- Introduction: The Real World Asset NFT
- Creating a Mattereum Asset Passport
- Generation: Genesis of MAP
- Population: Expert certification
- Launching the NFT
- Token Design
- MAP + NFT Pairing
- Marketplace Integration
A Real-World Asset NFT (rwaNFT) is a unique digital token that denotes the right to take physical custody of an object. While sharing features with the NFTs now gaining popularity in the cultural mainstream in the creative industries, these tokens are different in that they are backed by an underlying physical asset, complete with warranties and legal enforceability to create trust in trade.
In short, effectively bridging the virtual economy with the physical world gives rise to some incredible capabilities in the realm of finance, commerce, and even our quality of life.
In finance, rwaNFTs provide an onboarding mechanism for bringing trillions in stranded, underutilized, or insulated value in the physical world into the open, cryptographic protocols and global payment rails that define crypto. More importantly, this new digital-physical economy is accessible to all.
In commerce, tokenizing the physical world through properly integrated legal and software engineering allows us to remove the fear, uncertainty, and doubt that has plagued digital commerce for decades. By securing trust in trade, we create better pricing mechanisms and altogether better markets.
In the long view, maintaining a secure identity and provenance system around physical goods along the supply chain will allow us to see the truth in what we bring into the world. By bridging this divide, we can get a clearer picture of inefficiencies and injustices throughout the global machinery of trade (enabling carbon tracking, anti-counterfeiting, anti-slavery, etc.)
RwaNFTs provide an interface to this new realm of possibility.
So how do we do this?
The Mattereum Asset Passport (MAP) is the core innovation behind rwaNFTs. In practice, a MAP bundles together the legal and smart contracts which define, store and execute various claims, certificates of authenticity, dispute resolution agreements, insurance frameworks and other processes around the object.
On the surface, a MAP is a bundle of warranties attached to a particular object. While many different warranties may exist for a certain types of assets, some common examples would be the identification of the asset, a tagging system for in-person authentication of the asset (NFC or RFID tag), and the NFT smart contract itself. On the MAP, these individual warranties are contained in blocks, with each warranty containing a link to the NFT token and the underlying legal contract to insure proper linkage.
It’s important to note that the MAP is not a singular or static thing, but an integrated structure composed of software and legal elements which will evolve over time along the object’s journey.
To chart the process flow of creating and launching a MAP, we’ll look at one active case study: NFTs backed by actual gold bars!
For reference, here is the link to the Asset Passport for the gold bar:
Generation: Genesis of Asset Passport
The first step in creating a MAP is to collect essential data to identify the object. Naturally, this identification will be the initial warranty (as illustrated above). This information can and should include: detailed description, manufacturer, manufacture date, serial number, packaging, measurements, photographs, custody status (vault/personal), and any other information which can help establish the object as a a unique or limited item.
Now what happens when additional expert certification is necessary to verify the authenticity of an object, at genesis and in the future?
Population: Expert certification of product data
Now that we have a barebones MAP, we must now seek out additional knowledge through expert “Certifiers.” As mentioned earlier, the MAP is a living document of sorts that can change and adapt throughout the object’s lifecycle. A key part of this is the continuous certification of an object’s authenticity.
An innovation of the MAP is that it backs expert certification with financial stake in the form of indemnity. The Certifier(s) have skin the game for the information provided to the Purchaser(s). To attach a certification to an object, Certifiers will follow the same procedure as owners when they supplied the initial information at the generation phase (owners are, in essence, also certifiers in a manner of speaking). Each certification is backed up by a smart contract stating the nature of the indemnity the certifier is willing to place behind their statement. Additionally, Certifiers can set a fee which must be paid in order to activate a certification so that subsequent owners can enjoy the coverage offered. And, yes, current owners can set fees for their certifications as well, so that they can continue to profit from their knowledge even after the object has been sold on to several future owners.
While the key information is presented in the MAP interface, the underlying Certification Agreement is accessible here:
…where you’ll find plentiful legalese that is nonetheless valuable to go through to understand what the deal actually entails.
We mentioned above that the MAP is an integrated structure with software and legal elements. This framework for connecting the issuance of digital value with a legal agreement is called the Ricardian contract. Invented by financial cryptographer and Mattereum Chief Scientist Ian Grigg at the turn of the century, this model allows for the creation of digital value in a manner that is enforceable and recognizable in an international court of law. Our software substrate may include blockchain and distributed storage networks this time around, but the song remains the same.
By embedding an arbitration clause (clause 21 in the above contract) into the agreement, we have invoked a dispute resolution framework that is enforceable in 150+ countries via the 1958 New York Arbitration Convention.
That’s right: we can plug into the very machinery of global trade to launch tokenized physical goods, including this gold bar.
The combination of certification (by experts or primary sources) and dispute resolution in the context of NFTs is a very powerful and much needed structure. The freewheeling nature of the current NFT landscape is not sufficient for facilitating real-world commerce, and Mattereum provides the tools to address fraud and theft in this booming virtual economy.
So far, we have covered the overall structure and process for generating a Mattereum Asset Passport, from asset identification to certification to dispute resolution protocols. So when do the actual tokens come into play, and how are they integrated into existing NFT marketplaces?
The token standard we use to represent these unique digital assets is ERC-721, similar to most NFTs currently trading in the marketplace.
The key differentiator of course is the reference to an Asset Passport, with metadata matching the information gathered for the object. Metadata schemas for different asset classes will emerge over time as a wider range of assets are tokenized with particular considerations needed for each new category. What metadata do we record for pop culture memorabilia, or vintage wine, or Stradivarius violins, or gold bullion? All of these examples, in fact, are pending projects that showcase the versatility of MAPs and rwaNFTs.
MAP + NFT Pairing
One of the warranties within a MAP is the NFT itself. Turning the NFT into an actual warranty claim within the MAP allows it to denote true ownership of an underlying good in a systemic way rather than what would amount to a mere promise by a stranger on the Internet. Also, the smart contract is now a fundamental part of the deal, with execution of the agreement now deferred to the smart contract. Also, in the case of systemic fallout (software exploits on the protocol or application level) the legal agreement within the MAP provides a source of truth for all parties and arbitrators to refer to.
For the gold bar, the MAP has been integrated within the OpenSea marketplace, as seen here:
Every rwaNFT listing will feature an outbound link to the asset’s respective Asset Passport, where prospective buyers can review the warranties and learn more about the product.
One thing that stands out when examining the end-to-end process of generating Mattereum Asset Passports and launching rwaNFTs is the circularity. Software systems looping into and referencing legal systems and vice versa. While this is part of the magic, it is also a very hand-crafted and attentive process in its current practice. The challenge moving forward is to streamline the legal and technical processes such that new assets can be onboarded into this new realm of digital-physical economy. Adopting legal and smart contract templates, curating a global network of expert certifiers across a range of industries, and optimizing asset custody are a few areas where further R&D is required.
With rwaNFTs, new forms of ownership and utility can be programmed around an object: democratizing access to capital, unlocking trillions in stranded value, and paving the path to a more egalitarian and sustainable society.
Finally, here is a live rwaNTF auction on OpenSea that is powered by Mattereum Asset Passports: