World’s first Confidential Security Contract Standard (XSC) for regulatory compliant securities on Dusk Network
By Toghrul Maharramov

Feb 18, 2021

Release of Confidential Security Contract Standard (XSC) V2.0! XSC has built-in compliance by design. It natively integrates regulatory requirements such as public transaction confidentiality, and transaction auditability, while providing a framework for full life-cycle management, and automating corporate actions like dividend payouts and voting.

Today we release our protocol specification for the Confidential Security Contract Standard v2.0. This standard was created to reflect recent technical upgrades to Dusk Network’s core libraries and in response to continuous industry consultation.

Click on the image below to access the XSC 2.0 specification paper:

👉 Quick link: Confidential Security Contract (XSC) Standard V2.0.0

With XSC 2.0, we’re introducing a complete standard for the compliant issuance and trading of on-chain securities/security tokens. The XSC v2.0 allows for easy token creation, issuance, and transfers.

💡 For those new to blockchain, a popular example of a token standard is the Ethereum ERC-20 token standard for utility tokens. Token Standards are a framework that anyone can use to quickly build their own token and benefit from the characteristics automatically provided by the standard. In the example of Ethereum’s ERC-20 more than 200,000 variants had been deployed by 2019.

Back to XSC v2.0. Unlike the ERC-20 token standard, the XSC-token standard is created for the tokenization of securities. Securities are financial instruments, and can be anything from shares (equity) to bonds (debt), to more complex financial products. This is why it's important that the XSC’s token standard is created in a way that it supports regulatory requirements such as confidentiality, auditability and can be used to ensure only eligible investors can access its functionality.

Since tokenization is on the agenda of companies from all over the world, we’ve created XSC v2.0 in a way that provides the flexibility needed by companies from all over the globe. Our goal is to enable any company to use XSC, to embrace innovation, and benefit from the many opportunities that blockchain technology provides. This is also why Dusk Network and the XSC standard are completely open-source.

A quick rundown of some of the Security Token benefits:

  • Automate dividend payments, and secure online voting.
  • Quick & easy to connect with P2P markets
  • Fractionalisation of assets, enabling precision investing and small investors
  • Lower barriers to entry
  • Compliance can be hard-coded
  • Scales along company life-cycle with post-listing flexibility

Today’s release of the XSC v2.0 standard is an important milestone for Dusk Network because it demonstrates how we’ve managed to marry the world of compliance with the world of crypto and blockchain. As a result, creating a pathway to bring together traditional and decentralized finance.

Why all that hassle to create confidentiality, regulatory compliance and auditability on a public and permissionless blockchain?
It's simple, public and permissionless blockchains create network effects and allow for rapid scalability. Nobody wants to be trapped by vendor lock-ins of expensive permissioned networks that have proven not to scale. But don’t take our word for it, read this 2020 Ernst & Young report about it.

This is also why Dusk Network is working on creating a vast pipeline of tokenization projects together with its partners. Read our announcement on Dutch Stock Exchange NPEX, Firm24 x LTO Network, Elrond, and more here. Pushing for adoption now, to create a major pull reaction later.

Confidential Security Token Standard V2.0, what’s included?
The XSC v2.0 token standard will be natively supported in the Dusk Network Mainnet. This includes support for:

Standardization and configuration

With the new XSC, contract owners (the issuing company) can benefit from both standardization and configuration. This allows them to start with standard security or bond templates, and alter them to perfectly match their specific requirements. This provides opportunities for exact replicas of their ancient security counterparts, as well as new improved hybrids, with automated corporate actions like dividend-, coupon claims, and voting.

Read XSC V2.0

The XSC v2.0 paper is a complex and highly technical document. Even more so because of the (zero-knowledge) cryptography involved. This is also why it takes significant time to develop, but as the saying goes ‘good things take time’! We strongly urge the Dusk Network community to go through it and, as always, feel free to leave us any questions you may have on Twitter or Telegram.

Without further ado, dive straight into the XSC Paper by Toghrul Maharramov, Senior Researcher at Dusk Network:

XSC 2.0 Paper

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