0087 XLS-87d: Token Pre-Authorization

[mvadari]

Title:       Token Pre-Authorization
Revision:    1 (2024-12-11)

Author:      Mayukha Vadari

Affiliation: Ripple

Token Pre-Authorization

Abstract

Managing the authorization of tokens on the XRP Ledger is a complex task. This complexity is compounded when issuers use highly secure, locked-up keys, as frequent interactions to authorize trustlines or MPT holders can undermine the security benefits of these keys. Each authorization requires deliberate action by the issuer, making it impractical at scale and creating friction for both issuers and token holders. Without a streamlined mechanism to pre-approve or manage token authorizations efficiently, issuers face a tradeoff between operational efficiency and maintaining the security and decentralization principles of the ledger. This gap underscores the need for a robust solution that streamlines and simplifies the operational overhead of token authorization while preserving the integrity of issuer keys.

This spec proposes a solution to this problem by allowing issuers to pre-authorize token holders, either by authorizing specific accounts or by authorizing certain credentials/domains (which essentially allows them to move the burden of authorization to another account). By integrating token pre-authorization into the XRPL's existing trustline and MPT frameworks, issuers can establish robust controls over token distribution while maintaining a user-friendly process for holders. This allows issuers to manage their assets more effectively without compromising on security.

1. Overview

This feature mirrors the Deposit Authorization functionality, but for token authorization instead of payments.

We propose:

• Creating a TokenPreauth ledger object
• Creating a TokenPreauth transaction type
• Modifying the TrustSet transaction type
• Modifying the MPTokenAuthorize transaction type

This feature will require an amendment, tentatively titled TokenPreauth. It also depends on XLS-70d, On-Chain Credentials and XLS-80d, Permissioned Domains (though it can be adjusted to avoid those dependencies).

1.1. Background: Authorized Trustlines

Authorized trustlines allow issuers to control who can hold their issued tokens. By enabling the RequireAuth flag on their account, an issuer can enforce a policy where trustlines to that issuer must be explicitly authorized before any tokens can be held. Once authorized, the trustline functions as "normal" and the token holder can send, receive, or hold the issuer's tokens, subject to the usual rules of trustline limits and balances.

However, approving each trustline requires a signed TrustSet transaction from the issuer for each trustline to authorize.

1.2. Background: Authorized MPTs

Authorized MPTs function very similarly to authorized trustlines. The main differences are that the RequireAuth flag lives on the MPTokenIssuance object instead of the account object, and the MPTokenAuthorize transaction is used to authorize tokens instead.

2. On-Ledger Object: TokenPreauth

This object mirrors the DepositPreauth object post-XLS-70d in fields.

2.1. Fields

The fields of this object mirror the fields of DepositPreauth, including changes made in XLS-70d.

Field Name	Required?	JSON Type	Internal Type	Description
LedgerEntryType	✔️	string	UInt16	The ledger object's type (TokenPreauth).
Account	✔️	string	AccountID	The account that granted the preauthorization (the issuer).
Currency		string	Currency	The currency code of an IOU, to apply this pre-authorization to only one token.
MPTokenIssuanceID		string	UInt192	The ID of an MPToken issuance, to apply this pre-authorization to only one token.
Holder		string	AccountID	The account that received the preauthorization (the other end of the trustline, or the MPToken holder).
Credentials		array	STArray	The credential(s) that received the preauthorization. (Any account with these credentials can send pre-authorized payments).
DomainID	The domain that received the preauthorization. (Any account that is a member of this domain can send pre-authorized payments).
OwnerNode	✔️	string	UInt64	A hint indicating which page of the sender's owner directory links to this object, in case the directory consists of multiple pages. Note: The object does not contain a direct link to the owner directory containing it, since that value can be derived from the Account.PreviousTxnID.
PreviousTxnID	✔️	string	Hash256	The identifying hash of the transaction that most recently modified this object.
PreviousTxnLgrSeq	✔️	number	UInt32	The index of the ledger that contains the transaction that most recently modified this object.

2.1.1. Object ID

The ID of this object will be a hash of the Account and either the Holder, Credentials, or DomainID fields (whichever of those fields is included in the object), combined with the unique space key for TokenPreauth objects, which will be defined during implementation.

If a Currency or MPTokenIssuanceID is included, that will also be included in the hash.

2.2. Account Deletion

The TokenPreauth object is not a deletion blocker.

3. Transaction: TokenPreauth

This transaction mirrors the DepositPreauth transaction post-XLS-70d in fields.

3.1. Fields

Field Name	Required?	JSON Type	Internal Type	Description
Flags		number	UInt32	The supported flags on this transaction.
Currency		string	Currency	The currency code of an IOU, to apply this pre-authorization to only one token.
MPTokenIssuanceID		string	UInt192	The ID of an MPToken issuance, to apply this pre-authorization to only one token.
Holder		string	AccountID	The XRP Ledger address of the sender to preauthorize (or un-preauthorize).
Credentials		array	STArray	The credential(s) to preauthorize (or un-preauthorize).
DomainID		string	Hash256	The domain to preauthorize (or un-preauthorize).

Exactly one of the Holder, Credentials, and DomainID fields must be included.

3.1.1. Flags

Flag Name	Hex Value	Description
tfUnauthorize	0x00000001	If set, it indicates that the issuer no longer wants to pre-authorize that holder/credential set/domain. The TokenPreauth object will be deleted as a result (if the transaction is successful).

3.1.2. Currency and MPTokenIssuanceID

At most one of these fields can be provided.

If either Currency or MPTokenIssuanceID is provided, then this pre-authorization will only apply to that token.

3.2. Failure Conditions

• None or more than one of Holder, Credentials, and DomainID are included (i.e. there must be exactly one of these fields included).
• The account doesn't have enough reserve for the new TokenPreauth object, if authorizing a new account/credential/domain.
• If authorizing/unauthorizing an account:
  • The account doesn't exist.
  • If the tfUnauthorize flag is set, the account is not currently authorized.
  • If the tfUnauthorize flag is unset:
    • The account to be authorized is already authorized.
    • The account is trying to authorize itself.
• If authorizing/unauthorizing a credential:
  • The issuer of a credential doesn't exist.
  • The array is too long (i.e. has more than 8 credentials).
  • The array is empty (i.e. has no credentials).
  • If the tfUnauthorize flag is set, the credentials are not currently authorized.
  • If the tfUnauthorize flag is unset, the credentials are already authorized.
• If authorizing/unauthorizing a domain:
  • The domain doesn't exist.
  • If the tfUnauthorize flag is set, the domain is not currently authorized.
  • If the tfUnauthorize flag is unset, the domain is already authorized.
• The MPT represented by MPTokenIssuanceID isn't issued by Account.

3.3. State Changes

If authorizing:

• A new TokenPreauth object is created, with the provided fields.

If unauthorizing:

• The relevant TokenPreauth object is deleted.

4. Transaction: TrustSet

The TrustSet transaction already exists on the XRPL. We propose a slight modification to support token pre-authorization.

4.1. Fields

As a reference, here are the fields that the TrustSet transaction currently has.

Field Name	Required?	JSON Type	Internal Type	Description
LimitAmount	✔️	object	Amount	Object defining the trust line to create or modify.
LimitAmount.currency	✔️	string	(Amount.currency)	The currency to this trust line applies to.
LimitAmount.value	✔️	string	(Amount.value)	The limit to set on this trust line.
LimitAmount.issuer	✔️	string	(Amount.issuer)	The address of the account to extend trust to.
QualityIn		number	UInt32	Value incoming balances on this trust line at the ratio of this number per 1,000,000,000 units.
QualityOut		number	UInt32	Value outgoing balances on this trust line at the ratio of this number per 1,000,000,000 units.

We propose these additions:

Field Name	Required?	JSON Type	Internal Type	Description
CredentialIDs		array	Vector256	Credential(s) to attach to the transaction.
DomainID		array	Vector256	A domain to attach to the transaction.

No more than one of the CredentialIDs and DomainID fields must be included.

4.2. Failure Conditions

• Existing failure conditions for TrustSet will still be obeyed.
• Both CredentialIDs and DomainID are included.
• If CredentialIDs is included:
  • Any of the CredentialIDs:
    • Isn't an object that exists.
    • Isn't a Credential object.
    • Is an expired Credential object.
    • Has not been accepted.
    • Isn't a credential issued to the Account sending the transaction.
  • The group of CredentialIDs is not authorized by the destination (or isn't authorized for this token).
  • There are duplicates in the list of CredentialIDs.
• If DomainID is included:
  • The domain doesn't exist.
  • The object in the DomainID field is not a domain.
  • The account is not a member of the domain.
  • The DomainID is not authorized by the destination (or isn't authorized for this token).

4.3. State Changes

If the issuer has the lsfRequireAuth flag set, and the user is pre-authorizedin some way (either themselves or via credentials/domains), the lsfLowAuth/lsfHighAuth flag on the trustline will be enabled. This will be true even when editing an existing trustline, not just when creating a new one.

5. Transaction: MPTokenAuthorize

The MPTokenAuthorize transaction already exists on the XRPL - it is the transaction that allows an account to opt-in to holding a token, and also can be used by issuers who have authorization turned on to approve token holders.

We propose a slight modification to support token pre-authorization.

5.1. Fields

As a reference, here are the fields that the MPTokenAuthorize transaction currently has.

Field Name	Required?	JSON Type	Internal Type	Description
Account	✔️	string	AccountID	This address can indicate either an issuer or a potential holder of an MPT.
TransactionType	✔️	object	UInt16	Indicates the new transaction type MPTokenAuthorize. The integer value is 29.
MPTokenIssuanceID	✔️	string	UInt256	Indicates the ID of the MPT involved.
MPTokenHolder		string	AccountID	(Optional) Specifies the holder's address that the issuer wants to authorize. Only used for authorization/allow-listing; must be empty if submitted by the holder.
Flags		string	UInt32	Transaction-specific bitwise flags.

We propose these additions:

Field Name	Required?	JSON Type	Internal Type	Description
CredentialIDs		array	Vector256	Credential(s) to attach to the transaction.
DomainID		array	Vector256	A domain to attach to the transaction.

No more than one of the CredentialIDs and DomainID fields must be included.

5.2. Failure Conditions

• Existing failure conditions for MPTokenAuthorize will still be obeyed.
• Both CredentialIDs and DomainID are included.
• If CredentialIDs is included:
  • Any of the CredentialIDs:
    • Isn't an object that exists.
    • Isn't a Credential object.
    • Is an expired Credential object.
    • Has not been accepted.
    • Isn't a credential issued to the Account sending the transaction.
  • The group of CredentialIDs is not authorized by the destination (or isn't authorized for this token).
  • There are duplicates in the list of CredentialIDs.
• If DomainID is included:
  • The domain doesn't exist.
  • The object in the DomainID field is not a domain.
  • The account is not a member of the domain.
  • The DomainID is not authorized by the destination (or isn't authorized for this token).

5.3. State Changes

If the issuer has the lsfMPTRequireAuth flag set, and the user is pre-authorized in some way (either themselves or via credentials/domains), the lsfMPTAuthorized flag on the MPToken object will be enabled. This will be true even when editing an existing MPToken, not just when creating a new one.

6. Examples

In this example, Rowan is an RWA issuer, and there are certain legal criteria that must be met before a customer can hold his token (for example, they may need to be an accredited investor). A trusted issuer, Isabel, is issuing a credential that indicates that Alice meets these criteria.

6.1. TokenPreauth Transaction

Note: Rowan already has the lsfRequireAuth flag set on his account and the lsfMPTRequireAuth flag set on his MPTokenIssuance.

{
    TransactionType: "TokenPreauth",
    Account: "rOWAN....",
    Credentials: [
        {
            Credential: {
                Issuer: "rISABEL......",
                CredentialType: "4B5943"
            }
        }
    ]
}

6.2. TokenPreauth Ledger Object

{
    LedgerEntryType: "TokenPreauth",
    Account: "rOWAN....",
    Credentials: [
        {
            Credential: {
                Issuer: "rISABEL......",
                CredentialType: "4B5943"
            }
        }
    ]
}

6.3. TrustSet Transaction

This transaction will result in Alice's trustline with Rowan automatically being authorized.

{
    TransactionType: "TrustSet",
    Account: "rALICE......",
    LimitAmount: {
        currency: "RWA",
        issuer: "rOWAN....",
        value: "1000000000",
    }
    CredentialIDs: ["DD40031C6C21164E7673...17D467CEEE9"]
}

This transaction will succeed, but the trustline will remain unauthorized.

{
    TransactionType: "TrustSet",
    Account: "rALICE......",
    LimitAmount: {
        currency: "RWA",
        issuer: "rOWAN....",
        value: "1000000000",
    }
}

This transaction will fail, since the attached credential isn't Bob's.

{
    TransactionType: "TrustSet",
    Account: "rBOB......",
    LimitAmount: {
        currency: "RWA",
        issuer: "rOWAN....",
        value: "1000000000",
    }
    CredentialIDs: ["DD40031C6C21164E7673...17D467CEEE9"]
}

6.4. MPTokenAuthorize

This transaction will result in Alice being authorized to hold Rowan's RWA issuance.

{
    TransactionType: "MPTokenAuthorize",
    Account: "rALICE......",
    MPTokenIssuanceID: "000005F398B624EBD06822198649C920C8B20ADB8EBE745E", // Rowan's RWA issuance
    CredentialIDs: ["DD40031C6C21164E7673...17D467CEEE9"]
}

This transaction will fail, since Alice didn't provide her credential. She can re-submit with the credential attached (like above).

{
    TransactionType: "MPTokenAuthorize",
    Account: "rALICE......",
    MPTokenIssuanceID: "000005F398B624EBD06822198649C920C8B20ADB8EBE745E",
}

This transaction will fail, since the attached credential isn't Bob's.

{
    TransactionType: "MPTokenAuthorize",
    Account: "rBOB......",
    MPTokenIssuanceID: "000005F398B624EBD06822198649C920C8B20ADB8EBE745E",
    CredentialIDs: ["DD40031C6C21164E7673...17D467CEEE9"]
}

7. Invariants

A TokenPreauth ledger object always has exactly one of the Holder, Credentials, and DomainID field, and has at most one of the Currency and MPTokenIssuanceID fields.

If the Credentials field is included, the array contains between 1 and 10 credentials.

8. Security

8.1. Trust Assumptions

Issuers need to trust a credential issuer to only be issuing valid credentials, and to not delete a credential without a legitimate reason.

Issuers need to trust a domain issuer to only be allowing legitimate credentials into their domain.

Appendix

Appendix A: FAQ

A.1: Can I still authorize accounts that haven't been pre-authorized in any way?

Yes. The existing authorization flow will still work for those accounts.

A.2: What will happen during existing authorization flows if a holder has been pre-authorized?

A holder will be authorized on trustline/MPToken creation, essentially. So attempting to re-authorize the holder will have the same effect as attempting to re-authorize a holder in existing flows.

A.3: Why doesn't this use the existing Deposit Auth flow?

This would be a problem for issuers who want to authorize token holders but don't want those token holders to be able to send funds to their address (for compliance reasons).