ZK Proof Engine for Tokenization (ZK – PRET) : ZK-PRET is a provable business process composition engine for real-world asset tokenization. SCF-RWA-Reimagined is a reference implementation of ZK-PRET for supply chain finance, including international trade finance and insurance.
ZK PRET is a business infrastructure layer that produces layers of proof composition to reduce the validation risk for financiers for supply chain finance. The fundamentals of supply chain financing involve financing invoices and receivables, primarily the Bill of Lading and other instruments underlying the SCF tokenization.
Tokenization efforts are poised to grow exponentially, BUT if we must bring the next one billion people into Web 3, the use cases that are going to be helpful are the ones that are inter-twined with the lives of most people day-to-day, which is precisely the opportunity that Supply chain Finance brings.
In the International trade area alone, this is a 2-3 trillion financing deficit, and in general supply chain finance, it is estimated at 16 T. MSMEs are important globally (Davies, Narayanan and Balasubramanian 2021): – Over 95% of all companies are UK & US are MSMEs. – 90% of all businesses globally are MSMEs, they employ over 50% of all workers. – 88% of EU companies exporting to USA are MSMEs. – They are even more important in developing countries like India, particularly in the context of exports/imports (Chakravarthy, Bharathi, Khire, and Narayanan, 2023): 30% of GDP (40% of emerging economies income globally).
Supply chain Trade Finance is still under served and is a 2-3 Trillion gap in International trade alone. Include domestic opportuntities - Roughly the total addressable market is about 16 trillion USD – that’s the income generated by SMEs globally !, and participants are looking for efficiencies and inclusivity.
Please refer to the About ChainAim section for more details about the publications. (in attachments ) .
The predominant issue has been validation risk for financiers. Even with the DLT-based systems do NOT go beyond a simple hash of a current process documents, which only marginally improves the situation, and does NOT include the deep data integrity of the underlying systems of proofs.
For Buyers and Financiers, there is high validation, credit, market and operational risks. For Sellers, again there is validation, operational and market risks, and they have do to excessive documentation, high timelags. For all parties, Working capital cash flow maangement and optimization is a key concern and they need reliable real-time and minimally-needed and privacy protected data sharing for the purpose of use.
Even with attempts for due diligence efforts, because of the lack of transparency, decisions are made on partial understanding. For Financiers.
DLT/AI based transformation shows promise as tehy can shring the cycle time by allowing for dynamic capabilties. However, there are still a lot of gaps to be filled, to realize high efficiencies in the delivery-versus-payment cycle.
Institutional Defi / and RWA, and tokenization in general, have spurred interest with increasing regulatory movements and awareness of real-world blockchain use cases possible with the underlying technology.
There needs to be a solution that extends beyond simple hashes of paper-oridented process in to deep composition and proofs with privacy and zero-knowledge where needed, to share minimal data for the purpose of use.
These include
Layered Identity Business Identity
Layered Compliance
Company Level compliance Export level compliance Global LEI compliance Global KYC/AML Compliance
that could be composed with
Deep Instrument Instegrity Alignement to Standards Fully provenance inter-instrument integrity
Business Execution correctness To prove the needed off-chain real world work processes are defined aligned to standards and agreeed on workflows and executed according to the agreed on workflows
and these elements pipe on to the risk models that can evaluate the risk of these instruments in a detailed, quanititative, yet minimal and data-privacy oriented manner By generating proofs based on emerging standards that can facilitate Fintech analysis for Institutional Finance, Institutional Defi and Real World Tokenization.
These concepts also percolate to deep supply chain financing , for a chain of receivalbes for efficiecies as well.
The Key aspect is composition , recursion and balance of off-chian / on-chain designs for minimally needed, privacy and business-sensitivity oriented data share, Yet scalable.
The Insituitional Defi needs precise , succint and composed information for risk validation and reduciton for financing supply chain finance. and is a huge ask from Institutional financiers, defi and risk management frameworks. As Tokenization is poised to grow, there is a need to address these gaps.
IMPLEMENTATION
The MINA navigators proposal is to build the following components of the
produces proofs for
a) layered identity (including local jurisdictional identity, domain-specific identity, and emerging global legal entity standards like GLEIF ) Is the candidate borrower a registered entity? in the local jurisdiction? Is the candidate borrower a global legal entity?
b) verification of the key title documents based on the Model law for electronic transmission of records (MLETR) specifications. Key instruments like the Bill of Lading, and other collateral documents like the consumer invoice, and other substantiative documents for the jurisdictions involved are critical for real world tokenization in the supply chain finance space. Verifications are needed not just for integrity of the source identification, or just wallet KYCs, but in supply chain finance in goes deep, and also includes Is the instrument / document truly complying to the standards schema ? like ( digital container shipping association schema for bill of lading )? counter-party sensitive data integrity – (for example, Purchase Order to Consumer Invoice) Is the Bill of Lading in sync with the customer invoice? and is the customer invoice in sync with the PO in a privacy – protected proof.
c) layered compliance, Are the borrowers and the associated entities compliant with export-import agencies. Configurations for sanctions can be checked as well.
d) operational excellence indicators, including history
e) financial health proofs about the cash/asset balances and other financial metrics
f) proofs of association (being part of a deep supply chain network) the financiers are inclined to support a supplier that participates in the global supply chain of well-known brands for running efficient supply chains
This component is a registry of standardized digital negotiable instruments based on evolving regulations in the supply chain finance RWA tokenization space. The primary’s business relationships have been with many industry standards groups, which are emerging the standards.
These include APIs for standards and data providers in digital trade instruments, algorithmic contract types, risk model APIs, and access paths to corporate registration, legal entity identifiers. Initially we will be working in jurisdictions with known APIs, and emerging standards for income tax, and GST.
This registry provides validation of the data and the models from the source, which ZK-PET in turn attests and further composes aggregated proofs on them to meet the demands of the verifiers. We expect this to extend into other sources based on some of the MINA ecosystem partners, and other external partners, which we will cover in the ecosystems section (also having discussions with the MINA team on some of the ecosystem details).
As the standards-based trade instruments are provided, these tokenization workflows need the deep content analysis based on global schema compliance, and attestations on top of them for the execution completeness and the order sequence based on the process definition (including parallelism) for start to end state of the process. Per the industry practices, and for financier risk management, the specific templates for types of engagement and payments are modelled, for “negotiable”, non-negotiable types of interactions and any delivery-versus payments contract / guarantees. For a given template, the expected flow is matched against the execution trace – the “witness” trace . The solution uses a standard for modelling these templates and mapping them to convert them into circuits and state-transition checks for producing proofs of execution of expected business processes.
This module asserts and produces proofs based on the standards evolving in the space of next generation standards management that central banks are starting to use to model financial data and flows, based on credit risk, behavioral risk and market risk.
ChainAim has strategic relationships with many of the work groups and will produce the configurable service layer implementation serving as an oracle, based on these underlying evolving standards
The proofs of the simulated cash flows will be modeled against desired risk tolerance. These proofs address the critical Trade finance flows for Bill of Lading acceptance, which is a guarantee under English law (which is the global trade law ), for the tokenization of the instruments and the value transfer.
The same concepts equally apply to other kinds of insurance for business process flows, in insurance including primacy (primary / secondary ) evaluations and agreements at the business levels, for primary/secondary.
ALL Proofs at a certain level and below are fully provenanced and provable.
ZK-PRET-SCFReimagined-Deck.pptx
https://www.youtube.com/watch?v=lu3P0g7-XgI
