How to use Ethereum to save the planet

Transcript

hi everybody um so let me just start my share here [Music] um okay um do we have slides can you see okay so um uh what i'm going to be talking about today is managing physical assets using nfts so the idea here is that when you buy the nft you get an enforceable practical legal right that will allow you to take physical possession of the object and that is a problem that has both

legal layers uh where we have to be able to say that you actually own the thing it has technical layers in that we have to make sure we don't wind up for example double spending physical objects so you have two claims on a single for example gold bar and the third thing that we ought to be dealing with is physical custody to make sure that the physical assets that we're dealing with are where we think they are when we go and try and collect them so the objective is to kind of build a whole system here where the legals the technicals and the physical custody all align in a way that allows you to buy an nft for a physical thing and get the physical thing um so what i'm going to start with uh is a few slides that just kind of

illustrate how we got here and kind of what the idea is and then we can actually take a look at some nfts for hopefully desirable physical property that you can buy and sell right now um so the company's called materium uh a little bit about my background i'm basically a climate guy uh spent base off around 20 years figuring out how to relocate tens or hundreds of millions of people as part of climate change went into industry in 2014 after a long time in military think tanks uh and in the long run what i'm very interested in is using this kind of blockchain based resource allocation technology for managing very scarce physical resources in environments like

refugee camps but also potentially space stations moon based mars base because this problem of like you know who's got the 10 millimeter wrench and can i borrow it so i can get the satellite dish installed in various steering environments using software to manage scarce physical resources makes a ton of sense to me and at the kind of 10-year 15-year horizon that's the kind of direction that i'm traveling um i should also say that i was the release coordinator for the ethereum chain uh and my background in crypto goes back into the mid 1990s um so the bottom line is that we're trying to get ethereum into a position where ethereum can break out of the digital sphere and get right into the physical sphere

uh in the same way that for example usdt and usdc gave us access to the dollar economy and allowed us to do price stabilization inside of smart contracts what we want to achieve with materium is the same thing but for houses cars gold bars collectibles fine art clothes whatever it is and one of our critical sort of conceptual breakthroughs we actually got on twitter from a fell by the name of gmoney who basically said nfgs start to make a lot more sense once you realize that everything in the world except money is an nft and that was kind of where the lights went on like yeah okay this is exactly what we're doing we're just modeling everything that you can't get to with erc20s

you can't get to as an erc721 so it's that same extension kind of like usdt kind of like usdc but for everything represented as nfts rather than represented as currency instruments um does that kind of make sense i mean it's a kind of horror it's it's a big conceptual jumper let's start there um the reason for doing this is the world of physical goods is extremely large i mean the numbers are completely eye watering um and if we can begin to manage this kind of value using the blockchain at that point it's very very clear what the long-term economic model for

something like ethereum is you know right now we have a bit of a problem that we have layers of speculation on speculation on speculation on speculation so when the ethereum price wobbles the entire economy wobbles um and that is not where we want the world's global computing infrastructure to be we want the computing infrastructure to remain rock solid so if you get some kind of financial speculation over here the entire edifice doesn't rock and we get there by putting say tens of trillions of dollars of physical assets into the ethereum ecosystem so that 99 of the value in the ethereum ecosystem is physical goods which have their property rights controlled with ethereum

rather than virtual goods which are all denominated in value in ether and to me that is the point of which we've kind of finally broken through we're in the real world we're deployed in the real world and things really begin to change socially culturally and uh sort of in tricky areas of regulation like climate change this is how we get the leverage on those kind of tricky areas um so that's the kind of goal state right the goal states to get out into the physical world stabilize the economy by using the digital layer of all the smart contracts as a way of controlling value in the physical world rather than having the value only be locked inside of the smart contracts

um the economic lever for doing this is counterfeiting so in areas like wine for example roughly 2 8 of all the wine that was imported to germany is fake right in high-end wine markets like auction markets that number can be 20 or 30 and remember wine is 360 billion dollars annually so when you start talking about eight percent of a 360 billion dollar market if you can use the nfts to assert the credible provenance to prove the wine is real then what that gets you is an economic engine which is preventing the fraud drives the use case

for the blockchain and this is a very very direct powerful economic driver that moves real world transactions from the kind of website e-commerce paradigm where everything is done with credit cards up into the blockchain space where you do the same transactions for the same wine but this time you use crypto plus nfts rather than doing the transactions uh in the kind of credit card economy and you do that specifically because you can eradicate the fraud and that economic engine applies to a gigantic percentage of the world's trade i mean says here 3.3 that's averaged out of grand sole commodities it's very spiky some things are massively fraudulent and other things

are relatively fraud free but that's enough of a margin to pay for the transaction costs of moving on to a secure platform and in this respect um what we're looking at here is a kind of an economic gradient between a low-trust economy on credit cards and a high-trust economy on crypto and nfts with a kind of 3.3 of global gdp lever between those two economies so this is how we kind of get world trade to bump off the credit card system up and onto the ethereum rails uh i apologize if that's kind of abstract we're very deeply soaked in this stuff so you know i it can be a little jerk and you apologize

so the way that we do this jump is we essentially assemble a thing which is kind of like a miniature dowel and we call this trust community um so if i take a physical asset this is like grab prop um so here we have the infamous shopper stuff our first customer was william shatner the author from star trek here we have some memorabilia that shatner signed and the verification of these physical assets is driven by a community of trust around each asset

so what you have is multiple different parties who are each staking value guaranteeing that those assets are real and that multi-party authentication structure allows also for different kinds of truth so for example if you're looking at these shatner toys maybe somebody one person comes along and says i was there when they were signed another person comes along and says i've got records of when these things were manufactured another person comes along and says i've done a co2 calculation for how much energy was consumed in making these toys and you've got carbon offsets that pay for that um pay for that right so that is a model where we've got all of these different individuals who are all

staking value around a single asset but each one is picking up a different facet of the truth this is very much like a dao and you can also imagine a syndicate where you might get 20 30 40 50 people that were all simultaneously staking behind the opinion of a single expert and what this allows us to do is spread the trust and spread the risk associated with physical asset purchases across networks individuals uh staking pools potentially insurance networks um and we are working very closely with unn.finance to actually build staking pools that will allow people to participate

in providing the warranty infrastructure around the purchase of physical goods on ethereum um so much as i'm historically quite down on daos because of issues like joint several liability if you do it correctly and you're very careful not to create something which looks like a share you can still use a lot of the concepts from daos but what you're doing is spreading risk through essentially promissory instruments rather than uh things which entitle people to a share of future profit it's quite delicate but it's important to stay out for example security as well um i'm gonna skip this side because we've already covered a lot of this um so the final point that i want to make here

is that this is not a simple closed system right um the gold bars that we sell for example have an estimate of the amount of co2 involved in manufacturing the gold bar and the amount of co2 that was involved in creating the nft and then we've got partner company nori who has sold us blockchain tokens to cover that gold uh carbon burden right so what we have here is an integration of the authenticity data about the gold the legal transfer right instead instantiated as nft and also tokenized carbon to basically take away the environmental load what we're really doing is we're embedding these physical goods

inside of their total context and more and more and more of the total contacts of the goods becomes visible in the blockchain as we do things like importing data from anti-slavery databases or anti-slavery researchers to verify that for example gold bars were produced without any slave labor being involved um and we think that's fundamentally important because again you know if the blockchain really is kind of the world computer we need to be able to model the externalities of trade in that world computer so that we can accurately price goods right if something comes in contaminated with a whole bunch of you know slave centric manufacturing processes

we don't want to be in a position where that thing is being sold right besides something that was produced artisanally and extremely carefully to make sure no one was exploited you know we need to be able to show these distinctions so that we can apply economic or potentially regulatory pressure to get the garbage out of the global supply chain um so we talked a little about the gold bars these are live now i'm going to show you the nfts in a second um i think we can skip that right um uh let's go take a look at the agilent ft's uh that's really where the fun begins could have a quick check on time uh i don't want to over could have a quick check on time i don't

want to ten minutes okay it's longer than i thought if i had five uh i'm glad i asked okay so i might be able to make up a couple of minutes uh help your schedule so um oh come on where's it going so i'm just trying to find the window that actually has the ft's opening it this will take me just a second there we go oh is that the right one damn it sorry just one moment i'm trying to make sure i'm trying to make sure i wind up sharing the right thing here oh yeah there we

are okay right um so you should now be looking at an open c page so here we have an open c page for three physical objects an etching by salvador dali a half a million year old stone hand axe made by an unknown hominid probably a human but maybe not uh and a tibetan bronze statue of god called a kalanova

um now these are nfts on openc you can go find them if you look for materium here we are owned by materium here we are and this thing currently has a bid on it for just about sixty eight hundred and fifty dollars sorry eighty six hundred fifty dollars um so these things are being sold right now the physical hand axe is stored in a vault in london and when you buy the nft you get the right to take the handbags out of the vault or you can leave the handx in the vault and just hold the nft and every year you pay a storage fee and that covers the old the storage in the vault for another year um now why might you want to do this well

maybe you want to own a hot dogs and you don't want to have it shipped to your house and stick it on the shelf where your kids will decide they're going to use it for you know opening their box of cereal you want to own the thing because you're interested in the heritage of the history you don't need it physically in your house um more likely you're somebody that is interested in doing something like a museum show and you lock in ownership of all the assets you want to show simultaneously as a batch and then once you've got the property rights secured for all of these things then you can put the logistics into uh play to get all the stuff to one place to have it on display and then it can go back into vaulting um but i mean no denying it's a stop right

it's it's it's a thing which is there just to show how concrete and tangible these things are um let's go take a look at a gold bar which is maybe a little more practical so here we have one ounce gold bar currently owned by singh capital sold by a customer versus local so same thing this bar is in a vault in singapore ownership of the nft gives you the right to transfer the physical bar and let me talk through the legal magic that makes this possible so when you buy the nft openc takes a two percent payment out of the nft transfer so as the buyer have paid 98 of the money to the seller

of the lft two percent is being collected by open c and that two percent is then relayed to a set of people in this trust community who are authenticating the bar so that trust community is mapped in a structure called the asset passport so all these people here right you can see we've got data terms of service vol nft and carbon each one of those five entities is being paid a percentage of this two percent fee by the buyer immediately on purchase of the nft so this creates a legal obligation between say the vault warranty provider and the new owner of the nft

and those legal obligations are represented entirely on chain so although you can't directly verify that the bar is physically there on chain you know there is no video camera watching the bar where you can go and get a feed and if there was you couldn't trust the camera what we can represent fully on train is a legal liability to say if the bar isn't where you said it is then you will pay and so what we need to do then is assess the liability on each one of those people and their ability to pay and that serves as a proxy for the physical presence of a bar so on chain you can make the estimate about whether people actually have the money to pay their debts and if they do you can use that by extension to validate the physical goods

um and that is a is a very solid contractual relationship between the nft buyer because if you accepted the money from the nft buyer to say that you're signing up to provide this data and the data is wrong you have an extremely clear basis for litigation and materium also handles that litigation so if we take a look uh let's go take a look at the vault claim so um a party in this case local wallet who are our customer and our partner that is producing the gold they say they will take a quarter of a percent of the nft sale price of the bar and in return they will accept a

liability which is the gold value of the bar specified by the spot price from the london bullion market association plus five percent so they are on the hook as soon as you buy the nft for the full price of the bar plus five percent now notice you're not buying the nft from them you're running the nft from sing capital who are the current owner of the nft so you pay the money to sing capital you also pay the money to loco for sing capital you purchase the nft from local you purchase the warranty on the nft and this is also true for the other people in this warranty provider network this is what i mean by a trust community the trust structure continues to pay out every time the nft

is transferred and that creates a continuous legal container for the nft it's a very very durable structure now say that you have to make a claim right you want to say to local hey you know i asked for the bar to be physically shipped to me and it wasn't physically shipped to me i'm making a claim there is a contract and this is a big old scary legal document um every time a new asset is added new contracts are generated the fields in yellow are being basically pulled out of a data structure on ipfs so all the underlying documentation is stored in ipfs we pull that information out of the ipfs and we use it to prepare

these documents which verify the legal obligations so everything is very very tight on the back end all the documents are stored and identified where they're hashes they can't be modified they're uploaded into vfs at the same time the nft is created the nft links directly to um those documents in ipfs the whole print system is extremely tight and we're working on making this stuff easier to understand it's a bit tricky to document because there's so much detail um so at the point where the nft is transferred this is the contract which is being executed between uh the nft buyer and local and it's the network of those

executed contracts that provide the proof that the asset is there um i think we took a look at the ox we took a look here's some star trek stuff these were the first set of nfts we did exactly the same kind of structure um this time for ownership of a collection of star trek toys signed by william shatner these guys have digital authentication chips on them we're still being a little secretive about how that works but they'll be a big announcement about taking probably the next two or three months um but we have the ability to put a key pair in a physical chip directly on the asset to the vault and the whole system is basically as tight as a drum it's a very very clean clear model now there's a lot of stuff here which is

still to do um so i mentioned under finance so some of these warranties could draw not against an individual's assets but they could draw against a pool which is manifested as a smart contract so that in the event that the goods are not as described you make a claim on the pool and the pool then pays out and anybody can put their funds into that pool and collect revenue streams by virtue of the fact that their money is at risk covering these physical goods and covering those transactions once that system is set up that's really when the system goes from being slightly manual and a little bit legal

flavor to being dramatically uh sort of crypto native and digital um and i would expect that we would have gold with that set up attached to it probably within two months we're getting pretty close now it might even be a little sooner and once that's done what you get is a situation where one or more experts states their opinion about why something has value and maybe put some of their own money on the line kind of like a deductible in an insurance contract and then behind that a lot of other people can then pile in behind that expert and put their money into a warranty into an insurance pool which will then well about insurance for a benefit pool

which will then cover anything that isn't covered by that expert's own funds inside of this deductible framework so that point it becomes possible for people who believe these gold bars are genuine to profit from the sale of each bar because they put value at risk backing the fact that this gold is actually there and that structure is basically the lever that we're going to use to get you know enormous volumes of assets into the material into the ethereum world so that you can finally have things like smart contracts which are doing things like owning gold or buying houses you can imagine something that's like a property hedge fund

where you simply buy nfts for real estate and the whole thing is secured by a huge pool which is just taking a percentage of each transaction in return for making sure that if one of the properties is fraudulently double sold by somebody that risk isn't passed on to the hedge fund but it's absorbed by the insurance pool and as those models really begin to spin out i think you're going to see a very dramatic change in people's understanding of what blockchain is because the fastest and cheapest easiest way to buy a house will be to buy an nft over house and then walk around to the real estate agent pick up the keys literally two blocks later um and i expect us to do the first real estate using the system in q3 of this

year um it's probably only going to be a parking space in london but once the principal is established that you can do real estate after that the fund really begins um and that's basically it i'm not going to delve down into the guts of the environmental work that we've been doing there's also a whole bunch of stuff here about circular economy and carbon management but i think that's a topic for another talk uh and i'll leave it about there um so we have not done a live litigation

on this yet um a couple of years ago we did a mooch litigation so it's like it's run as if it was a walk suit but you don't actually have damages at the end of it and we ran the moot litigation on a system very very close to this called ethercam which was an earlier generation product that material made um with an english qc as the presiding judge so qcs are like the very top level of um barristers in the uk they're kind of like the the most senior grade of lawyers that we have in the uk system and they regarded the system as being suitable for running a move on and they made a some award in that case because they did

agree the copyright had been violated and someone needed to be paid um so we don't have any fear that this stuff won't work and in fact the english law society um let me see if i can find this well anyway uk law society has done a very large report on digital dispute resolution rules and material is actually quoted in that document so if i do this very very quickly [Music] there we go so forward by jeffrey walsh master of the roles digital dispute

resolution rules material quoted on state on page four basically indicating that we're very close to the uk machinery in terms of how these contracts are being understood in the role of blockchain under law so this is not some kind of renegade thing nobody doubts that this is enforceable if it comes to it any more questions okay

great follow me on twitter so if you find on twitter message and i can get into depth or just give me a call sometime fungals um the smart contracts are

largely just enumerating which legal documents are associated with which assets and handling the payment infrastructure okay very good looking forward to that thank you yeah i really wanted to be there but the covid regulations kept changing and i wasn't sure if i came i'd be able to get back it's really a mess thank you thank you you