The Problem of Provenance and NFT

I see a problem in binding a real-world asset with a digital token, in a way that the binding is hard to break. I will try to explain it a bit here. For this blog context, ownable things are real world things, not some digital art or any other digital stuff. These are physical, real things. Internet of such things means that these ownable things have a verifiable identity and ownership relation stored in the internet which can be tracked to their owners.

That is two hops between real world and internet - from the real world owner to the internet and back to the owned thing in the real world.

Let's call the ownable thing an asset. The owner and asset both belong to real world, and we are trying to attach them with an ownership link that goes through internet.

We have a problem

The first hop is no problem. We can use a key-pair to glue the owner to the internet. Private key is with the owner and public key is in the internet. Also, the public key can be tied to a token which represents the asset. Good job! But wait, how can a token represent a real world asset?

Well, derive the token from the asset's physical features and store the token's private key in the asset itself (chip etc). Ah, things seem better now. But what if a malicious owner/dealer of a painting creates another chip with same private key or simply removes the chip and attaches it to a fake version of the painting?

It all boils down to the age-old problem of attaching an ID to a thing in a tamper-proof way using some non-digital techniques - burn it into circuits, 3D-print into the material etc. Cryptography is not a saviour here.

How does this work in case of human identities? It works because humans have a memory and free will to retrive information from their biological memory and use it as they like. The digital information is attached to physical body through the memory which can't be tampered with.

Let's go back to the basics

What is an ownership? Does it exist? Well, sort of. Birds claimed ownership to their nests and animals had their territories and habitats. Ownership is a relation between sentient life and inanimate sought-after things.

"Owner" refers to an agent who can "do" an activity and "own" things, while a thing like an asset is not an agent. It doesn't do anything on its own nor owns other assets. This difference is what is causing the issue. Contrast this with an employee and employer signing their contract on a blockchain. Both have their own private keys and freedom and the problem is solved. Asset ownership is a different beast.

In modern times, ownership is established by acknowledgment of central authorities or social bodies. We are interested in the second approach - by the social bodies. We already have crypto assets using this democratic solution.

Not so fast. The blockchain or crypto strategies will work fine as long as the ownable thing lies in the digital world only. It still can't be used to tie down an ownership to a real world thing, due to the problem explained above. It need to cross the chasm of tamper-proofing.

Let's throw some AI and IoT into the mix

What if the asset is an intelligent connected thing, which can manage it's own private key? The problem is not really about the ability to manage private keys. The ownership relation is asymmetric, unlike the employee-employer contract. The ownership need to be transferred without the "consent" of the asset being transferred. So, the asset having a private key doesn't matter.

The talk of NFTs (non-fungible tokens) and provenance in the context of real-world assets, probably requires more thought.