The security of any blockchain ledger comes down to public verifiability of
two properties of every transaction: that they are authorized by all required
parties, and that they do not affect the total currency supply. In Bitcoin,
the latter property is so simple to check that it often goes unremarked: add
up the total output amount and total input amount and compare them. However,
with our prior invention of Confidential Transactions (CT)^{1}, this security
property is front and center, because all amounts must still balance, despite
being cryptographically blinded.

A natural evolution for blockchain technologies is to support multiple asset
types on the same chain. This allows a wider set of users to share the security
properties of the same chain, and also enables new use cases, such as
multi-asset transactions which effect atomic exchanges. Enabling support for
multiple asset types could be as simple as labelling each transaction output
with a publicly visible “asset tag”; however, this would expose information
about users’ financial behavior. **Confidential Assets (CA)**^{2,3,4} is a
technology to support multiple asset types with blinding of asset tags, which
builds on the privacy benefits of CT and extends the power and expressibility
of blockchain transactions.

As in CT, Confidential Assets allows anybody to cryptographically verify that a transaction is secure: the transaction is authorized by all required parties and no asset is unexpectedly created, destroyed, or transmuted. However, only the participants in the transaction are able to see the identity of asset types involved and in what amounts.

In a multi-asset chain, it may make sense in some contexts for assets of a
specific type to be created or destroyed. With CA, this is accomplished by means of
**issuance transactions**, which create new asset tags and a specified amount
of this asset. Later reissuance may be done by proving authority
over **reissuance tokens**, which are related (but distinct) assets. Issuance tokens
may be created alongside a given asset type, or not, if the asset should not
support reissuance.

Issuance transactions are unique in that they are not required to balance to zero. However, if they issue a public amount, it is still verifiable that exactly this amount, no more and no less, was actually issued.

## Technology Behind Confidential Assets

### Asset Tags and Rangeproofs

To describe the technology behind Confidential Assets, we start with Pedersen commitments that form the basis of Confidential Transactions:

```
commitment = xG + aH
```

where **G** is a standard generator of an elliptic curve and **H** is a second
generator for which nobody knows the discrete log with respect to **G** We call
such a generator nothing-up-my-sleeve, or NUMS.

In CT, this was described as committing to **a** coins, the amount, with a blinding factor of
**x**. We observe that if we refer to the generator **H** as a coin we can read the
term **aH** algebraically as “**a** coins”. When **H** is our only generator this is
merely a semantic trick. But suppose we add another NUMS generator **I**, and
consider the two commitments

```
commitment_1 = xG + aH
commitment_2 = xG + aI
```

Now we can think of **H** and **I** as representing two distinct assets, and we see
that these two commitments, while committing to the same amount, are commitments
to different assets.

Consider now a complete transaction with two inputs of distinct asset types and two outputs, like so

```
in1 = xG + aH, H --\ /-- uG + cH, H = out1
|---|
in2 = yG + bI, I --/ \-- vG + dI, I = out2
```

In CT, where we had only one generator, we required the equation

```
out1 + out2 - in1 - in2 = 0
```

to hold, which it would if and only if the transaction balanced. As it turns out, this same equation works even with multiple assets:

```
0 = out1 + out2 - in1 - in2
= (uG + cH) + (vG + dI) - (xG + aH) - (yG + bI)
= (u + v - x - y)G + (c - a)H + (d - b)I
```

Since **H** and **I** are both NUMS points, the only way for this equation to hold
is if each individual term is 0, and in particular, if **c = a** and **b = d**. In
other words, this equation holds only if the total amount of asset **H** is the
same on the input side and the output side, *and* the total amount of asset
**I** is the same on the input side and the output side.

This extends naturally to more than two asset tags; in fact, it is possible to support an unlimited number of distinct asset types, as long as each one can be assigned a unique NUMS generator.

As in CT, this simple equation is insufficient because it is possible for amounts
to overflow, effectively allowing negative-valued outputs. As in CT, this can be
solved by attaching a rangeproof to each output, in exactly the same way. The only
difference is that the verifier must use the appropriate asset tag in place of
the fixed generator **H**.

### Blinded Asset Tags and Asset Surjection Proofs

The above discussion assumed every transaction output had a NUMS generator, or asset tag, associated to it, and that outputs of the same asset type would use the same tag. This does not satisfy our privacy goals because it is visible what type of asset every output represents.

This can be solved by replacing each asset tag with a **blinded asset tag** of
the form

```
A = H + rG
```

Here **H** is an asset tag from above and **r** is a secret random value. Anybody
who knows **r** can tell what asset this tag represents, but to anyone else it
will appear to be a uniformly random elliptic curve point. We see that any
commitment to a value with **A** is also a commitment to the same value with
**H**, so our “outputs minus inputs equals zero” rule will continue to work
when validating transactions:

```
commitment_A = xG + aA = xG + a(H + rG) = (x + ra)G + aH = commitment_H
```

The introduction of this blinding factor does not affect the user’s ability to produce a rangeproof, though it does make the algebra slightly more complicated when constructing the transaction to balance out to zero.

However, since every blinded asset tag looks uniformly random, how can verifiers be sure that the underlying asset tags are legitimate? It turns out that the “sum to zero” rule is not sufficient to prevent abuse. For example, consider the “blinded asset tag”

```
A′ = -H + rG
```

Any amount of the blinded asset **A′** will actually correspond to a *negative*
amount of asset **H**, which an attacker could use to offset an illegal
increase of the money supply.

To solve this problem we introduce an **asset surjection proof**, which is a
cryptographic proof that within a transaction every output asset type is
the same as some input asset type, while blinding which outputs correspond
to which inputs.

The way this works is simple. If **A** and **B** are blinded asset tags which
commit to the same asset tag **H** say, then

```
A - B = (H + aG) - (H + bG) = (a - b)G
```

will be a signature key with corresponding secret key **a - b**. Given a
transaction output **out1**, we can use a ring signature (proof that one of
several secret keys is known that keeps secret which one) with the keys
**out1 - in1**, **out1 - in2**, and so on for every input in the transaction.
If **out1** has the same asset tag as one of the inputs, the transaction
signer will know the secret key corresponding to one of these differences,
and be able to produce the ring signature.

The asset surjection proof consists of this ring signature.

### Confidential Assets Demo

DG Lab authored a developer-oriented open source demo showcasing these new asset identifier blinding capabilities.

### Future Work

Because algebraically Confidential Assets is such a straightforward extension of Confidential Transactions, many of the tools developed for use with CT can be used with few modifications with CA, giving them the power to confidently and confidentially handle multi-asset transactions. Examples of such technologies are

We are looking forward to the future, as many exciting developments continue to appear.

### Related Reading

^{1} Confidential Transactions Whitepaper

^{2} Press release: Blockstream Launches New Confidential Assets Feature for Enterprise Blockchain Customers

^{3} Confidential Assets Whitepaper

^{4} Further documentation and information on how to get started with CA