While non-fungible tokens (NFTs) are generally believed to represent the link between an owner and an asset, without platforms acting as “digital notaries” there can be no effective way of stopping scammers from minting and selling plagiarized works, Shaban Shaame, the co-founder of Wakweli protocol has argued.
Tokenizing Real-World Assets
According to Shaame, the ease with which anyone (including scammers) is able to generate a certificate of authenticity for an NFT only further highlights the importance of having such an authenticating entity. In addition to using tools such as digital notaries, the co-founder of Wakweli — a Layer-1 protocol that issues certificates of authenticity for NFTs & real-world assets — said NFT users must learn to do their own research. NFT traders should always triple-check transactions they sign or the projects they join, Shaame added.
Also, in his written answers to questions sent from Bitcoin.com News, the co-founder also offered his thoughts on Bitcoin ordinals and why linking an asset to a “bitcoin fraction” like this may “present risks when making transactions with incompatible wallets.” He also touched on the tokenization of real-world assets and the future prospects of this phenomenon.
Below are all of Shaame’s answers to questions sent to him via Telegram.
Bitcoin.com News (BCN): Can you start by explaining to our readers what the tokenization of real-world assets is all about and the prospects of tokenized real-world assets on a blockchain?
Shaban Shaame (SS): Real-world assets are generally linked to a title of property of some kind, like the paper saying you own your house. The tokenization of real-world assets is the migration of a physical title of the property to a digital one, generally a non-fungible token (NFT). After tokenization, this digital token ideally represents property over the physical asset. This emerging mechanism has several complex parts, especially on how you enforce this digital link to the real world. For instance, is a shared ledger an acceptable support for a legally-binding title? Such questions have different answers depending on where you are in the world.
Once tokenized, new opportunities are enabled by this digital representation: it becomes easier to fragment assets into smaller parts or to transfer them fastly and at scale. For instance, when a building is tokenized, it becomes possible for thousands of people to share its ownership and to recurrently receive rent payments with digital currencies at a fraction of the cost. We also start to see tokenization projects around financial assets, equity shares, music, movies, ticketing, wine…Sky’s the limit, and we’ve only seen the beginning of it.
BCN: On the surface, non-fungible tokens (NFTs) are perceived as certificates of authentication. However, as you may have observed, intellectual property (IP) infringement remains a serious issue. Scammers can and are minting and selling plagiarized works and fake collections on different platforms or blockchains. Is there a way to prevent such scams and assure buyers that they are acquiring an authentic asset?
SS: The tricky part is that everyone can mint an NFT; so if anyone — including scammers — can create a certificate of authenticity, then nothing is. NFTs are a way to represent the link between an owner and an asset, but there is no real definition of what an asset is and what the link is in this scope. There is a missing piece in the digital space to clarify this: in the physical world, a notary would be there to make the link between your house and the paper representing it. As long as we don’t have this missing piece in the digital space — a digital notary — there will be no effective way to stop scammers. Wakweli — “the truth sayers” in Swahili — is this missing piece, an open notary that anyone can benefit from.
BCN: Since Web3 is evolving as a multi-chain ecosystem where users and assets can seamlessly move between different blockchains, can tokenized real-world assets (RWAs) be presented by a single token across the multi-chain cryptosphere? If yes, how does this work?
SS: The first step to answering this question would be to clarify the relationship between tokens and assets. A real-world asset may be represented by one token on one chain (1-1 relationship), but it could also be several tokens on several chains (like a multi-keyed safe). One of Wakweli’s objectives is to clarify this token-to-asset relationship so anyone [can] understand clearly what is linked to what. Anyone is able to get information about the representation of a certified asset by interrogating the Wakweli protocol directly or through third-party integration, such as on marketplaces.
BCN: Your protocol is said to use the so-called proof of democracy (PoD) consensus algorithm to certify the authenticity of any tokenized asset. Can you explain how it works as well as how this ensures that the same asset is not being represented by multiple tokens on multiple platforms?
SS: With the PoD, anyone can request verification for an asset on Wakweli. It is a community-based system where all actors have to lock actual value in certificates, from the requester to the certifier and its electors. Certificates are then controlled by the community who can issue challenge requests to try and get back this locked value if something’s wrong. This mechanism creates a general incentive for the community to tell the truth, generating a virtuous system that scales to protect the $16 trillion market that digital assets will represent in 6 years. And once an asset is certified on one chain, it will be referenced on Wakweli meaning any new certificate request for the same asset on another chain will be declined.
BCN: The Bitcoin Ordinals NFTs have recorded more than 10 million inscriptions so far. Ordinals are said to have brought a whole range of use cases to the Bitcoin network including BRC-20 tokens, NFTs, and more. What’s your take on the Bitcoin network’s ability to handle large volumes of tokenized real-world assets?
SS: Bitcoin Ordinals are one of many ways to represent real-world assets, with their own pros and cons. It relies on Bitcoin, the mother of all blockchains, using tech that was so far never breached: this has great value. On the other hand, linking an asset to a bitcoin fraction like this presents risks when making transactions with incompatible wallets. The Proof-of-Work mechanism also has some pros and cons, like energy consumption with current mining difficulty. Alternatives like smart-contract-based representations or protocol-native tokens enable different features that may be a good fit for some use cases. It ultimately depends on what you are tokenizing and who is your targeted audience, but Bitcoin Ordinals are a big part of the picture.
BCN: With the growing use cases of NFTs, many users have been falling victim to NFT scams. Scammers are always seeking new ways to exploit people and their holdings. What tips would you like to share to help our readers stay safe and avoid scams?
SS: You probably heard that many times before: always do your own research. Triple-check transactions you sign and projects you join: are they authentic? Is the team behind them reliable? Is the IP legit? Actually, this is precisely why we built Wakweli: to provide a simple way to avoid scams at a glance with a green tick mark. With Wakweli, anyone can share their project review, make it easily accessible and valorize it.
What are your thoughts about this interview? Let us know what you think in the comments section below.