What You Can Learn From This Article. Learn about the concept of Tokenized Book Transfer (TBT) , TBT is a rediscovery by Corda of a service that has been around for a long time. It is a new kind of token, consisting of a mutual debt relationship between participants, and it is an effective means of reducing liquidity costs and reconciliation tasks for certain groups of companies.

目次

• What is Tokenized Book Transfer (TBT)?
• What are tokens in TBT?
• What makes TBT tokens different from bank deposits, Bitcoin or Stable Coin?
• Settlement basics
• Life cycle of TBT tokens
• ① Offsetting TBT tokens and commodities/services
• ②Offsetting TBT tokens against bank deposits
• ③Offsetting between TBT tokens
• The ultimate “P2P payment” tool, TBT
• Business Advantages of TBT tokens
• Intra-group settlement tool for corporation groups
• As an incremental picture, simultaneous issuance of TBT Tokens (fixed token from subsidiary and liquidized token from headquarters)
• Clear advantages on TBT token
• No need for intra-group liquidity costs
• Easy customisation as it resides within the control of the group
• Essential benefits of TBT token, compared to other concepts like Stable Coin
• Remaining challenges

What is Tokenized Book Transfer (TBT)?

TBT stands for Tokenized Book Transfer. It is a new solution concept based on the distributed ledger technology Corda. Although it has a new name as a solution, the idea has a long history, dating back to the ancient Mesopotamian civilisation. Around 3500 BC, the Sumerians living in Mesopotamia (near present-day Iraq) wrote their borrowing and lending records in cuneiform characters pressed onto clay tablets. These clay tablets have been fired and preserved, and remain as historical documents showing the debt relationships of the time. (Refer to Ichiro Nakata / Introduction to Mesopotamian Civilisation / Iwanami Junior Shinsho / 2007, etc.)

The basic idea of TBT is to record lending and borrowing on a distributed ledger. It is a simple idea, and in Corda, our distributed ledger platform, we have made a sample IOU (=I Owe yoU) available to the public as the very first sample program.

What are tokens in TBT?

Tokens in Tokenized Book Transfer (TBT) are the record of the mutual loan and borrowing. For example, I bought a certain product from Company A for 1 million yen. The basic idea of TBT is that instead of immediately paying, we record the fact that "I owe Company A 1 million yen.” We call the information that says “I owe company A 1 million yen" a “token.” TBT aims to make existing businesses more efficient through the exchange of such tokens (”TBT tokens”).

What makes TBT tokens different from bank deposits, Bitcoin or Stable Coin?

So what makes TBT tokens different from bank deposits, Bitcoin and Stable Coin? Let's look at it from the perspective of payments.

Settlement basics

What is settlement? Let us define settlement as “lowering the cost of doing business with an untrustworthy party.”

Let's start with an example. Say I buy a car 🚗 worth 1 million yen from Company A. At this time, I will receive the car 🚗 from Company A, and Company A will receive 1 million yen from me.

Company A should be concerned whether I will really pay 1 million yen. At this time, what happens if I pay the 1 million yen in due course? Would they be OK with that? We can think of a worse example of "I'll bring you some food that might be worth 1 million yen!"

A 10,000 yen note or bank transfer is a very useful tool in these situations, and the role of the settlement is to use these tools to smooth out the transaction. So let's take a look at some settlement tools here.

• Cash: hand-deliver Cash (debt issued by BOJ) to Company A to settle my debt of the car.
• Bank transfer: bank deposits (debt issued by Bank) are transferred to Company A to settle my debt of the car.
• Stable Coin: Stable Coin (debt issued by the issuer of the Coin) is transferred to Company A to settle my debt of the car.
• Pay on credit: Give an oral agreement (debt issued by me) to Company A to settle my debt of the car.

Looking at some of these tools, settlement may be described as “lowering transaction costs through debt issued by the 3rd party.”

Now, one of the key points of reducing transaction costs is the question of how settlement parties can trust these liabilities. Looking into that a bit, it is common for debts used for settlement to have the power to force someone to do something.

For example, Banks and Stable Coin issuers are forced by law to "maintain a system whereby they can return cash (i.e. central bank debt) that matches this debt." The rules are many, but as a whole, the mechanism exists to ensure such a trust. At least for banks, they are subject to a wide range of rules and regulations. In this way, banks and SC issuers are always able to spit out cash. And cash is a liability of the country they belong to (strictly speaking, of the consolidated government).

As for cash, it can be used to "pay taxes." Put differently, cash is a liability to the country “to avoid being evicted from the country or being caught with tax evasion." At the very least, you can see that the tools that have been used for payments have been equipped with the power to "make someone do something" or the violence committed by the country.

Life cycle of TBT tokens

Now, let's consider TBT: in the case of TBT, debt is tokenized as one’s own debt. In the previous example of a 1 million yen purchase, "I receive goods from company A" and "company A lends me 1 million yen.” The transaction is completed without a third party, with the delivery of the goods and issuing of the TBT Token. Again, no cash exchange or bank transfer occurs. Let's abstract for a little. What happened here is that "TBT is issued to the counterparty" for “the provision of some service or goods.”

TBT tokens can be accrued in all manner of commercial transactions. The tokens become a liability of the counterparty to the transaction, not a liability to a specific counterparty like Stable Coin, deposits or cash.

But, TBT tokens will only accumulate if left alone. How on earth can Company A, which has received TBT tokens of 1 million yen from me, use the tokens? There are a number of patterns, which we will look at in turn.

① Offsetting TBT tokens and commodities/services

The first and simplest example is I would offer something to Company A in exchange for the token. Let's say I work for Company A. I work hard and provide Company A with 1 million yen worth of labour. In this case, Company A would return my TBT token as a salary. In this way I can clear my “1 million yen debt.” I can consider the 1 million yen worth of tokens I issued null and void. (This is called a token write-off.)

②Offsetting TBT tokens against bank deposits

The second example is offsetting against bank deposits. In short, this would be "debt repayment." In the most normal way, Company A having my TBT tokens would press me to exchange my TBT tokens for a bank deposit, which is much more trustworthy than me. (I am just a person, so Company A can’t be confident if I can offer the value of 1 million yen to Company A.)

Let’s say that I make 10 purchases of 1 million yen each, Company A will have 10 million yen in TBT tokens. I will cancel my savings of 10 million yen and transfer it to Company A. At this time, Company A will have a deposit of 10 million yen issued by Bank B instead of the TBT tokens issued by me.

I am relieved that I have paid back my debt of 10 million yen. (which of course means my 10 million TBT tokens would be a write-off)

③Offsetting between TBT tokens

The third example is slightly more complex.

Company A has 1 million yen worth of TBT tokens issued by me. Let’s call them TBT-ME tokens.

Separately, Company A issues a TBT token to Company C through another transaction issued by Company A. Let's call them TBT-A token.

Now, Company A has a TBT-ME token of 1 million yen, and Company A wants to get the TBT-A token back (and write it off) from Company C by paying TBT-ME token to Company C.

From Company C's point of view, this is an exchange of TBT-A token for TBT-ME token.

If Company C thinks that the value of the TBT-A tokens and the TBT-ME tokens are the same, Company C would accept this transaction. In this way, write-off can take place through the exchange of tokens by different issuers.

The ultimate “P2P payment” tool, TBT

Now, you may have felt that this was quite a blistering story. However, if you look at it from the perspective of “who issues the tokens,” this TBT token could be seen as the very democratisation of finance and true Defi (decentralised finance) that Bitcoin was the subject of. Perhaps a world where “my token” and “your token” are exchanged might be realised in some future.

However, It is not the purpose of this article to present such a outrageous world view.

The above example is a fanciful story to illustrate the idea of TBT tokens.

My intention in this article is to show how TBT tokens can be used to solve a business problem. The following section describes specific use cases for TBT tokens.

Business Advantages of TBT tokens

Intra-group settlement tool for corporation groups

TBT tokens, which basically tokenise a 1:1 lending relationship, does have one weakness. That is the risk that the token issuer may not be able to repay the token or debt.

As for the TBT-Me token, the issuer(me) may not be able to earn 1 million yen. Even if I somehow get the amount, I may not use it to repay Company A. Under these circumstances, it is highly doubtful that Company A will accept my TBT tokens as payment for the product.

However, dramatic value can be created when TBT tokens are used within "a group of companies with a good mutual understanding of the other companies’ risk."

We will now look at that in detail.

If a party understands the risk of the counterparty not repaying the debt, the repayment risk is essentially controllable. For example, if the TBT token is issued by the headquarter of the group companies, it might be possible to ignore the risk. (apart from regulations)

Then, TBT tokens can make full use of the features of distributed ledgers or blockchains, such as “smooth, seamless value transfer” or “advanced and automatic control as a programmable money.” Let's look at some of the specific benefits.

As an incremental picture, simultaneous issuance of TBT Tokens (fixed token from subsidiary and liquidized token from headquarters)

Ideally, each company should become the issuer of the TBT tokens. Then, they should strive to encourage the exchange of those tokens within the group. But It seems difficult to make it a reality out of the blue.

While the exchange of freely issued tokens is beautiful in principle, it can be complicated to manage in practice. Therefore, as an incremental picture, only “the headquarter token” can be exchanged from one company to another, and the tokens issued by the group companies can be held by the headquarter only. In this way, each company can manage the token simply.

Such a mechanism is commonly referred to as a liquidity hub, and in this way various rules can be circumvented.

One typical rule is that the liquidity provision can be seen as the provision of a service and it can be caught by the arm's length rule, but this could certainly be avoided by applying an interest rate to both the “the headquarter token” and “the subsidiary token.” The interest rate can be applied at the actual market interest rate, or it may be possible to deny the application of the interest payment itself, as there is always a 1:1 corresponding debt relationship between the tokens of both parties (”the headquarter token” always has a matching “subsidiary token”). We would be happy to discuss this with lawyers who are familiar with inter-company group legal matters.

Clear advantages on TBT token

No need for intra-group liquidity costs

As intra-group settlement is replaced by the exchange of TBT tokens, the liquidity costs required for intra-group settlement are no longer necessary. There are two types of liquidity costs here: one is foreign exchange costs (transfer fees and foreign exchange exchange charges) and the other is costs associated with raising and hedging funds for the exchange. These costs are usually all-in and should be quoted by the bank in the form of exchange commissions and interest rates. Among these costs, intra-group foreign exchange can be expected to improve the income and expenditure of the corporate group, as the costs themselves remain within the company.

Easy customisation as it resides within the control of the group

Once TBT tokens are in circulation, they can demonstrate their value as programmable money through smart contracts and various APIs. This can lower administrative costs in various ways; for example, through automatic system collaboration or through the reduction of reconciliation tasks. Therefore, this increases the competitiveness of the group in the long run. In addition, as the TBT token system is governed in the group, it is possible to modify specific functions quickly at the group’s convenience. TBT should be able to improve quicker than, for example, joining some kind of network established by a consortium.

Essential benefits of TBT token, compared to other concepts like Stable Coin

It may be difficult to understand what the benefits of TBT tokens are compared to, for example, banking APIs or Stable Coin. A common question is: How is it different from what can be done with banking APIs or Stable Coin?

The essential difference is that you do not need trust outside the group. Normally with bank deposits, you would have to trust the bank. With Stable Coin, you trust the issuer of the Stable Coin. Organisations offering these trusts will naturally try to recoup their costs through some form of payment. I think we should be cautious about using this mechanism for transactions with someone we don't trust (me), for example, outside the group. However, I do not see much point in using a third party as a trust point (and dropping costs there) for transactions with parties with whom there is mutual trust. Until now, we have not had a mechanism for easy collaboration, especially technology that can perform transfers of value between organisations, but now we have distributed ledgers and blockchain. We hope that this can be used to reduce costs and improve operational efficiency for the Group. We hope you understand that this is the mechanism of TBT.

Remaining challenges

While various benefits are being discovered with TBT, there are of course challenges as well. That is the issue of communication with those outside the group. For interactions outside the Group, it will continue to be necessary to make use of external third parties. This will continue to take the form of banks providing liquidity or the use of Stable Coin. In this regard, the use of interoperability technology could be considered. If a function is provided to convert TBT tokens circulating within the group to external liquidity in real time, it would be possible to draw a picture of highly flexible TBT tokens within the group and Stable Coin for those outside the group. If there is an end point of interoperability at the boundary between the group and other companies, it may be possible to draw a world where tokens circulate seamlessly within and outside the group.

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Written by 生永 雄輔 (Yusuke Ikunaga)

SBI R3 Japan エンジニアリング部長

書籍出してます：https://amzn.asia/d/c0V31Vd　

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