, and others that can be traded or used in decentralized applications.

The attributes of the MLS-01 token include the code (representing the symbol of the token), total supply, decimal places, and the permissions to control the token. The permissions can be simple users or more complex governance entities. In addition to basic functions, the MLS-01 token can also be set to support transfer freezing or allow an increase in total circulation.

Due to the complete integration of MLS-01 tokens into Mintlayer's UTXO model, their management is highly efficient. When tokens are issued, they are treated as outputs in a transaction, similar to how Bitcoin handles unspent outputs. This approach simplifies the tracking and management process of tokens, as the UTXO model itself ensures transparency and traceability. Every token transfer is recorded in the UTXO structure, allowing anyone to verify the flow of tokens through the blockchain.

Unlike other blockchains that typically require a lot of interaction with smart contracts to perform operations such as minting or burning, MLS-01 allows these operations to be completed within the Mintlayer's basic transaction framework. This reduces transaction costs and minimizes the risk of errors, as complex contract code is not required.

Privacy-focused token: MLS-02

Privacy is becoming increasingly important in the blockchain ecosystem, and Mintlayer addresses this need by introducing the MLS-02 standard. MLS-02 tokens are a privacy-focused token standard designed to achieve confidential transactions through zero-knowledge proofs, ensuring that transaction amounts and other sensitive information are not disclosed.

In terms of issuance and management, the MLS-02 token is similar to the MLS-01, but with added complexity in privacy mechanisms. Zero-knowledge proofs allow users to verify the validity of transactions without revealing transaction details, ensuring both network integrity and protecting the privacy of transaction participants.

Mintlayer's MLS-02 enables privacy-focused scenarios such as private financial transactions, confidential asset transfers, and sensitive business transactions. In the future of decentralized finance, such tokens may play an important role as privacy is often a limiting factor for institutional adoption. By enabling confidential transactions, MLS-02 makes Mintlayer more attractive to individuals and businesses that need to protect sensitive financial data.

Future upgrades of Mintlayer may include additional features and optimizations to enhance the usability and efficiency of these tokens. The addition of privacy tokens also reflects a widespread trend in decentralized finance towards enhancing privacy, with users desiring greater control over personal information and financial activities.

Non-Fungible Token (NFT): MLS-03

Mintlayer supports non-fungible tokens (NFT) through its MLS-03 standard. NFT represents unique assets such as artwork, collectibles, or real estate, and has gained much attention for its application in the digital art field.

The technical structure of MLS-03 tokens is similar to that of MLS-01, but with some differences. Since NFTs are unique, MLS-03 tokens do not require supply parameters, as each token represents a single and indivisible asset. MLS-03 tokens also include additional metadata fields, such as creator information, token name, description, and URI for token icons or related media.

The creation and management of MLS-03 tokens follow the basic principles of other tokens on Mintlayer, using the UTXO model for transparent and efficient tracking. When an NFT is transferred, the UTXO representing the token is simply moved from one address to another, providing a simple ownership transfer mechanism without the need for complex contracts.

NFTs on Mintlayer have a wide range of potential applications beyond digital art. For example, real estate can be tokenized and traded as NFTs, enabling ownership transfers on the blockchain. Other potential use cases include tokenizing intellectual property, legal contracts, and authenticity certificates for luxury goods. The flexibility of the MLS-03 standard combined with the transparency of the UTXO model makes it well-suited for these types of applications.

Technological aspects of tokenization

Creating tokens on Mintlayer is a simplified process that takes full advantage of the UTXO model. In Mintlayer, tokens are represented as outputs in transactions and have unique TokenIds to distinguish them from other tokens or Mintlayer native assets like ML. The properties of a token, such as its symbol, supply, and metadata, are defined during issuance.

One of the main advantages of Mintlayer's tokenization process is that it does not require the deployment of smart contracts, which can be complex and expensive on other blockchains. Mintlayer embeds the necessary functionality directly into the transaction structure, making it more accessible for users and developers.

Metadata is particularly important in token creation, especially for NFTs. Mintlayer allows issuers to define rich metadata that can be attached to each token, providing additional information about the asset. This metadata can include any information ranging from a description of the token's purpose to image or file links related to the token. For NFTs, this metadata is especially important as it defines the unique characteristics of each token.

Security tokens and stablecoins are two potential use cases benefiting from the Mintlayer tokenization standard. Security tokens representing company or asset ownership can be issued as MLS-01 tokens with optional access control lists to meet compliance requirements. These tokens can be restricted to specific users or transferred under specific conditions to ensure compliance with security regulations. Stablecoins are tokens pegged to fiat currency or commodities and can also be issued as MLS-01 tokens, providing stable value assets for decentralized finance.

Highlights

• Tokens on Mintlayer can be issued without smart contracts, simplifying the creation process.
• MLS-01 is the homogenization token standard of Mintlayer, which can be used to create stablecoins and secure tokens, and other assets.
• MLS-02 focuses on privacy and supports confidential transactions through zero-knowledge proofs.
• MLS-03 supports non-fungible tokens (NFTs), suitable for unique assets such as artworks and collectibles.
• Tokenization is achieved using Mintlayer's UTXO model, providing flexibility, security, and scalability.