Vinay Gupta | Mattereum: Part 2
Hashing It OutIn Mattereum Part 2, Vinay Gupta - CEO of Mattereum, discussed the complexities of establishing legal ownership and property rights for physical and digital assets, emphasising the societal and legal constructs surrounding property. He highlighted the work Mattereum does to tokenise real-world assets like gold bars and houses, ensuring that ownership can be legally verified and transferred through NFTs and smart contracts. The conversation also touched on unconventional forms of property like in-game items, which may be owned by companies rather than players, suggesting the need for clarification and potential insurance mechanisms.
Fergulati
We're back for part two. If you just finished listening to part one, then you're probably really excited about what you're about to hear in part two. The conversation just got so riveting, we felt like, hey, we need to do back to backs here. So Doctor Vinay Gupta is back. Welcome back.
Vinay Gupta
Yeah, or interestingly enough, I don't even have an undergrad degree. I am just plain old Vinayay.
Fergulati
Really.
Vinay Gupta
Yeah.
Fergulati
Really.
Vinay Gupta
Really, really dropped out university to a startup?
Jessie Broke
You don't need that. That's
Fergulati
I have
Jessie Broke
Just
Fergulati
No
Jessie Broke
A piece
Vinay Gupta
No,
Fergulati
Idea
Jessie Broke
Of paper.
Fergulati
How
Vinay Gupta
I
Fergulati
I even.
Vinay Gupta
Never thought I did.
Dr. Petty
Even
Vinay Gupta
Yeah.
Dr. Petty
Says
Vinay Gupta
Whenever
Dr. Petty
It in
Vinay Gupta
Somebody
Dr. Petty
The
Vinay Gupta
Says.
Dr. Petty
Title. How did you get that? Where did you get that from?
Vinay Gupta
I
Dr. Petty
You just. You
Vinay Gupta
Have
Dr. Petty
Talk
Vinay Gupta
No
Dr. Petty
Like
Vinay Gupta
Idea
Dr. Petty
A doctor.
Vinay Gupta
Where that came from. Well, I mean, you know, my my father was a doctor. Do you mean doctor? Gupta is always my dad. But my family
Fergulati
Well you
Vinay Gupta
Have
Fergulati
Are.
Vinay Gupta
Been, like, in academics for a long time in India. So the the Indian
Vinay Gupta
Side of the family are very doctor, I think I think maybe five PhDs out of eight kids in my father's generation, they were they were quite doctors. But I am no, I am largely self-educated. God help
Fergulati
Wow.
Vinay Gupta
Us.
Fergulati
I did not know that. I always thought you weren't that. But nevertheless, I've
Dr. Petty
It's
Fergulati
Always
Dr. Petty
Funny.
Fergulati
Enjoyed.
Vinay Gupta
No,
Dr. Petty
I think people
Vinay Gupta
No,
Dr. Petty
Think the
Vinay Gupta
I
Dr. Petty
Opposite
Vinay Gupta
Just, I
Dr. Petty
Of
Vinay Gupta
Just.
Dr. Petty
Me.
Vinay Gupta
It's genetic.
Fergulati
Let's take the opposite of you.
Vinay Gupta
It's genetic.
Dr. Petty
You're not a fucking doctor. Yes, yes I am.
Fergulati
And we are also joined by multidimensional Jesse today.
Dr. Petty
Cyber. Jesse.
Fergulati
No cyber Jesse.
Vinay Gupta
Cyber. Jesse. Nice.
Jessie Broke
Do.
Dr. Petty
Instead of a potato. This time he's a he's he's a he's an animation.
Fergulati
So we
Jessie Broke
Yep.
Fergulati
We all were always experimenting here. Well, I think our conversation left off. We were right about to dig into the weeds. The details of basically what Mattereum has been working on for the past six years.
Vinay Gupta
So.
Fergulati
The nitty gritty details. I think you said something along the lines of, I don't want to bore you with the details. And we were like, no, we get excited
Fergulati
About the details. And
Vinay Gupta
Bring
Fergulati
That
Vinay Gupta
The
Fergulati
Is
Jessie Broke
Yes.
Vinay Gupta
Details.
Fergulati
Kind of like where we had to wrap the episode. So cliffhanger over. We would like to get into some of those details and the technicals of how Mattereum has built, what it's built, and how it hopes
Fergulati
To usher in this reality where physical assets are tokenized. And I can you know, tokenize my house or tokenize an investment property or tokenize
Vinay Gupta
Hmm'hmm.
Fergulati
A RV, I don't know.
Vinay Gupta
Yeah. Well we can, we can do all that right here, right now. I mean
Dr. Petty
Let's
Vinay Gupta
You know
Dr. Petty
Go.
Vinay Gupta
I'm not going to suggest you do a stunt where we try and tokenize something by the end of the episode. But if we had a little preparation it's not impossible.
Vinay Gupta
So let's start with about, like, define some terms. Right. So when we say tokenize something, what we mean is that a piece of property will be somehow magically attached to the token. And if you're the owner of the token, you are the owner of the piece of property, right?
Jessie Broke
Yep.
Vinay Gupta
Right now. Guess which word is doing the hard work in that statement.
Dr. Petty
Ownership.
Vinay Gupta
Yes. My
Jessie Broke
Legal ownership?
Dr. Petty
I'm
Jessie Broke
Probably.
Dr. Petty
Good at this.
Vinay Gupta
What? That's what you are good at it. I had a moment of like. My God, he got to it first time. Who is this guy? So legal ownership is not at all trivial to define, right? What I'm explaining this to folks, I usually say is, look, the def. The thing that turns an object into property is that the state will use violence to return it to you if somebody takes it off you. Right? So the world is
Jessie Broke
Yep.
Vinay Gupta
Filled with physical objects that aren't really property. Right. And give you an example, right. If you're on a beach and you find a stick and you pick it up and you walk down the beach with it, and some teenage kid on a skateboard runs by, grabs it and runs away. If you go to the policeman and say, a child stole my stick, he's probably not going to do anything about it, right? If you tell the same story, but it's your laptop, he probably is. So there are some things which are too cheap to be regarded as property in the state will not enforce.
Vinay Gupta
Except.
Fergulati
Makes perfect sense.
Jessie Broke
Yeah.
Vinay Gupta
There are other things which are property in some places and not property in others. So I have heard that in a lot of societies songs are things which not everybody has a right. You know, there are some songs which not everybody has a right to sing. So there are songs which can only be sung by the descendants of a specific hero, or there are songs which can only be sung by women in, you know, March and April because otherwise it's bad luck or these kinds of things. So you wind up with a set of what amount of legal restrictions around music that are not copyright, and they're not about getting paid for it, but they're about who has the right to sing or doesn't have the right to sing. And in that society, those things are monopolies akin to patents,
Dr. Petty
You.
Vinay Gupta
And they will be socially enforced or even legally enforced if somebody does something they're not meant to. With that song, I've never dug into the anthropological details of that. I may be mangling the stories, but it's from a bunch of different cultures. So the first starting point for this is the horrible and dramatic truth that all forms of property are socially constructed. All right.
Vinay Gupta
America has two different mechanisms for handling water rights and rivers. There's an East Coast mechanism and a West Coast mechanism. There are two completely different legal frameworks for handling the water in rivers. And which one you get depends on what state you're in. Which one is objectively correct? Both of them. So the social construction of property is something that the anarchists are super into. I come from an anarchist background. I'm very into social construction property. So we start by saying that property is socially constructed, all of the property is socially constructed. And then what we're doing with crypto is we're creating new social property. We're we're creating new social properties. Sorry, I'm saying this wrong. We're creating new property using new social constructions.
Vinay Gupta
So my argument is that Bitcoin is a social construction and that all software is free speech, and therefore Bitcoin is a social construction property.
Dr. Petty
How would you feel about this as a
Fergulati
It.
Dr. Petty
As a Like. I don't know. The right word is classification system or like a litmus test for property. It has a registry.
Dr. Petty
But it has a agreed upon registry.
Jessie Broke
I
Vinay Gupta
Yeah.
Jessie Broke
Think that's the that's the caveat. It's it's socially agreed upon registry. Right. Because like at the end of the day, if enough people within Bitcoin, if you socially, you know, changed people's desire to run a specific version of, you know, Bitcoin Core, then you could potentially alter the rules in which the registry operates and under, you
Dr. Petty
That's
Jessie Broke
Know.
Dr. Petty
The social. That's the social agreement is the registry. And the innovation here in blockchain is that we've made better registries and management of those registries.
Vinay Gupta
I mean not all properties on registries. You know I'm trying to think what's a good example. Cameras. Right. Cameras are not on a register. So you can have a $5,000 dSLR. It's worth more than many cars and it's still not. It still doesn't exist on a register.
Dr. Petty
Okay.
Vinay Gupta
So there
Fergulati
Mm.hmm.
Vinay Gupta
Is
Jessie Broke
Sometime.
Vinay Gupta
A lot of property which is on registers. There's also a lot of what they call chattel property. Chattel property tends not to be on registers.
Dr. Petty
Okay.
Vinay Gupta
But for a large class of assets, the registry is the key to what something is in terms of ownership. For assets that aren't in registers, you get into evidence and courts and blah, blah, blah. So that initial starting point of social construction of property is super controversial. But if we accept it as a hypothesis, to work with, everything else becomes like an order of magnitude easier. Part of the problem that the libertarians struggle so badly with real world assets is that the libertarians usually implicitly believe that there is a single, objective, correct form of property rights, and
Dr. Petty
You.
Vinay Gupta
That makes it incredibly difficult to work with real world property.
Fergulati
So then what comes first? Does it come this registry? And then people just rally around the registry and start to say like, okay, that's the source of truth, or does it have to have some sort of blessing from a group of people? Like, this is the registry we follow, like what comes first?
Vinay Gupta
So what comes first is the property that already exists in the real world. So
Vinay Gupta
Houses, cars, gold bars, cameras, all these things already exist inside of social relations, which are good enough for the world to run in the way that it currently does. Right. The world exists, stuff kind of works, and the world is filled with property that is, you know, the property norms good enough to be getting on with. You know, it's not perfect, but it's all right.
Vinay Gupta
And that stuff is everywhere around us, right? It's what the world is made of. So by accepting that that stuff is social construction, we can then bind the social construction of blockchain property. Like think of an NFT. We use NFTs a lot. If you think of an NFT as a form of socially constructed property, and you think of English real estate as a form of socially constructed property, what we're now doing is matching expectations between two social systems. And immediately our problems become 90% smaller. Because once we talk about matching expectations between two systems, which are arbitrary, we're no longer arguing about which system is right and trying to eat one system with the other. What we're trying to do is create a zone of matched expectations. And this is the kind of thinking that happens when you've got one parent that's an Indian academic and the other parent that is a Scottish sheep farmer. You get used to working in two worlds.
Dr. Petty
Yes.
Jessie Broke
It's interesting
Jessie Broke
Because, like, there's this narrative of like the lunar punks who are kind of like, we're not going to try and socially bind our, our blockchain to, you know, the legal system that exists in
Vinay Gupta
Thomson.
Jessie Broke
Order to try and get physical property on chain.
Vinay Gupta
Yeah.
Jessie Broke
How do you how do you feel about those groups? And, like, I don't know.
Vinay Gupta
Everything is social construction. If they can figure out a social construct
Jessie Broke
Yeah.
Vinay Gupta
That allows them to work with property without haVinayg to touch nation state norms, I don't see why they wouldn't like. How, how how do we want to be on this? Because we could talk
Jessie Broke
I
Vinay Gupta
About
Jessie Broke
Think
Vinay Gupta
Countering.
Jessie Broke
We're going to get to our network. We're going to get to our network states and special economic zones. So maybe this is a good
Vinay Gupta
Oh,
Jessie Broke
Lead in.
Vinay Gupta
No. I was thinking more of, like, cocaine cartels and the stateless
Jessie Broke
Oh.
Vinay Gupta
Region.
Dr. Petty
Say whatever
Vinay Gupta
Ghanistan.
Dr. Petty
You want. We don't care.
Jessie Broke
Oh, yeah. Yeah. Go for it.
Vinay Gupta
Okay.
Jessie Broke
Yeah!
Vinay Gupta
Well, okay.
Fergulati
What?
Vinay Gupta
So.
Fergulati
What
Jessie Broke
Open
Fergulati
Grade,
Jessie Broke
That can of worms.
Fergulati
What grade? Cocaine. What
Fergulati
Grade?
Vinay Gupta
You know.
Fergulati
That's where we need to.
Vinay Gupta
I
Fergulati
Know.
Vinay Gupta
Just.
Fergulati
Okay.
Vinay Gupta
I was so naive. I think I was 45 before I ever attended a party at which people were taking cocaine.
Fergulati
That's a long time. Yeah.
Vinay Gupta
45. Yeah. I mean, you know, I've been hanging out with hippies in the 1990s and it turns out that nobody had enough money for cocaine. You know, it was just not a cocaine culture, you
Vinay Gupta
Know, like it was just that separation between cocaine world and everywhere else. It's like two different dimensions. I never I never understood it. It was just like there was a
Jessie Broke
I
Vinay Gupta
Parallel
Jessie Broke
Went to Mexico.
Vinay Gupta
Universe.
Jessie Broke
I saw
Vinay Gupta
Oh,
Jessie Broke
Cocaine.
Vinay Gupta
Is that where you sell cocaine? It's just a weird thing because, like, sorry, this is a little bit of an aside, and then we'll get into organized crime. So, like the disco era, right? Ran on cocaine. And I remember being at a party in Chicago about 2003, and they were flag dancers. So, you know, like poi where you can spin poi. So they were spinning poi, but the poi were attached to these rainbow colored flags under incredibly bright UV light. So it looked like they were on fire. And it was a professional couple. He was the CEO of some sort of energy technology firm. She was a surgeon, and they were blowing off steam from their super high pressure jobs with this kind of really seriously, you know, like ballroom dancing on TV, level of skill, flag dance routine that they kind of did for fun. And they were
Jessie Broke
That's
Vinay Gupta
Doing
Jessie Broke
Awesome.
Vinay Gupta
This thing. And everybody gathered in a circle to watch this happen. And what I realized was I was watching Saturday Night Fever happening live. It was exactly
Fergulati
He.
Vinay Gupta
The social phenomena that Saturday Night Fever was documenting, and there it was happening live. So from there to organized crime. Right. Somebody keeps the party going and that somebody is breaking the law, and that runs through a whole bunch of, you know, one thing and another thing until you get to a bunch of South American cartels, most of whom have revolutionary armies associated with their movements. Hugely dangerous, hugely violent and completely outside the nation state system of property. So there's a kind of method where you've got a bunch of, you know, folks out in the jungle who are growing coca, and then they're running industrial facilities to turn that coca into cocaine, and then they're moVinayg the cocaine illegally. And so you wind up with a whole bunch of property, drugs, which is outside of nation state property rights, because if you're some gangbanger and somebody kicks down your front door and steals your cocaine, you cannot go to the government to get your cocaine back. So in a very real
Fergulati
Is.
Vinay Gupta
Sense, cocaine is not property, right? And yet there's
Jessie Broke
Oh,
Vinay Gupta
Probably
Jessie Broke
Wow. Interesting.
Vinay Gupta
Right. Oh, you see,
Jessie Broke
Yeah.
Vinay Gupta
You see. So you have these terrible disco people for 50. I mean, there's been 50 years of disco in America. And if there are no drugs, there is no disco. Right. So you've got 50
Fergulati
Mm.hmm.
Vinay Gupta
Years of disco in America, and it all runs on physical assets, which are not property. Right?
Jessie Broke
That
Vinay Gupta
I
Jessie Broke
Would be
Vinay Gupta
Mean,
Jessie Broke
An interesting
Vinay Gupta
Their
Jessie Broke
Argument to
Vinay Gupta
Argument
Jessie Broke
Set up with a
Vinay Gupta
Is.
Jessie Broke
Cop who pulls you over for haVinayg not property with you.
Dr. Petty
Good luck with that. Good
Vinay Gupta
Well,
Dr. Petty
Luck with that.
Vinay Gupta
Right? But the police have.
Fergulati
It.
Vinay Gupta
The police have a special name for that kind of property. They call that kind of property evidence. You see the
Fergulati
Yeah.
Vinay Gupta
Evidence, and so you wind up in a position where you have. I mean, if we were to make an estimate of the total street value of all the illicit drugs currently sitting in warehouses in America right now. Pick a number, $50 billion. I don't know how big the drug trade is. I'm not, you know, I'm not
Fergulati
Let's
Vinay Gupta
A specialist in narco.
Fergulati
Talk about drugs. Talk about
Dr. Petty
Yeah,
Fergulati
Drugs
Vinay Gupta
Yeah.
Jessie Broke
You know,
Fergulati
And warehouses.
Jessie Broke
In
Dr. Petty
Yeah.
Fergulati
50
Vinay Gupta
Yeah.
Fergulati
Billion.
Jessie Broke
You know, in.
Dr. Petty
Probably.
Jessie Broke
Oh, yeah.
Vinay Gupta
Could be.
Jessie Broke
You
Fergulati
Let's
Jessie Broke
Know, they
Fergulati
Go. A
Jessie Broke
Just
Fergulati
Little bit higher
Jessie Broke
Eased
Fergulati
Than that.
Jessie Broke
They
Fergulati
Let's
Jessie Broke
Just seized 2
Fergulati
Push
Jessie Broke
Or
Vinay Gupta
Could
Jessie Broke
3.
Fergulati
That up.
Vinay Gupta
Be
Jessie Broke
Oh,
Vinay Gupta
Much.
Jessie Broke
Yeah. That's what I think. He's.
Dr. Petty
In
Jessie Broke
Yeah.
Vinay Gupta
Could
Dr. Petty
Any
Vinay Gupta
Be
Dr. Petty
Event.
Vinay Gupta
Much harder, right? So
Fergulati
Yeah,
Vinay Gupta
In any event,
Fergulati
That's.
Vinay Gupta
All of that stuff is not properly defined by the state. That's property
Fergulati
Hmm'hmm.
Vinay Gupta
Defined by something else. And that something else is really complicated. Right. So this is why the social construction of property stuff is such a big deal, right? That what's his name? Ross Ulbricht, the kid that went to jail for
Jessie Broke
Yep.
Vinay Gupta
Mumble mumble Silk Road, right.
Jessie Broke
Yeah, yeah.
Vinay Gupta
I have no idea what really happened around Silk Road. Was he really trying to hire hitmen? Was that some frame that was put around him? Was he the real operator of Silk Road, or was he just some? I have no idea. I haven't looked at it in detail. I know people on Twitter that are really into that story and have very strong opinions about it. I've not examined it, but here's what happens when somebody starts to create new property rights around property that the state doesn't say is property. The state says it's evidence, Ulbricht says it's property. You got conflict between two sets of property rights, and the result is eventually, you know, Swat teams and clarity. Right. So that's a model, right? This is why it's so important to think about all of these systems as abstract. So if you go back to the empire of the Peruvians, Aztecs, you know, these South American places. In those places, cocaine was just like coffee. It was just a thing that people had around. If you were going to go mountain climbing, you would take some cocaine with you. It would help you with altitude sickness. Have a nice day. Yeah, they run a functional society. They had multimillion person cities. They had huge amounts of agriculture. They were terribly refined and sophisticated, and they had a bunch of cocaine lying around and they used it. India would consider alcohol to be contraband. Through most of its history, production of alcohol would have been considered to be a grievous, grievous offense in huge periods of Indian history. Because the Indians didn't drink, they thought it was super bad for people and poisonous and horrible, and they tried to keep alcohol out of their societies. Hindus traditionally don't drink. Scottish people, on the other hand, do. Don't ask me about eating meat. So all those things together.
Jessie Broke
No.
Vinay Gupta
Property is socially constructed. The norms of society are socially constructed that are very few universal taboos. And the sociologists and the anthropologists make a big deal of studying the universal taboos to figure out what's going on. But the place where the rubber meets the road is nobody has a global agreement about what constitutes property. When you get to land rights. Every country has a bizarre, weird, totally impossibly complicated form of land rights. When you get to copyright, there are two great global regimes on copyright the European model and the American model. And then there is the Chinese model, which is like, what do you mean, copyright? What does that have to do with us?
Fergulati
It's.
Vinay Gupta
And they're not joking.
Fergulati
A little bit
Vinay Gupta
The Chinese
Fergulati
Of Africa's like that.
Vinay Gupta
Chinese culture never had a notion of copyright. And then some bunch of round eyed guys in metal boats come along and decide they're going to impose this completely bizarre thing. So you're telling me that if I hear a song, I cannot play the song at home without paying you? Since when do you own the inside of my head and the inside of my house? What is wrong with you? Right? Because in that culture, it just sounds completely bizarre and wrong that you are not allowed to learn something and use the knowledge patent.
Jessie Broke
What
Vinay Gupta
Oh.
Jessie Broke
Would you would you classify the Chinese perspective on copyright as closer to open source? I guess.
Vinay Gupta
It's a culture in which the idea of restricting learning and restricting the use of learning is totally weird sounding.
Jessie Broke
Sounds
Vinay Gupta
You know,
Jessie Broke
Weird
Vinay Gupta
Think
Jessie Broke
To
Vinay Gupta
Of
Jessie Broke
Me when
Vinay Gupta
Chinese.
Jessie Broke
You say that.
Vinay Gupta
Write. Think of Chinese scholasticism. Think of how hard the Chinese have been studying for exams and passing exams. You know, they have a god of exams. Chinese have a god of exams.
Fergulati
A.
Vinay Gupta
Yeah. I could tell you the story. I'll
Fergulati
It's
Vinay Gupta
Take
Fergulati
A.
Vinay Gupta
Five minutes. But the Chinese have a god of exams,
Fergulati
Of.
Vinay Gupta
And the god of exams is based on a historical figure. And it's a great story. We could go down
Fergulati
Do
Vinay Gupta
That rabbit
Fergulati
They pray
Vinay Gupta
Hole and
Fergulati
To?
Vinay Gupta
Then cut it later. Or we could do it. Yes. You bet. If you're if you're a Chinese kid and you're going to sit exams I believe that if your family has any religion at all, the God of exams would be within scope. Couldn't tell you that for sure. I'm not a full expert in Chinese religious stuff, but yeah, there is a Chinese god of exams based on a
Fergulati
This
Vinay Gupta
Historical
Fergulati
Explains
Vinay Gupta
Figure.
Fergulati
A lot. This explains
Vinay Gupta
Okay,
Fergulati
A lot.
Vinay Gupta
Fine. We're doing okay. We're doing the Chinese god of exams. So
Fergulati
The
Vinay Gupta
The story
Fergulati
Stuart.
Dr. Petty
Here
Vinay Gupta
Is
Dr. Petty
We go.
Vinay Gupta
As I remember,
Dr. Petty
One day
Vinay Gupta
As
Dr. Petty
We'll
Vinay Gupta
I
Dr. Petty
Get
Vinay Gupta
Remember
Dr. Petty
Into
Vinay Gupta
It,
Dr. Petty
The
Vinay Gupta
Badly.
Dr. Petty
Story.
Vinay Gupta
Chinese god of exams. There was the Chinese have state examination system. And I promise you all of this will tie together beautifully in a moment. The Chinese have a state examination system and the rule is very strict. The people that have the highest examination scores get the most senior jobs in the civil service in that year's intake. Straight ranking. Here are the jobs. Here's your exam score and they just go down the ladder 111111111. And that was how the Chinese maintained their civil service for thousands of years. And I mean thousands of years when the Romans are still like getting their game together. This is how China operates. It's amazing, isn't it? I fucking love China. So the Chinese god of examination stories. Is that the guy who wins the top scorer that year is staggeringly ugly. He is just
Fergulati
It.
Vinay Gupta
One misshapen looking dude. He is staggeringly ugly. The Emperor is just like, no, we can't put this. No, please, no! And so the Emperor basically refuses to give the guy the job. And one way or the other, I can't remember exactly what happens, but I seem to remember the great forces of Heaven and Empire combined and basically tell the Empire very clearly. I am very sorry you don't get to make the rules here, sir. And
Fergulati
A.
Vinay Gupta
One way or the other, this guy becomes the Chinese god of examinations. I'm horribly mangling the story. I should really learn it because I tell it over and over again, and it's different every time and wrong every time. If any of your listeners have the story straight, do please tell us. But think of a culture that has that attitude to learning. And then somebody says that you're not allowed to use the stuff in this book because somebody else owns it. What what are you talking about? So this idea
Fergulati
The.
Vinay Gupta
That, you know, in the imperial phase, the Europeans and then the Americans went around the world and imposed our system of property rights on other people's property rights. You know, we we, the English turn up in India and I'm like we we we own this now, what do you mean, you own this now? You know the story about New York where the legend again, again, not an anthropologist. I should really learn this stuff properly. But the legend is that the Indians who sold New York for a handful of beads had no idea that they were selling property. Right. Oh,
Jessie Broke
Oh, yeah.
Vinay Gupta
You
Jessie Broke
I
Vinay Gupta
Want
Jessie Broke
Heard
Vinay Gupta
To give
Jessie Broke
That
Vinay Gupta
Us some?
Jessie Broke
Story. Yeah.
Vinay Gupta
You want to give us some beads so that you can hang out here, man, you can hang out here anyway. Have a nice day. Yeah, sure. Absolutely. You want to give us some beads in exchange for the right to be here? You have the right to be here already. But we like beads. Thank you. And then somebody comes along and tells them that they can't be here. Like, what do you mean? We own this? What? You what? Right. And
Fergulati
We gave
Vinay Gupta
You
Fergulati
You
Vinay Gupta
See
Fergulati
The
Vinay Gupta
What
Fergulati
Beans.
Vinay Gupta
I mean? Right.
Jessie Broke
Native Americans don't have a concept of owning Mother Earth. It's belongs
Dr. Petty
Yeah.
Jessie Broke
To everybody. And so, yeah, it's
Vinay Gupta
No.
Jessie Broke
Definitely a miscommunication and kind of like they knew what they were doing. The people who essentially bought the land.
Vinay Gupta
Right.
Fergulati
They know about owning casinos.
Vinay Gupta
Bought
Fergulati
They
Vinay Gupta
A
Fergulati
Know
Vinay Gupta
Lot,
Fergulati
All about
Vinay Gupta
Right?
Fergulati
That shit.
Jessie Broke
Yeah, exactly.
Vinay Gupta
Yeah.
Jessie Broke
They ripped them off.
Vinay Gupta
Right.
Jessie Broke
They
Vinay Gupta
And.
Jessie Broke
Did it multiple times. Multiple times.
Vinay Gupta
And wait until, you know, like as the political climate changes, the amount of chaos that Native Americans could cause with tribal sovereignty, you take tribal sovereignty off the blockchain. You put those two things together and look
Jessie Broke
Oh my
Vinay Gupta
Out
Jessie Broke
God.
Vinay Gupta
World. Oh, yeah. Oh yeah.
Fergulati
So.
Vinay Gupta
I have had conversations which I am not at liberty to disclose, but there are some truly, truly ambitious plans you wouldn't talk about. Network state, network state plus tribal sovereignty,
Jessie Broke
Wow. Yeah,
Vinay Gupta
Right?
Jessie Broke
That would be insane.
Fergulati
We've got an off the record button. We'll save that for later. So material.
Dr. Petty
No,
Fergulati
From
Dr. Petty
No, we're
Fergulati
So,
Dr. Petty
Back
Fergulati
So.
Dr. Petty
To ownership, right? Ownership is a muddy thing,
Jessie Broke
Yeah.
Vinay Gupta
Right.
Dr. Petty
Especially when it comes to land and general. It's a social construct.
Dr. Petty
If we take that as face
Vinay Gupta
So.
Dr. Petty
Value. It's a social construct that makes it muddy in a lot of places where you have required arbitration, if you will.
Vinay Gupta
Well.
Jessie Broke
And
Vinay Gupta
So
Jessie Broke
Then Miriam
Vinay Gupta
What we're now doing.
Jessie Broke
Bound to UK law, right?
Vinay Gupta
Well bound. Bound. Right. So we know what we're talking about is how
Fergulati
The.
Jessie Broke
Okay.
Vinay Gupta
Does material match social expectations about property between the blockchain people on one side and the judges that control the real world
Vinay Gupta
Assets on the other?
Vinay Gupta
Right.
Fergulati
Mm.hmm.
Vinay Gupta
So think
Vinay Gupta
Of this as harmonizing expectations between two cultures. I am half Scottish. I am half Indian. My father is an Indian academic. My mother was a Scottish sheep farmer. How did I survive? I survived by figuring out how to match expectations. I could find the area where there was overlap and then I could try and live in that area. So what do the judges and the blockchain people agree on? Right? Well, you have to write down the agreement, right.
Dr. Petty
Yes.
Vinay Gupta
Otherwise, how does the blockchain know what's happening? There has to be a smart contract, and then there has to be a written description of what the smart contract does. Right?
Vinay Gupta
And if the written description of what the smart contract does is written in a way that a lawyer will recognize as being a description of what a system that handles property does. The description of what the smart contract does is written in a way that a lawyer will recognize it, which means a judge will recognize it. And it's also a specification for a piece of software. And that piece of software then matches the expectation of the blockchain community. So the harmonization between the function of the smart contract and the function of the legal system is the contract that attaches the NFT to the legal system, and it's the harmonization of expectations in that document that is the binding link between these two separate cultures.
Dr. Petty
The engineering speak,
Jessie Broke
This
Dr. Petty
You made
Jessie Broke
Is what
Dr. Petty
A mapping
Jessie Broke
I think
Dr. Petty
Between
Jessie Broke
You.
Dr. Petty
Legal contracts and smart contracts.
Vinay Gupta
Well, if, if a if a smart contract is described by a legal contract and the lawyer agrees to that legal contract is legal, then at that point everything the smart contract does is legal.
Dr. Petty
Mm.hmm.
Vinay Gupta
Right.
Jessie Broke
And
Vinay Gupta
So
Fergulati
How
Jessie Broke
I think
Fergulati
Do
Vinay Gupta
There
Fergulati
We
Jessie Broke
You have
Vinay Gupta
Are
Fergulati
Get
Vinay Gupta
Some.
Jessie Broke
A name
Fergulati
Past?
Jessie Broke
For this, right? Call it the Ricardian contract.
Vinay Gupta
Oh, it was invented when I was a young, young man by a guy called Ian Grigg. And as I will say about Ian Gregg, if I have seen further than other men, is because I have stood on the shoulder of Ian Grigg. Ian Grigg invented everything, right? Everything. I often say that Ian Grigg is more important than Satoshi because Satoshi just figured out how. Ian Grigg figured out why he's incredibly important. Nobody knows he and Greg. I keep saying Ian Grigg is the most important thinker about technology. No no no no
Fergulati
Hmm'hmm.
Vinay Gupta
No. Ian Grigg is the guy,
Jessie Broke
Interesting.
Vinay Gupta
Right?
Jessie Broke
Never heard
Vinay Gupta
Yep.
Jessie Broke
Of it.
Vinay Gupta
Crotchety Australian former soldier has been involved in a bunch of crypto projects over the years. Nobody ever listens to him. I listened to everything he had. Says. It usually takes me three years to understand it. And then I'm like, oh my God, really? I had that a couple of couple of weeks ago, I finally understood what Ian was telling me about Kenya. It was like, oh, and he was like, yes. And I'm like, Ian, you don't understand. It took me three years to understand what you had seen. Imagine how long it's going to take everybody else. So yeah, Ian is the man. He invented all this stuff. 2002, 2003. He'd already fought court cases about handling real world assets on chain. In 2003,
Jessie Broke
Well.
Vinay Gupta
Before there even was a chain. He had done litigation about this. Right.
Jessie Broke
What
Vinay Gupta
Literally.
Jessie Broke
Was what was the
Fergulati
So.
Jessie Broke
Actual what was the actual entity in like, what was the technology back then in 2003?
Vinay Gupta
So Oh, it's another rabbit hole. Sorry, guys.
Jessie Broke
There's
Vinay Gupta
So.
Jessie Broke
So many rabbit holes.
Dr. Petty
Jesse
Vinay Gupta
Well,
Dr. Petty
Is a is
Vinay Gupta
You know.
Dr. Petty
A king of spontaneously creating new rabbit holes to go down.
Vinay Gupta
Sorry.
Jessie Broke
This is there
Vinay Gupta
So.
Jessie Broke
Are details. It's like it's very interesting
Vinay Gupta
Once
Fergulati
Yes.
Vinay Gupta
Upon a time
Jessie Broke
Part of the journey.
Vinay Gupta
There was a thing called e-gold. An e-gold was a vault
Jessie Broke
Okay.
Vinay Gupta
Packed with gold bars and an SQL database that recorded who owned which bars. Okay, fine. Ian Grigg comes along and is like but what if we had cryptographic tokens on top? So E-gold was no longer required to know exactly what was happening in the transactions. So you get a single master account on E-gold. And then against the master account you issue digital tokens. Okay, fine. So the digital tokens were moved around using a set of techniques that you would now group in the family of what you would call shaumian digital cash.
Vinay Gupta
So David Chaum was the cryptographer. You know, I mean, I mean, Chaum oh my God. Chaum is like. I don't know the the Isaac Newton of some aspects of cryptography. These people are you're gonna know their name in 500 years. So Chaum
Jessie Broke
Yeah,
Vinay Gupta
Is
Jessie Broke
I
Vinay Gupta
The
Jessie Broke
Know
Vinay Gupta
Guy
Jessie Broke
David
Vinay Gupta
That originally,
Jessie Broke
Chaum
Vinay Gupta
Right? So
Jessie Broke
And
Vinay Gupta
Chelmey
Jessie Broke
I know
Vinay Gupta
And
Jessie Broke
Of
Vinay Gupta
Digital.
Jessie Broke
Eagle. I just didn't know Ian Griggs relationship to that. Sorry. Yeah.
Vinay Gupta
Well. So Enron was a common digital cash or common type digital cash. Layer on top of e-gold. So Egle provided the backing. Right here is an E-gold account with X $100,000 worth of gold in it, right? Five kilograms of gold. There's your Egle account of five kilos. Here are five kilos worth of tokens, one gram per token. And those tokens are being moved inside a chromium digital cash type network. Right. And that Chaumiere network is centralized. There is a bank server, you have a wallet. The wallet talks to the bank server. When you do a transaction, the money moves through the bank, but the bank doesn't know who got paid. Dreadfully clever. The troll me and stuff is very, very clever. It's really, really clever. And it worked. I bought Egld and I bought Digi gold from Ian back at the beginning of history.
Dr. Petty
If.
Vinay Gupta
And then there was some kind of falling out. There was a lawsuit, somebody sued somebody. And the whole construct of how do these chummy and digital tokens turn into a claim on actual gold in a vault? All of that stuff was tested in court and it held up. The judge was like, yes. The paper contract describes the functioning of the technical system. The technical system did not break. It did exactly what it was going to do. Therefore, the goods are controlled by the numbers and the technical system, broadly speaking. And at that point, it was like he had precedent and nobody got the implications. So I'm at the Ethereum Foundation 2014, 2015. I'm like, My God, my God, my God, we have to go get Ian. Eric, we have to go get Ian. Greg, we have to go get Ian. Greg, we need to get some lawyers involved. We need to get the real world asset stuff sorted out. We need to make smart contracts into legal contracts. Give me some resources. I'll go get these people and I'll make it happen. And the Ethereum Foundation was like, what? Why would we need that? All property will be on the blockchain. I'm just like, no, no, no, this is how we get it on the blockchain. So it didn't happen at the foundation. I went to consensus and like Joe, Joe, Joe, Joe, Joe, Joe Joe was like hum hum. Yeah. Have a think about that. We had a couple of meetings about it. There
Jessie Broke
Well.
Vinay Gupta
Were some discussions and consensus decided they weren't doing it. And like. God damn it. Don't make me do this myself. I'm going to be a lousy CEO. I'm going to suck at running a company. This is going to be eventually. There was nobody left to do it. So at that point, I had to go and learn how to run a company. I was like, wow, I am not a talented CEO. Oh, I'm fantastic as a think tank. I'm fantastic as a visionary man. I can see around corners, but the agonizing process of learning how to run a company was hard work. Eventually, I got to be, you know, I'm probably the right side of average for a CEO. But, you know, like I am, I am, you know, I'm a four star general worth a futurist and like a decent colonel level of CEO. You know, it's like and osmeterium goes forward, we're going to more and more of the management load on people that are really talented at running companies, because I'm talented at knowing what to do, but I'm not necessarily great with people or great at running a firm. And, you
Vinay Gupta
Know, a lot of people that are good at one thing and then wind up as CEOs get very attached to the idea that they're going to become the world's best CEO at the same time. No, I'm going to hire a professional manager. I've already hired professional management. We survive because we have professional management. But that whole thing of just like doing the thing that I do, well, the thing that I do well is not CEO ING, right. I am a I'm an acceptable CEO. I have much, much more talented people coming in behind me that are going to be taking more of the load as we grow. But the thing that I'm good at is this kind of five year, ten year, 15, 20 year forecast and really fundamental technology strategy and indeed technology implementation. Right? I'm a pretty good technology implementer. I'm a really good forecaster. So. Going back to the pool. Chromium digital cash machine. Greg. Litigation thing. What we basically had. Right? What Ian had was a system that handled one asset class with one technology system. So there was a single account with gold in it. There was a single piece of software that managed the gold, and it all ran on a single contract. And that was what it did. It was an existence proof. Right. But think of the internet. It was like haVinayg a single server and a single client and then adding a few more clients. Right. We have the web
Vinay Gupta
Server.
Jessie Broke
Yeah.
Vinay Gupta
It's amazing. Can we have a second web server? Well, that's a little complicated. We need to rewrite the entire internet stack if you want a second server. Okay.
Vinay Gupta
Right. So it was obvious that what we needed was a generalization of Ian's work on digital gold. We had to make it work for all asset classes, on all smart contracts, in a much more kind of polycentric, comprehensive way. And that was a big job. That was a heavy lift. Okay, we've got an existence proof for this done 20 years ago. We now need to generalize that to handle all assets in all jurisdictions, regardless of what the smart contract does. That was what we set out to go do. Right. And that has turned into quite a mission. We had originally intended to do far, far more than real world assets. Real world assets are like 5% of the stuff that you could do with a blockchain. And you'd say illegals. Right.
Dr. Petty
Mm.hmm.
Vinay Gupta
So we're doing real world
Dr. Petty
Hmm'hmm.
Vinay Gupta
Assets now because it's the first big thing. But you think of copyright, IP licenses, patent licenses the creation of eternally new classes of property. Let's talk asteroid mining. Right. Licensing
Jessie Broke
Oh,
Vinay Gupta
Orbits.
Jessie Broke
That was my research.
Vinay Gupta
Really.
Jessie Broke
My my research was literally building tendril robots to mine asteroids. Yeah.
Vinay Gupta
Oh
Jessie Broke
For NASA.
Vinay Gupta
My God. Right.
Jessie Broke
Yep.
Vinay Gupta
So when you need your robots to talk to the lawyers about what they're allowed to do or not allowed to do to an asteroid, come and talk to me.
Jessie Broke
Yeah.
Vinay Gupta
Right? No. I'm serious. We threw the first conference on blockchain and space. Right.
Jessie Broke
In
Vinay Gupta
Internet
Jessie Broke
Bristol.
Vinay Gupta
Of agreements for blockchain in space with the former head of the UK Space Agency. Come and tell us off your non-state anarchists. You're. You can't be allowed in space. Who's gonna
Jessie Broke
So
Vinay Gupta
Stop
Jessie Broke
How
Vinay Gupta
Us, lady?
Jessie Broke
How does that
Dr. Petty
Okay.
Jessie Broke
Work?
Dr. Petty
Let's say
Jessie Broke
Like,
Dr. Petty
Ellen.
Jessie Broke
Do you, do you like the the private company like like yeah. Like let's say Elon Musk. You know, you use SpaceX to
Jessie Broke
Get your mining equipment on the asteroid. Who actually
Vinay Gupta
Hmm'hmm.
Jessie Broke
Owns the asteroid? Is it the mining company that paid to contract out, you know, Falcon Heavy rocket or whatever to get there? Or how does that work?
Vinay Gupta
Well,
Fergulati
Oh,
Fergulati
Sorry.
Vinay Gupta
Yeah. No. Hit it, hit it.
Fergulati
This is a this is where I come in. There's a show on Apple+.
Jessie Broke
Are we getting? Oh.
Fergulati
No, it's called this. It's it's like a space show on
Vinay Gupta
Yes,
Fergulati
Apple+ that
Vinay Gupta
A good
Fergulati
There's
Vinay Gupta
One.
Fergulati
Like five seasons of it, and this is like the current season. They're trying to map out how to who gets the asteroid? Do the nations get the asteroid, or does the private
Dr. Petty
Aunts.
Fergulati
Company get the asteroid? It's
Jessie Broke
Interesting
Fergulati
Called
Vinay Gupta
For
Fergulati
What's
Jessie Broke
For
Fergulati
It
Jessie Broke
All
Fergulati
Called?
Jessie Broke
Mankind.
Vinay Gupta
All mankind.
Fergulati
For all mankind. It's
Jessie Broke
And.
Fergulati
An amazing show. Like amazing
Vinay Gupta
It is an
Fergulati
Show.
Vinay Gupta
Amazing film. No
Fergulati
And
Vinay Gupta
Spoilers,
Fergulati
That's like,
Vinay Gupta
I've not
Jessie Broke
No
Vinay Gupta
Started
Fergulati
I'm not
Vinay Gupta
The
Fergulati
Going
Vinay Gupta
New
Jessie Broke
Spoilers.
Fergulati
To give
Vinay Gupta
Season.
Fergulati
Any spoilers.
Jessie Broke
Yes.
Fergulati
I'm just going
Vinay Gupta
The first.
Fergulati
To say that's like this season coming
Vinay Gupta
So
Fergulati
Up,
Vinay Gupta
Good.
Fergulati
And I'm very excited about it.
Vinay Gupta
It's
Fergulati
But
Vinay Gupta
Amazing because it's an alternate history. Right? So
Fergulati
Yeah.
Vinay Gupta
They go through the 1960s. They go through the 1970s. They go through the 1980s. There's one change in history and then it shows a completely different timeline for
Vinay Gupta
Space goes way faster. It's amazing. So,
Fergulati
It's
Vinay Gupta
Right,
Fergulati
An amazing
Vinay Gupta
That question
Fergulati
Show.
Vinay Gupta
About who owns the asteroid? Who owns the cocaine?
Jessie Broke
Oh, man.
Fergulati
Oh,
Vinay Gupta
Right.
Fergulati
I have a statement about
Jessie Broke
If
Fergulati
That
Jessie Broke
You
Dr. Petty
Quality
Jessie Broke
Put
Fergulati
Too.
Jessie Broke
It.
Dr. Petty
Full circle.
Fergulati
Yeah.
Jessie Broke
So
Dr. Petty
It's.
Jessie Broke
Space
Fergulati
So?
Jessie Broke
Army.
Jessie Broke
And then you own the asteroid.
Vinay Gupta
Right. So
Fergulati
He
Vinay Gupta
There
Fergulati
Said
Vinay Gupta
Is
Fergulati
Space
Vinay Gupta
No
Fergulati
Army, and then you
Vinay Gupta
Right.
Fergulati
Own
Jessie Broke
Yeah,
Fergulati
It.
Jessie Broke
I saw Halo.
Vinay Gupta
There. You see what I'm saying? Right there isn't. There is no guarantee that the space people are going to agree with the earth people about who owns the asteroids. Right.
Fergulati
No.
Vinay Gupta
So the United Nations says, well, under the Space Treaty of 19, blah, blah, the asteroid actually belongs to blah, blah, blah. And the people who are liVinayg on the asteroid, mining the asteroid and sending gold bricks back to Earth with an orbital cannon are just like
Fergulati
Yeah.
Vinay Gupta
As far as we are concerned,
Jessie Broke
Even.
Vinay Gupta
We own the asteroid. And if you mess with us, we will put our gold bricks through your goddamn spaceships with our orbital cannon.
Jessie Broke
That's so cool.
Jessie Broke
Are you going
Vinay Gupta
Right
Jessie Broke
To make the Federation?
Vinay Gupta
Because.
Fergulati
So I just go ahead.
Vinay Gupta
Do I do, I do I look like the Federation?
Jessie Broke
I feel like I.
Vinay Gupta
Do I
Fergulati
If
Vinay Gupta
Look more
Fergulati
You had
Vinay Gupta
Like
Fergulati
A
Vinay Gupta
The clown?
Dr. Petty
Would
Fergulati
You
Dr. Petty
You like
Fergulati
Need
Dr. Petty
To know
Vinay Gupta
Clown?
Fergulati
A
Dr. Petty
More?
Fergulati
Mono, you need a
Jessie Broke
Yeah.
Fergulati
If you had a mono
Jessie Broke
Coppola.
Fergulati
Colored sweater.
Vinay Gupta
Yeah. Definitely
Vinay Gupta
Not. You know, if we're doing this thing, we're doing this thing. Terran Empire style. Thank you very much. I cannot stand any more of this galactic Sweden nonsense.
Fergulati
I
Jessie Broke
Okay.
Fergulati
Mean, history rhymes like Elon Musk might as well name his rocket models like the Nina, the Pinta and the Santa Maria. Because like if he is successful and they go to Mars, like I don't even need to live forever to know how that ends. There's a moon
Vinay Gupta
Right.
Fergulati
War and
Jessie Broke
Yeah.
Fergulati
Then
Jessie Broke
It's
Fergulati
There's
Jessie Broke
True.
Fergulati
Two different currencies, and then there's those humans and those humans over there. Like we're always the same. Nothing changes but the clothes. So.
Vinay Gupta
We're
Fergulati
But
Vinay Gupta
Always the
Fergulati
Anyways,
Vinay Gupta
Same.
Fergulati
It's cool to live through it. So,
Vinay Gupta
But maybe
Fergulati
This is a good
Vinay Gupta
Not
Fergulati
Conversation.
Vinay Gupta
War, maybe not a war. Right. Because.
Dr. Petty
Within that the point. Like that's the whole point of this. This conversation, right, is like, that's what
Vinay Gupta
Or.
Dr. Petty
That's what you're trying to stop. No.
Vinay Gupta
Yeah. Yes.
Dr. Petty
Is, is an ability to come to an agreement in the overlap.
Vinay Gupta
Right. So let's talk about how we actually swing this because it'll make it a lot less mysterious. So what we say is when you buy an NFT you receive the value of the asset the NFT is tied to. Right now. This is a really tricky construct. If you receive, you know, you buy an NFT for Gold Bar, you should receive the gold bar. If for some reason you cannot receive the gold bar, you should receive the value of the gold bar. Right. And the value of a thing represented in dollars is something that everybody on both sides of the fence can agree on. I buy the NFT, I get $60,000 worth of gold in the form of the following one kilogram bar with the serial number, or I receive $60,000. Okay? Okay, everybody cool with $60,000 as the value of the object. Yeah, we're all cool with that. Okay. We're going to write that down in the contract. You're going to get the object or you're going to get 60 grand. If the vault is broken into and somebody steals the gold part, yay is going to give you the 60 grand. If the bar turns out to be fake and hollow and made of titanium, tungsten party B is going to give you the 60 grand.
Vinay Gupta
If we sold the bar to somebody else by accident and your bar isn't there, we will give you the 60 grand and that's party C, so all the different things that could go wrong are different party volunteers to carry that risk. If I'm the insurance company for the vault, I might carry the risk of the bar being stolen. If I'm the gold refiner, I might start carry the risk of the bar being fake. If I'm the company that is orchestrating this whole thing, like a gold dealer that comes to you and says, hey, we want to sell bars, then I'm going to take responsibility for not accidentally double spending and selling your goddamn bar to somebody else. Right. And so you clearly document whose money is on the table. If something goes wrong and you write that down in a way that the lawyers can understand, and then the sort of blockchain side of it. So I buy this token, I get a gold bar. Yep. And if somebody screws me over, I get money. Yep. Okay. Does that work? Well, the only person that can tell you for sure is your lawyer. And then irresponsible buyer of NFTs, hires a lawyer. The lawyer reads all the contract paperwork, interprets all of this real world stuff, comes back and tells the prospective buyer of the NFT.
Vinay Gupta
Yeah, as far as I can tell, if you buy this NFT in just about any imaginable scenario, it looks like you're going to wind up with 60 grand. Ipso facto, there are terms and conditions. Certain disclaimers may apply here. Some edge cases where it's a little less clear what happens. But overall, I would say this is a legit transaction. Off you go. Right? And if somebody's lawyer comes back and it's like, oh no, no no no no no no no, no. Then at that point we go talk to their lawyer and I'm like, okay, explain to us what it is you think we missed. No, I'm pretty sure we covered that or maybe even You're right. That is potentially an edge case where we could wind up with a big dispute. We better make sure that we explicitly assign that liability. Right? And all of this stuff, you know, what we're doing here is basically just documenting who's responsible. We write down really carefully who is responsible, and we make sure that at the point where they are going to be made responsible, you can actually get hold of their money.
Dr. Petty
I spent a good portion of my career thinking about Secure smart contract development. How do you make something
Dr. Petty
That does what you think it does and nothing more and isn't
Vinay Gupta
Hmm'hmm.
Dr. Petty
Subject to malign behavior?
Vinay Gupta
We're
Dr. Petty
My
Vinay Gupta
Thinking like
Dr. Petty
Expectation
Vinay Gupta
Formal methods.
Dr. Petty
Here. Yeah. Formal methods. Just secure spark, developing life cycle, etc.. Right? Like,
Vinay Gupta
Yep.
Dr. Petty
How does that thing that goes on chain is do what it's supposed to do, nothing more. Right.
Vinay Gupta
Yeah
Dr. Petty
Based
Vinay Gupta
Yeah
Dr. Petty
In
Vinay Gupta
Yeah
Dr. Petty
The
Vinay Gupta
Yeah.
Dr. Petty
Framework of the way in which we build these things in the first place, which changes, yada yada. What I wanted to get to is like what you just described to me.
Vinay Gupta
Hmm'hmm.
Dr. Petty
Like in terms of an order of operations feels like a good way to make a specification for a smart contract. So it seems like you're doing the legalese first, getting that agreement and then enshrining that through some, I would assume, formalism into smart contracts.
Dr. Petty
You're not shoehorning legalese into pre-constructed secure smart contracts. The legalese is the specification in which you can then get done. Am I am I kind of on base here?
Vinay Gupta
We are not smart enough to do that. Right. We have a single
Fergulati
Those
Vinay Gupta
Smart
Fergulati
We.
Vinay Gupta
Contract material, possibly humans, but
Fergulati
Okay.
Vinay Gupta
We have a single smart contract, which is ERC 20. Sorry. 721 ERC 721. The only smart contract we really use are 720 ones, because all we need to do is figure out who owns the gold bar, and right now that's the person holding the NFT,
Dr. Petty
Okay.
Vinay Gupta
And that's enough to get started with. The reason I'm making the complicated face is.
Dr. Petty
The party's.
Vinay Gupta
So again,
Dr. Petty
The parties. It's like
Vinay Gupta
The
Dr. Petty
The
Vinay Gupta
Parties.
Dr. Petty
Like all of the stuff you just described in terms of arbitration, in the event that you don't get the object, it's
Dr. Petty
What you just said off chain now.
Vinay Gupta
Okay. So here God,
Dr. Petty
Not automated.
Vinay Gupta
It's just a rabbit. Rabbit holes. So here's here's a rabbit hole. Right. So what happens is to be very specific, right? The NFT handles. Who owns the object? I buy
Dr. Petty
Mm.hmm.
Vinay Gupta
The object from you by buying the NFT. Now, here's the problem. You've never seen the object in. You're not responsible for vaulting it, right?
Dr. Petty
Mm.hmm.
Vinay Gupta
So if I buy the object from you and you are now legally responsible for a bunch of things like the bar being real, that makes no sense because you've never seen the bar, you've got no data, you have no exposure. It's not your fault. All right. So
Dr. Petty
Mm.hmm.
Vinay Gupta
What we do is that when the NFT is transferred, money has to be paid to all the people that are writing the warranties that guarantee the performance of the NFT. So I'm going to buy the bar. You see, before you buy the bar, you got to go and you got to pay off A, B, and C to make sure that you have the warranties in place so that they are legally responsible. If this bar is dodgy, I don't want the responsibility, and I'm not going to sell you the bar until you've got proof that you've bought the warranties. Okay, I pay a, I pay b, I say pay c I now have legal warranty because that payment and their acceptance of that payment constitutes the formation of a contract. Loyalties goes here. So you come back and you show me that you've got I come and show you that I have proof that I bought these warranties. And then at that point, you sound like the NFT right now, of course, all of that happens instantaneously. Is an atomic transaction in an all singing, all dancing system, right? All that stuff should happen on chain for
Vinay Gupta
Gas price optimization reasons and for legal reasons thus far, what that has happened off chain. So actually, legally to handle that as a set of obligations which are cleared by invoices actually is a little tighter legally, it is a little was more efficient in gas terms when we move the system to polygon. And we expect a whole bunch of stuff which is currently back end manual goes on chain right
Dr. Petty
Mm.hmm.
Vinay Gupta
There that are oh God, this is such a point of pain for me. So the way that the way that this should work is there should be an extendable array in a smart contract sitting on Ethereum main chain tied to an NFT, and somebody should be able to insert a warranty into the extendable array when they want to offer somebody legal protection or an asset. And that entire process should be third party certifiers who are basically clicking their protections into a smart contract and all of the payment flows and all the rest of that stuff should be fully automated. The problem is, it's like two grand a transaction. To do that on Ethereum main chain
Vinay Gupta
Could be as high as five. These days it's just infeasibly expensive because it's all of this grained. So at the point where we move a bunch of this stuff onto L twos, what happens is these things go from being really, really papery, you know, like there is just a lot of paper and back end invoicing crap on the current Ethereum Ethereum system, which is fine if you're doing real estate for $1 million a pop, because it's the only language that real estate people speak. But when you start doing $60,000 gold bars, you really want that stuff automated away, right? So
Vinay Gupta
In the processes that we're doing right now, we're going from extremely simple smart contracts into smart contracts are a lot more all singing, all dancing. But in every case the actual legal transactions which are happening are very simple and the on chain stuff is happy path, sad path where things begin to go dramatically wrong. You'll lock the assets on chain and then you deal with everything offline in a court.
Jessie Broke
Well,
Vinay Gupta
And.
Jessie Broke
That doesn't sound great.
Vinay Gupta
For now.
Dr. Petty
Oh,
Vinay Gupta
For.
Dr. Petty
You're
Jessie Broke
Okay.
Dr. Petty
Talking
Vinay Gupta
Right.
Dr. Petty
About legal agreements. So arbitration is the court.
Vinay Gupta
Arbitration.
Fergulati
How?
Vinay Gupta
Yeah, I mean, I
Jessie Broke
Yeah.
Vinay Gupta
Keep using arbitration
Fergulati
Well.
Vinay Gupta
For court. It's not court. It's a tribunal. I keep misusing the Terme arbitration tribunal.
Dr. Petty
It's a
Vinay Gupta
Yes.
Dr. Petty
Formal process for arbitration. But
Vinay Gupta
Following
Dr. Petty
Like yeah
Vinay Gupta
Creation
Dr. Petty
Depending
Vinay Gupta
Under UK
Dr. Petty
On.
Vinay Gupta
Law UK jurisdiction task force rules. Let me grind one more point on this. So the the limit on what you can do on chain is defined by the limit of what the buyers and sellers lawyers will accept on chain. So when the buyer and seller lawyers are both very, very, very paper based, what you show them is that what's happening on chain is basically DocuSign plus payments. Use DocuSign, use
Vinay Gupta
Docusign. This is DocuSign, but you can issue an invoice in the DocuSign, and then you can sign the contract and make the payment that activates the contract. Oh, yeah. And you do it on the blockchain. Yeah. And the record is permanent. Yeah. Docusign with payments and. Yeah. Yeah. Okay, fine. If we were to build a system that was digital arbitration, where the arbitration tribunal accepts evidence on chain, they make a ruling on chain. You've got some interface with the video call where they've got a big red button they can push for which way they're going to vote. And we showed them that whole thing. Right now the buyer and seller lawyers would they'd just freak,
Dr. Petty
Mm.hmm.
Vinay Gupta
Oh my God, what the hell
Fergulati
He.
Vinay Gupta
Are you trying to. No, no, no. So we have to kind of not get the technology too far ahead of what the asset handling lawyers will accept. And the asset handling lawyers are not blockchain lawyers, right? We don't have to conVinayce blockchain lawyers they're already sold. They love us. No no no no no. We have to conVinayce gold industry lawyers.
Dr. Petty
Yeah,
Fergulati
Good
Vinay Gupta
Difference
Dr. Petty
That
Fergulati
Luck.
Dr. Petty
Makes sense.
Vinay Gupta
Are, it's fine. It works
Fergulati
No
Vinay Gupta
Because, you know,
Fergulati
Kidding.
Vinay Gupta
We walk in and we're like, well, so here is Sir Geoffrey Vos statement about the future of the blockchain and enforcement of contract under English law. And here's the UK jurisdiction task force digital dispute resolution rules. And as you can see, we contributed to the rules, are named in the rules and were the first company in the UK to use the rules. And well, you know, if Sir Geoffrey Vos says that this is a responsible way of handling disputes involVinayg digital assets, you know, I think I think that your legal team will probably find this acceptable and the legal team are like. The master of the rolls? Yes, the master of the rolls. The head of civil justice in Wales. Yes. He thinks the blockchain is okay. He thinks the blockchain is going to be necessary for all financial transactions in the future. In the same way the internet is necessary to all kinds of consumer stuff now. Wow. And that's kind of the door opener. Without the work that the English judiciary had done in examining how the blockchain shows up inside of a courtroom or inside of an arbitration tribunal, it would be almost impossible to conVinayce the legal fraternity that it was a responsible deployment of assets to put them on chain, like the
Dr. Petty
I
Vinay Gupta
Work
Dr. Petty
Like
Vinay Gupta
That was
Dr. Petty
That
Vinay Gupta
Done
Dr. Petty
Terme.
Vinay Gupta
In.
Dr. Petty
I love that terme. The legal fraternity. That's. That's wonderful. That's.
Fergulati
Is very.
Dr. Petty
That paints the picture well.
Fergulati
There
Dr. Petty
And
Fergulati
Was
Dr. Petty
The work you have to do.
Fergulati
There
Fergulati
Was. It's
Vinay Gupta
So?
Fergulati
Funny. We at one point in the past, we had a lawyer that did a podcast for our podcast network. It was called Law and Blockchain, and we had set up a way to pay her if we received a sponsor at the network level. And
Fergulati
We did. And then we paid her in crypto and then she disputed me. She goes, hey, I never got my sponsorship cut. And I said, well, here's the transaction IDs. Like, it's not my fault if you don't check your wallets. Like, there it is.
Vinay Gupta
My.
Fergulati
And she was like, I'm going to need something more formal than this. And I said, that's very funny. You're not going to get it for me. I'm not wasting my time. Like making a bunch of receipts and shit. Like, you're in crypto, you're doing a crypto podcast. This is the blockchain. This is what it says. This is the wallet you gave me. That's where I said the money. These are the transactions. It's over. Like we don't need anything else. She's like, well, I'm going to need else. And I was like, well, you're going to need a new network too, because I'm not you're not doing your show for us anymore. And it's
Vinay Gupta
Yeah.
Fergulati
Just, it's funny how we've got this technology. It's like fool proof in my eyes, obviously, but
Fergulati
Still, the human, like, getting over that human hump is going to take so much longer than anyone ever thought.
Vinay Gupta
Social.
Fergulati
Because even the lawyer, she's a lawyer. She was a lawyer, and she
Vinay Gupta
Yes.
Fergulati
Was still like, no, that's not enough for me. And I was like, this is you realize this is absurd. So
Vinay Gupta
Yeah,
Fergulati
I
Vinay Gupta
But
Fergulati
Do like
Vinay Gupta
Man,
Fergulati
That
Vinay Gupta
This
Fergulati
You're
Vinay Gupta
Is
Fergulati
Tackling it.
Vinay Gupta
This is it, man. That is the social construction property. Right? So
Fergulati
In.
Vinay Gupta
You had handed her stuff, right?
Vinay Gupta
The stuff is being transferred, but the stuff wasn't property because it didn't come with the necessary paperwork that made it into property.
Dr. Petty
Under
Fergulati
Yeah.
Vinay Gupta
Still
Dr. Petty
Her eyes.
Fergulati
Under
Vinay Gupta
Under
Fergulati
Her eyes.
Vinay Gupta
Her
Jessie Broke
Right?
Fergulati
Right?
Jessie Broke
Right.
Vinay Gupta
Right because her
Fergulati
Yeah.
Vinay Gupta
Property norm required something, and your property norm required something. But, you know, everybody agreed the stuff had been handed over. The
Fergulati
Yeah.
Vinay Gupta
Problem wasn't the stuff. The problem was the paperwork that turned the stuff into property. It's super
Fergulati
Now.
Vinay Gupta
Weird,
Jessie Broke
I need.
Vinay Gupta
Like,
Jessie Broke
Federation.
Vinay Gupta
I mean.
Jessie Broke
Federation.
Fergulati
To
Jessie Broke
Global
Fergulati
Be fair.
Jessie Broke
Interplanetary scale. Legal norms.
Vinay Gupta
Which
Fergulati
Yeah.
Vinay Gupta
We have,
Dr. Petty
Just.
Vinay Gupta
By the way, we've got great legal norms that work at a planetary level 169
Vinay Gupta
Countries, 172 jurisdictions. And there's every reason to expect that those norms will work in space, too, for reasons which I could go into. But it's another rabbit hole.
Fergulati
Well, I guess to be fair, when she asks for more, I just exported the transactions from etherscan to a PDF and then sent
Dr. Petty
Haha.
Fergulati
Her a PDF and I was like, is this good? And then she said no. So then I made it a doc X for word and I sent it to her. I was a little bit of an ass, but. I mean.
Vinay Gupta
I, I've heard
Fergulati
Anyways.
Vinay Gupta
A story recently about somebody trying to get a German law firm to accept a document. So, you know, notarization where you take a document to an office and they look at you and they look at your passport, and they
Vinay Gupta
Put a big stamp on the document and they witness it. Never had
Jessie Broke
Yep.
Vinay Gupta
To do that
Dr. Petty
Yes.
Vinay Gupta
Notarization.
Jessie Broke
And that? Yep.
Dr. Petty
Oh, yeah.
Jessie Broke
Multiple times.
Vinay Gupta
Yeah,
Dr. Petty
Oh, yeah.
Vinay Gupta
That. So somebody was trying to get a German outfit to accept a document that was being notarized in England. An English notaries and German notaries are really different animals. German notaries are like law firms and English notaries are like. You know, they're just they're just they just don't really ask what's in the document. They just provide the proofs. Right. It's a much, much less formal process. So the German lawyers were haVinayg a real hard time accepting the documents. So they walk into the notary of like, right. We need the German law firm to accept this. What do you do? They're like, do you really want to know? Yeah, yeah. Tell us. So the answer is you need golden string. What? Yeah. So you just kind of put golden string all over the document, and then you, you put sealing wax over the golden string, and you have to punch some holes in the document and loop it through a particular way. And at the end of it, it produces this kind of medieval bundle of paper with some golden string wrapped through it, and then big seals that kind of stick everything down. And then you put the embossing on the big seals, and the English folks are just like, but it's the same document in the same office. And they're like, do you want the Germans to accept it or not? And so they go through the song and dance, and they put all the gold seals and the string on and stuff like that, and then they ship it to the Germans. And the Germans are like, fine, thank you for the document notarization. Accept it. Form over content culture over semantics.
Vinay Gupta
Yes.
Dr. Petty
So.
Vinay Gupta
And, you know, all your lawyer wanted was, you know, she wanted the freaking seal in the cold straight. Can I have some cold string on this, please? And nobody will ever ask for the gold string. Oh, but this isn't done properly. It doesn't have gold string on it. Would you like some candles? And maybe we could send you a little a little muffin with a candle. Would that help? No, I want my gold string.
Fergulati
He.
Vinay Gupta
Yeah. People are insane.
Dr. Petty
You
Jessie Broke
Would
Dr. Petty
Are
Jessie Broke
It be
Dr. Petty
Explaining.
Jessie Broke
Possible?
Dr. Petty
Go ahead. Go ahead. Jesse.
Jessie Broke
I was gonna ask, so, like, I, I have some things that might be worth using material for. Similar to
Vinay Gupta
Yes.
Jessie Broke
Gold bars, both physical and digital. Could I
Vinay Gupta
Yes.
Jessie Broke
Could we, like, run through using material to sell these things?
Vinay Gupta
Yeah, sure. What you got? Tell me what you want to spend.
Jessie Broke
Okay.
Vinay Gupta
What
Jessie Broke
Cool.
Vinay Gupta
You want to sell.
Fergulati
Okay.
Jessie Broke
So.
Dr. Petty
Okay.
Jessie Broke
Okay. No. So, like, I'm into keyboards and audio equipment as, like, you know, a side hobby. I have
Vinay Gupta
Mm.hmm.
Jessie Broke
Some keyboards that are fairly expensive. Same thing with headphones. And when it comes to, like, digital collectibles, you know, I play some video games where some of the collectibles are like, five figures worth. And so,
Jessie Broke
If I was looking to sell, you know, some real life stuff and then some digital stuff, how would it look like to go through that process of selling something through Mattereum?
Vinay Gupta
Okay. Great. Oh, this is
Dr. Petty
It.
Vinay Gupta
Fun. Right. So let's divide these into some piles. Right. The first question is physical assets versus digital assets. So
Vinay Gupta
The digital assets the question is whether they are formally property or not. And if they are formally property are they your property. So let's start with are these things your property, or are they sort of like in-game objects that are probably technically, legally the property of the company that operates the game?
Jessie Broke
Yes. So
Vinay Gupta
Yes.
Jessie Broke
Like for instance the example is Counter-Strike, which you probably familiar with by name.
Vinay Gupta
Yeah,
Jessie Broke
So it's
Vinay Gupta
Yeah.
Jessie Broke
Owned by valve. And so
Vinay Gupta
Yep.
Jessie Broke
Yeah, the in game, you know, data is probably owned by them. But my character has, you know, some digital items on it.
Vinay Gupta
Yes. So probably what we would discover is that you are not the owner of those items in a legal sense. You're only the owner of those items in a sort of socially constructed sense relative to
Vinay Gupta
The norms in the game. Right. So inside
Vinay Gupta
Of the game, relative to the norms of the game relative to Valve's customer service, you're the owner of those items. So
Jessie Broke
Yep.
Vinay Gupta
If there's a dispute
Jessie Broke
Yep.
Vinay Gupta
And the Tribunal is Valve's customer service, they will agree the inside of those social norms with them as the adjudicator, these assets belong to you. But if we zoom back a step and say, okay, now we have to go to the United States of America District court, circuit court, whatever it is. And those people have to look at the situation and say, who owns it? Those people are going to say valve.
Jessie Broke
Okay.
Vinay Gupta
So in all probability, those assets cannot be sold as real, actual legal property. Because probably you don't own them in a way that that like an American court would choose to enforce.
Jessie Broke
Got it. I
Vinay Gupta
There
Jessie Broke
Always had this
Vinay Gupta
Is
Jessie Broke
Question
Vinay Gupta
A
Jessie Broke
Of like, I've
Vinay Gupta
There
Jessie Broke
Seen some
Vinay Gupta
Is
Jessie Broke
Video
Vinay Gupta
A.
Jessie Broke
Games. Okay, okay, cool. I'll listen to
Vinay Gupta
The
Jessie Broke
The button.
Vinay Gupta
Go where you're going. Then I'll come back to the bar.
Jessie Broke
Okay, I was just going to say I've seen some games that mint an NFT that matches up with the digital in-game item. But to your point, in a court of law, the owner would be recognized as the actual game development company rather than the actual individual who still even owns the NFT, which is kind of weird.
Vinay Gupta
It's a little tricky when you get into NFTs and cash payments, so you probably didn't buy the object from valve, right?
Jessie Broke
I did not. Yes.
Vinay Gupta
So if somebody paid cash for something, it's much harder to argue that there wasn't a transfer of property.
Vinay Gupta
It's not impossible to argue that there was no transfer of property, but it's harder to argue. So when you get towards an NFT, you know, it's kind of like, well, does the company own the smart contract that the NFT is in? No, it's on the blockchain. It's public infrastructure. They don't have control of that contract. Or maybe they do. And that could be materially significant trying to figure out whether this is their property and you're kind of using it under license or whether it's your property, and they sold it to you fair and square.
Vinay Gupta
All of that stuff is very fussy, but there is a sort of way of hacking this right now. This is dirty. It's legal, it's clean. It might be economically efficient, but you've got to understand that this
Jessie Broke
And.
Vinay Gupta
Is like kind of filthy, right? So,
Dr. Petty
Filthy clean.
Fergulati
Yeah.
Vinay Gupta
Well, I
Jessie Broke
Filthy
Vinay Gupta
Mean,
Jessie Broke
Clean.
Vinay Gupta
It's the sort of thing, it's the kind of stuff that you find a lot in real world finance. Like you start asking,
Dr. Petty
Yeah.
Vinay Gupta
How does a company go public and you get to a bunch of places in the process of how a company goes public where you're like,
Dr. Petty
That's gross.
Vinay Gupta
You're kidding, right?
Dr. Petty
That's.
Jessie Broke
Yeah.
Vinay Gupta
Oh,
Fergulati
Yeah.
Dr. Petty
That
Vinay Gupta
Right.
Dr. Petty
Can't be
Vinay Gupta
So
Dr. Petty
Real. It's
Vinay Gupta
You
Dr. Petty
Real.
Vinay Gupta
That can't be
Dr. Petty
Yeah.
Vinay Gupta
Right. That's how they do that. What? So it's a little bit it's one of those. Right. It's a financial it's a, it's a thing which allows you to get transactions done by taking all of the nasty problems and wrapping them up in somebody else's money. So let's take an independent person with a lot of money, let's say, who's the guy that owns owns valve again? What's his face?
Jessie Broke
Gaben.
Dr. Petty
Gabin.
Jessie Broke
Gabe. Newell.
Vinay Gupta
Gabe. Yeah. Gabe. Right. Gabe. So let's say that Gabe says, right. Look, I don't really care what the lawyers say. I want people to be able to buy and sell valve stuff as if it's their property, and I'm not going to hassle with their corporate law. Here's what I'm going to do. I'm going to take $20 million. I'm going to put it in an account, and I'm going to say, you should go ahead and treat these assets as property. And if something goes wrong and it gets overturned in a court of law, I will pay for all the legal costs and I will pay you whatever financial damages you got out of this pool of money that I'm reserVinayg for that purpose. Reasonable.
Jessie Broke
I wouldn't understand why he would do that unless there's
Fergulati
It's
Jessie Broke
Like an
Fergulati
Reasonable,
Jessie Broke
Upside
Dr. Petty
Red
Jessie Broke
Business
Fergulati
But.
Dr. Petty
Tape
Jessie Broke
Wise.
Dr. Petty
Cutting.
Jessie Broke
But
Dr. Petty
It's called red
Jessie Broke
Yeah,
Dr. Petty
Tape cutting.
Jessie Broke
Yeah.
Dr. Petty
It's.
Fergulati
Yeah.
Vinay Gupta
Right? So Gabe wants her to be a thriVinayg market for these valve assets. But, you know, corporate law is kind of a pain in the butt. And Gabe just says, right, here's a pool of money. You guys go out and act as if it's true. And if there is a problem, you'll let me know and I'll deal with the first, say, five court cases. After that, you're on your own. And at that point, a market begins to develop, norms become established. Everybody agrees. The system works. You wind up with, you know, 500, 5000, 50,000 transactions and everybody seems to be getting what they paid for. And at that point it's like, well, maybe, maybe this is just a system. And we put the legal work in and it's fine. Right? So in a notionally Gabe could do that. It's a little confused because Gabe is theoretically controlling that market. Let's say instead of Gabe, it's Vitalik. Right? Vitalik is right. Here's the Vitalik crypto game. Token
Vinay Gupta
Count. Legal defense fund. We will make you whole. If you buy a Counter-Strike asset that costs less than 100 grand and something goes wrong when you trade it on the blockchain, we'll come and make you whole. So what happens is you basically run the system as if everything is cool. And if something isn't cool, somebody gets a wallet. Now, if that's a high net worth individual, the political agenda, you call it a legal defense fund. If it's a ruthless, heartless corporation that wants to make money, they charge you money for accessing that pool. And it's called insurance. You ensure the transactions have integrity. If the transactions go wrong, somebody comes in with a role and fixes it for you. Right. And that is actually a doable, doable thing. Right. That's a fully doable thing. So in a situation where we're not entirely sure of the outcomes of transacting the property, it is possible to have an insurance type structure come in and underwrite the transactions. And that is a way of taking things which are only marginally property and turning them into property. Because when you buy the token, what you're buying is the insurance policy more than you're buying the actual questionable digital asset. And that's a way of bridging between two sets of norms in the game. We are absolutely sure that this thing is property out of the game. We're only 85% sure it's property, but we've got an insurance contract and the insurance contract is definitely property. So you buy the insurance contract and that then kind of covers the game asset. And that's a way of sort of wrapping a transaction that is on the edge of the world and turning it into something that everybody can understand. Because you can just you can, you know, you can whack an insurance contract with a spoon and it makes a nice ringing noise.
Dr. Petty
And what's the. Timeline of material and facilitating something like that.
Vinay Gupta
Oh, if you walked in tomorrow morning and said, we want to do this, we would get started and it probably take 2 or 3 months. And then you could have set a legal paperwork that would work for all of the assets of that type.
Dr. Petty
So
Vinay Gupta
We
Dr. Petty
That's something that
Vinay Gupta
Have.
Dr. Petty
You
Dr. Petty
Have to you have to set up a specific type of transaction, get it done properly, and then you can facilitate it relatively instantaneously.
Vinay Gupta
Oh, yeah. I mean, the first question that we always have, and I cannot tell you the amount of drama that this causes, right. We I had a meeting yesterday with somebody that had a bunch of really esoteric mining related stuff. Right. And you know how complicated mining stuff is in America, and you've got all these different kinds of rights and one thing or another, we were trying to make our way through the pile of the mining related stuff to try and understand what the underlying property was. And it turned out at the end of the meeting, nobody knew. Right. The buyers didn't know. The sellers didn't know. We didn't know. The right lawyer was not in the room. Nobody could identify under what law this property was constituted. Everybody wanted to trade it, but nobody could actually point to the statute that created it. Well, this is the stuff we always do. Yes, we understand, but legally, what is this stuff? Well, you know, and until we get the right lawyer in the room, that process is not going to go anywhere. Right. So you have to start with an analysis of what is being transacted. Is this thing property? And the answer to that is often kind of. And then the question is well, so what do we have to do in addition to that to make it into property.
Fergulati
In.
Vinay Gupta
Right. And that's kind of tricky. So I'll give you an example, which is concert tickets. Concert tickets can either be property or not be property. Right. You know, like if you have a ticket and it's, it's a paper ticket and you own the paper ticket and they don't check your passport and it's just a ticket and you turn up, that's without a shadow of a doubt, physical property. And you can transfer it to somebody for cash. That's an effective transfer of property. The ticket is the piece of paper, and if you lose it, you've got no recompense. At the other extreme, you have kind of tickets that you would get from big institutional ticket sales places where they check your ID at the venue. The tickets are nontransferable, and at that point the ticket is more like some kind of license. The physical paper is really unimportant. If you turn up with your passport and no paper, they're still going to let you in the venue. The tickets are just a reminder. The actual thing is some kind of contractual obligation on their behalf to let you in, but it's nontransferable and at that point, it's really not property. And the fact that you can have a concert ticket be either property or not property or some weird thing in between, depending on a bunch of protocol issues about who is admitted to the venue and what it said on the website and the terms and conditions. You know that legal tangle is where Ticketmaster operates a monopoly. So,
Fergulati
Ihmm.
Vinay Gupta
You know, question one is this property? Question two whose property? Right, and two's property is even worse. Oh my God, is it property? Okay, there are some nice clean, yes or no answers to that. Whose property do I have the right to sell this? Yes. Can you prove you have the right to sell it? What? Yeah. This house. Can you prove you have the right to sell this house? Well, it's my house. Yeah, but are we sure it isn't also the bank's house? Are you sure your grandmother doesn't still own 2% of it? Are you sure you don't owe a bunch of money to some roofing contractor that came in two years ago, and they still have the potential for a workman's lien or a builder's
Fergulati
Aileen.
Vinay Gupta
Lien, whatever they call that. And so just figuring out whether somebody is outright ownership of a piece of real estate is a nightmare. And there are companies that specifically sell title insurance, which is they went off and they did a check and they come back and they give you a piece of paper and blah, blah, blah, blah, blah. So all of these questions, these are primal questions about property that you never really notice because most of the time you're working with retail, right? I walked into the shop, I gave them my credit card. I walked out with this laptop. I own the laptop. All good. But that is although there are a lot of transactions of that type, right? There's a really common model mode, which is chattel property bought retail, chattel property bought, mail order. Those things are very tightly defined, particularly when the property is new. When you get into second hand markets, the complexity goes through the roof. When you get into assets which aren't chattel property, the complexity goes through the roof. Used cars are a thousand times more complicated than new laptops.
Jessie Broke
Interesting.
Vinay Gupta
Right. So the first the first question is it property and who owns it? Those things are a big deal. So we covered the digital stuff physical stuff. We're talking about chattel property. We're talking about things that you bought and you own.
Fergulati
Jesse.
Jessie Broke
Yeah,
Vinay Gupta
Keyboards
Jessie Broke
Yeah
Vinay Gupta
Things.
Jessie Broke
It is, it is things that I,
Dr. Petty
But.
Jessie Broke
I own similar to purchasing a laptop.
Vinay Gupta
Yeah,
Jessie Broke
Yeah.
Vinay Gupta
Yeah. Right. So that that is second hand chattel. It is physical property that you bought that you can prove that you bought that you can prove that you owned, that isn't currently owned by somebody else, etc., etc.. And at the end of that process, what do we need? We need a description of what it is that is being sold, and we need some secure way of handling the physical assets. You're somewhere in the state.
Jessie Broke
Yep.
Vinay Gupta
So I got a cough here. Better. Sorry, I've been spending too much time talking on a microphone, so I'm a little dry. So in America, there is a vault. And in the vault there are, I want to say, maybe 100 objects. 89 objects belonging initially to William Shatner, who turned them into NFTs, who three years ago, four years ago and sold some of them on OpenSea. And man, you
Dr. Petty
We
Vinay Gupta
Want
Dr. Petty
Interviewed
Vinay Gupta
To talk about
Dr. Petty
For that.
Vinay Gupta
Sleeper assets.
Jessie Broke
And I saw those collectibles, the
Dr. Petty
We
Jessie Broke
Figurines
Dr. Petty
Interviewed
Jessie Broke
That
Vinay Gupta
Right.
Dr. Petty
You.
Jessie Broke
He
Dr. Petty
We
Jessie Broke
Was
Dr. Petty
Interviewed
Jessie Broke
Selling through
Dr. Petty
For
Jessie Broke
You.
Dr. Petty
It.
Vinay Gupta
Yeah
Vinay Gupta
That's right. Right. So those things are still on OpenSea. I don't think they're setting any more bids, but the people that bought those things and have them on OpenSea have the ability to sell those assets. And those are probably some of the first reasonably well legally constituted physical NFTs in the world. You want to talk about collectibles. Those things are NFT history. So you need some kind of vaulting arrangement. So somebody has to hold the stuff other than you. You need some protocols for what happens to identify the stuff and verify its physical condition. And you need some protocols for handling what happens when somebody cashes the NFT and wants the underlying asset. And you need some protocols for resolVinayg the disputes. If somebody says they got it and it wasn't what was described. And for each one of those things, you look at the asset, you look at the people involved, you look at the resources. You write down what the protocol is, and you embed that in the asset passport. You bind the asset passport to the NFT. And then when the asset is taken into custody inside of the vault or whatever it is, it's storing it. That's when the NFT is listed for sale.
Vinay Gupta
And that's how it works. It's just a process of methodically going through, okay, where's the stuff going to be stored? It's going to be stored in my garage. That is not a sufficiently secure place to store other people's $10,000 keyboard property. This needs to go into proper storage. Well, what's a proper storage for $10,000 keyboard? And we figure out what proper storage looks like and you get a storage solution. Well, okay, how are we going to do a condition report? Well, who would you take this to if it broke Bob okay. So is Bob willing to look at this stuff and verify that it's currently working right. Guarantee. And if it's broken, Bob will fix it. Sure. How much is Bob going to charge? Well, and then you figure out how much Bob costs and Bob's costs go into the asset passport. And every person that buys the asset passport pays Bob a fee. And you see how this sounds like? It's kind of methodical. It's like one step at a time. There's a list of questions, and you can't get an answer to every question. And when every single question is answered and legally documented, you're done.
Jessie Broke
Yeah.
Vinay Gupta
This is what material. This is what material is. It's the
Fergulati
Oh.
Vinay Gupta
Expertise to answer those questions correctly. That's what the company does. The end product. The end product is clear thinking as a service.
Jessie Broke
Interesting.
Vinay Gupta
Just
Jessie Broke
It would be. It
Vinay Gupta
Right.
Jessie Broke
Would be cool to like, see, you
Vinay Gupta
Holy
Jessie Broke
Know,
Vinay Gupta
See.
Jessie Broke
Like I the the most leanest form of as little of human interaction as possible and then Mattereum become like eBay and like Legalzoom combined with DocuSign.
Vinay Gupta
Hmm'hmm.
Jessie Broke
That would be pretty interesting.
Vinay Gupta
Yeah, I'm. So the way that this could work. Take an asset class, like watches. I have been fighting. So there are two things that I have fought in my life which had the potential to become real addictions. And the first was audio equipment. There was a real possibility at one stage in my life, I was going to become an audio file, and I was going to be one of these people that, like, didn't more, didn't have a mortgage, but they had like, you know, $58,000 worth of stereo gear. And fortunately, I managed to hold off Audiophilia for many years until I was old enough that I couldn't tell the difference between good and bad audio anymore, because, you know, as a 52 year old raver, you know, like, I actually still have a little heavy metal damage in my left ear. Was it worth it? Yes.
Jessie Broke
Yeah.
Vinay Gupta
Yeah. Well, I mean, it's just, you know, I wore earplugs my entire life when I was at, like, anything that was really loud. But once
Jessie Broke
Yeah.
Vinay Gupta
In a while, you forget your earplugs and you get careless. And, you know, I have a tiny little bit of tinnitus in one year and blah, blah, blah. But Audiophilia was, you know, that was a real danger because, you know, you watch Audiophilia just eating people's lives. The search
Dr. Petty
I
Vinay Gupta
For the
Dr. Petty
Know.
Vinay Gupta
Perfect sound. Oh, yeah. That. How old are you now? Roughly.
Dr. Petty
May 40th.
Vinay Gupta
Furry. Yeah. So give
Jessie Broke
32
Vinay Gupta
It another 5
Jessie Broke
Here.
Vinay Gupta
To
Fergulati
Well you're
Vinay Gupta
8
Fergulati
Not.
Vinay Gupta
Years.
Dr. Petty
39.
Vinay Gupta
39. Give it another 5 to 8 years. You won't be able to tell the difference either. You're you're at the end of the realistic part of audiophilia.
Dr. Petty
It makes it way
Vinay Gupta
Because
Dr. Petty
Easier
Vinay Gupta
Once you.
Dr. Petty
To find that perfect setup because you can't tell the difference.
Vinay Gupta
Right? Because what happens is you lose all your hearing over about, say, 14,000Hz. So at that point it doesn't really matter as long as you've got a really solid subwoofer and your midrange is fine. All of that
Jessie Broke
Exactly.
Vinay Gupta
Super esoteric spectral stuff, you just can't hear anywhere. Something to look forward to, right?
Dr. Petty
I'm aware of it.
Vinay Gupta
Do you shoot guns?
Dr. Petty
Yes.
Vinay Gupta
Yeah. So you may have already lost a little of that. So
Dr. Petty
Yep.
Vinay Gupta
I resisted audiophilia very carefully. And what's happening now is I'm slowly turning into a watch person. And that's ridiculous, because nothing at this point in history is more useless than watches. They are literally just ornamental at this point. But because, yeah, I mean, it's like, oh, so you, you, you, you grow your own mint. Yes, yes. Because you can't buy mint at the store. Well, I like to grow my own mint. Okay, great. So, you know, you manufacture your own time rather than getting it from NP like normal people. Ntp network time
Fergulati
The.
Vinay Gupta
Protocol.
Dr. Petty
Yes,
Vinay Gupta
The thing that produces
Dr. Petty
Yes.
Vinay Gupta
Industrial time, like electricity is produced by power plant. We have machines that produce time. So nonetheless watches are cool and there is an enormous infrastructure for watch people. And, you know, I mean very tiny, low end, cheap watch guy. Right? I would consider $1,000 to be a stupid amount of money to pay for a watch. But a lot of really interesting stuff happens at 2 or
Fergulati
In.
Vinay Gupta
$300 for their watches, which are really fun to wear as essentially theoretically functional jewelry. Although if you want to know what time it is, you still probably look at your phone first, right? It's a sad condition, but you know, you get
Fergulati
Oh,
Vinay Gupta
To be middle aged.
Fergulati
I look at my watch.
Vinay Gupta
Yeah,
Fergulati
I'm a watch guy for
Vinay Gupta
I think
Fergulati
A
Vinay Gupta
You could
Fergulati
Watch
Vinay Gupta
Do. It's
Fergulati
Purpose.
Vinay Gupta
All
Fergulati
Well,
Vinay Gupta
So. Go
Fergulati
I think
Vinay Gupta
On,
Fergulati
We're
Vinay Gupta
Go
Fergulati
Running
Vinay Gupta
On.
Fergulati
Out of time. I think.
Vinay Gupta
Okay,
Fergulati
I think I
Vinay Gupta
So
Fergulati
Hate
Vinay Gupta
We're gonna
Fergulati
To cut you off, but
Vinay Gupta
We're gonna do the watch thing
Fergulati
We can
Vinay Gupta
Real
Fergulati
Always
Vinay Gupta
Fast.
Fergulati
Do a part three. No
Vinay Gupta
Oh,
Fergulati
Kidding?
Vinay Gupta
No, no, no,
Fergulati
No.
Vinay Gupta
We're gonna be watching real fast. So anywhere
Fergulati
Okay.
Vinay Gupta
In the world, you can find someplace which will fix a watch for you if you take it in. And you can find somebody that will buy a watch from you after examining it and making sure it works right. Any city, all of those cities could turn watches into NFTs. You walk into a place that would buy a watch for money, you walk into a place which would repair a watch. They've got all the skills necessary to asset password a watch. Secure
Vinay Gupta
Custody. You take the watch to the store, they do an examination, they write a report. If you agree with the report, the watch stays in their custody. They issue an NFT, and they send the watch to the big vault in the sky. And at that point you wind up with the material. Work still has to be done. Somebody still has to look at the goods. But there are already 100,000 people in the world that have the skills to look at the goods, and they've got everything they need, apart from a phone app and maybe an insurance contract that would allow them to become agents or free agents operating inside of the blockchain asset Passporting goods. They could do that under material contracts. They could do it for for other companies at the same time. You know, Bob's Watch NFTs are us Inc. Okay. Yeah, yeah. You work with Bob, you work with material. And which one do you want to put your watch on? I want to put my watch on material. Why? Because it's expensive and that's very expensive. Stuff goes okay, fine. Right. So it's not that you have to start from scratch, and it's not that all these people would work for material like employees, the prospect for independent experts to work together to get things sold by absorbing the liability and the deals. Every asset class that matters, those people already exist and there are hundreds of thousands of them. Real estate. How many Americans work in real estate? Every single one of those people could be a participant
Jessie Broke
It's a lot.
Vinay Gupta
In the system.
Dr. Petty
Half of them.
Jessie Broke
Yeah.
Vinay Gupta
Half of it, right?
Fergulati
Hmm'hmm.
Vinay Gupta
Literally. And I'm talking builders and plumbers. You take careful pictures of the plumbing that you put into a building, and you put that into an asset password and you get paid every time the building changes hands. Seriously. Builders, plumbers. You pour the foundation, you take pictures of it being poured. You put those into the asset passport. You get paid when the building changes hands. The best imaginable
Fergulati
Woof!
Vinay Gupta
Documentation because the workmen get paid for taking pictures of their work, so that when somebody comes back in 12 years and says, you know, so that foundation, is it stainless steel rotor down there or is it rebar? Oh, it's stainless steel rod with no expense was spared. Can you prove it? Yeah. Here are the pictures.
Fergulati
So
Vinay Gupta
The stuff. Really?
Fergulati
Why do you keep opening such good doors to great conversations
Jessie Broke
Now.
Fergulati
In your stories? Oh my goodness.
Jessie Broke
I
Vinay Gupta
Yeah.
Jessie Broke
Understand
Jessie Broke
Where you're coming from because we're haVinayg some roof repairs done on the house. So, like, we had to engage like a basically a roof consulting company to take pictures of the roof, assess the damages. And so it's just interesting, like to imagine a reality where this could all be done, you know, somewhat on chain with, you know, the off chain component. But yeah, pretty
Jessie Broke
Cool.
Vinay Gupta
Docusign's a real good model. Docusign is sort of where blockchain like stuff has actually gotten most penetration into the real, real world. You know, lawyers
Dr. Petty
Yeah, yeah.
Vinay Gupta
And big companies and everybody else. And a blockchain version of DocuSign is there are probably 50 of those already. A blockchain
Dr. Petty
Have to
Vinay Gupta
Version
Dr. Petty
Be.
Fergulati
Hmm'hmm.
Vinay Gupta
Of have to be. Right. So you know, blockchain, DocuSign plus some ability to do invoicing plus some ability to get transactional input from something like an NFT. You know, it's not that hard to imagine that the final thing that you get on your phone kind of looks a bit like DocuSign and a bit like eBay.
Fergulati
Hmm'hmm.
Vinay Gupta
And, you know, it's kind of a bit like DocuSign and it's a bit like eBay. And then there's kind of a bit over here that kind of talks to or is your crypto wallet, and there might be something over on the side of that looks a little bit like a banking app. And it's kind of like, you know, which modules are you interacting with? I am using the eBay like thing, and I'm taking pictures of this thing that I'm going to sell. And this person over here, this person over here is using the thing which is more like a banking app, or they're calculating the value of all the NFTs they've got and they're borrowing money against it. And, you know, you kind of wind up with a sort of blockchain interface to all of these physical asset processes through a phone, but each individual part of that looks more or less like things people are already using at huge scale. But, you know, the bottom line is that everybody knows that this is going to be the real world asset bull market, and we don't think that that bull market is going to be fragile in the way that, say, the NFT bull market was, because when the underlying assets are houses and cars and gold bars and fine art and wine and all the rest of this, you know, real stuff, what that bull market is sustained by is margin on transactions. The gold people are buying the gold anyway. They're doing it on the blockchain because it's more efficient. The money that sticks to the blockchain in that process is going to stay stuck. And
Vinay Gupta
So the more we build out a real world asset economy, the more you wind up with boom conditions that don't end. Because, you know, the Ethereum is valuable because people are really selling houses on it. And at that point, if ether prices go down, all that happens is the house. People sell more houses more quickly. It's a really different environment when it's real world asset trade that sustains the value of the blockchain rather than speculative assets like NFTs.
Fergulati
Well, join us again for part three. No. I'm kidding.
Vinay Gupta
If you guys want to go down some more rabbit holes, call me. Internet of agreements
Dr. Petty
Just have a
Vinay Gupta
For
Dr. Petty
Somewhat
Vinay Gupta
The videos are on YouTube.
Dr. Petty
Semi-regular
Vinay Gupta
You can watch the whole.
Dr. Petty
Call with Vinayay on various rabbit
Dr. Petty
Holes of material and blockchain tech.
Fergulati
Yeah.
Vinay Gupta
Sure.
Fergulati
It's been a pleasure speaking with you over the years. I mean, we've been the podcast for eight years now and you've been regular every year, and it's always eye opening and just a great conversation. So thank you very much. To everyone listening material, Google that you're going to land where you should land. Google Vinayay Gupta, you're going to land where you should land. Yeah, I guess what do we say at the end of this one, guys? Cocaine is not property. Play the outro.
Episode hosts - Demetrick Fergurson, Corey Petty, Jessie Santiago
Produced by - Christian Noguera
Edited by - Joe Siebert