Token-Controlled Token Circulation

Abstract

This paper presents a general-purpose token circulating system for circulating various types of rights such as tickets, vouchers, coupons, and licenses as tokens on the blockchain. The circulation of tokens comprises four types of principal transactions: issuance, transfer, present, and consumption. Depending on the application, various conditions must be satisfied to execute these transactions, e.g., only qualified shops can issue the tokens and only a certain agent can transfer the tokens. The token circulating system issues, transfers, presents, or consumes a token only if the control tokens are owned by the participants of the transaction. The circulation control tokens themselves can be any type of token, e.g., a driver's license or a membership certificate of a certain group, and recursively circulated in the token circulating system. This scheme eliminates the need to write complex circulation control in smart contracts for each application, improving the security of the system and reducing development costs. The idea of using tokens for token circulation was already presented in a paper by the authors in 1999, but with the spread of modern smart contracts and token wallets, it has become a practical and feasible technology. This paper presents the implementation techniques on the smart contract and its merits.