Vinay Gupta’s Big Idea: An Identity Layer for Your Things

Vinay Gupta knows pandemics. And he knows how to deal with crises. When he researched the most effective way that society should respond to flu-like outbreaks, Gupta identified a concept that had not yet gone mainstream, “social distancing,” and wrote that social distancing is “one of the few tangible measures an ordinary person can take to increase their odds of survival.” This sentence alone is not remarkable. What’s remarkable is that he wrote it in 2008. 

Gupta, an old-school cypherpunk who helped launch Ethereum (serving as its release coordinator), has a long history of deep-thinking humanitarian projects, like his seminar Hope for the World, his work at the energy policy think tank Rocky Mountain Institute, and his invention of the Hexayurt – cheap, eco-friendly shelters for refugee camps and disaster relief. (If you’ve been to Burning Man, you’ve seen one.) 

Now he’s focused on his new startup, Mattereum. A few weeks before CV-19 shut down life as we know it, I caught up with Gupta at ETH Denver to explore how, exactly, Mattereum would change the world. 

And just what is Mattereum? In a novella-length manifesto, Gupta describes the project as a “companion to projects like uPort and SOVRIN – a digital identity layer for Ethereum, but for things instead of people.” The core concept: all physical objects of value would have “digital twins” that can be easily searched, tagged, classified, optimized, and – thanks to a clever system of smart contracts and Ricardian contracts – be bought and sold in a way that is legally binding in the real world. “Matter is worth more once it is searchable,” Gupta argues in the piece.

The document is a “manifesto” in the fullest sense, showcasing the sweeping range of Gupta’s intellect and interests. It plumbs the history of consumerism, engineering production, and waste management, tossing in both deep-cut references to Sigmund Freud’s nephew (Edward Bernays) and nods to “Fight Club.” Gupta on the early days of aircraft production:  “Everything was hand-tuned. Even the SR71, the most advanced plane imaginable in the 1950s, was hand-made. Gigantic sheets of titanium in fifty thousand ton presses still varied enough that essentially every one of the 32 SR71s created was unique and had to be maintained individually…” (There are many passages like this.)

The sheer volume can be dizzying. And yet there seems to be something of a paradox: As Mattereum rolled out in 2019, the focus seemed to be on William Shatner’s involvement with… art collectibles? “Cryptonians!” Shatner tweeted on May 9, 2019.  “My friends @VitalikButerin & @ElonMusk were trying to decide what to build on @Ethereum. I’ve been waiting & waiting…I finally decided to do something myself. Join me!” When announcing his involvement, Shatner said that Mattereum will help the collectibles space because “it can mean the difference between a priceless, future heirloom, and worthless fake.”

No shots at Shatner, but authenticating Star Trek memorabilia seems to be a far cry from the loftier goals of Gupta’s manifesto, which includes helping to “deliver sustainable abundance to all of humanity.”

I wanted to, as Gupta would say in the manifesto, “square this circle.” How, exactly, do we connect the seemingly mundane (but legitimate) act of improving collectibles with the stated goal of delivering “a significant reduction of the environmental and social harms caused by inefficiencies in industrial capitalism, using the Ethereum blockchain”? To be more blunt: Much of the blockchain space is hyperbole and bluster and pipe dreams, but Vinay Gupta is none of those things – he’s a man who actually gets things done. So I wanted to hear, directly from Gupta, how Mattereum would actually connect the dots between Kirk action figures and cracking the world’s sustainability problem. 

Gupta’s response? Mattereum could provide 10 percent, and maybe 15 percent, of all of the unmet needs of humanity… and the solution to this puzzle is in your garage. 

A quick note on the timing: We met in February, so in a throwback to what feels like a long-ago era, our conversation is Coronavirus-free. Since then, Mattereum has provided a gamut of COVID-19 resources. The interview has been lightly edited for length and clarity.

CoinDesk: How do we get from William Shatner and art auctions to the *big picture* goals of Mattereum, like helping millions of refugees?

Gupta: The first-world application is where you make the money and you refine the design. That’s our collectibles. It’s fine art. It’s wine. Next year it will be electronics and phones and all the rest of that stuff. But once those systems are slick and up and running, that’s how you then find a 10-millimeter wrench in a refugee camp.

So the first wave is fine arts? And the second wave is cameras, cars, electronics?

Gupta: This year will be arts and collectibles, next year will be things that are mass-produced, like cameras, cars, and electronics. 

And the third wave helps out refugees?

Gupta: So once you’ve got the ability to track all the matter and all the property rights associated with the matter, and once you get good at that, over the next 10 years, the price will drop to the point where, if you’re doing something like large-scale refugee relief, every single physical object that’s been paid for with aid-money gets a tracker.

It’s so hard to explain, because it cuts so deep into people’s idea about the structure of the world.

How does that work, exactly? 

Gupta:  So [it starts] with digital identities for physical things. Once you’ve got digital identity for physical things, then it’s a question of what kind of information you put into that portfolio. For fine art, it’s the authentication, it’s the providence, it’s all the rest of that stuff. For mass-produced items, specification is super-important. Does this SD card fit into this camera, and allow it to record 4K video at 60 frames? 

How is that different from, say, eBay? What’s the value over that? 

Gupta: Most of the information on eBay isn’t good. I don’t know how much you use eBay. [Laughs.]

Not much, really. Fair. 

Gupta: There’s also the fact that even if you, as the [eBay] seller, happen to be perfect, and even if you’re some crystal clear angelic channel of truth, everyone else is lying. So I have no way of trusting you. 

How does Mattereum crack the problem?

Gupta: So now we get a third party involved. The third party looks at the goods. The third party sells me information about the goods in the form of a warranty, and you sell me the physical goods. That gets rid of the conflict of interest, because that third party’s job is to tell the damn truth. They don’t get paid for the object sale.

How did they get paid?

Gupta: When I’m about to buy the object, I pay them for the warranty information. If the object arrives and is not as warrantied, I claim on that.

So you’re basically just buying a warranty?

Gupta: It’s multiple third parties that sell you a warranty, telling you exactly what the object is like. They’re not guaranteeing its future performance. They’re telling you this really is a Stradivarius violin. They’re telling you this really is a Cortina cylinder head gasket. 

Those third-party promises break the logjam that’s caused by the fact that the seller is wearing two hats. [Normally] they have the goods and also they describe the goods to you, so they’re incentivized to distort. These third parties are not incentivized to distort.

You’re saying there’s something fundamentally flawed with the classic, two-party system of buyers and sellers? That’s actually a bit more “disruptive,” if you will, than I thought. 

Gupta: Yes, absolutely.

I don’t think that’s been fully appreciated, from what I’ve seen online.

Gupta: No. It’s so hard to explain, because it cuts so deep into people’s idea about the structure of the world. If we explain to people what we’re doing at that level, their eyes glaze over. Because believe it or not, that’s only the thin edge of the wedge. 

What do you mean?

Think about object pricing. Here we have an object. You and I both think that this is worth $1,000 if it’s as described. But I think there’s a one third chance that you’re going to oversell it. And you think there’s a one in 20 chance I’m going to screw you on eBay and just refuse… like go raise a dispute and then not pay.

I’m with you. 

Gupta: So if you [the buyer] risk-compensate a 30 percent chance of the thing being fake, you’ll only pay $700. And if I risk-compensate because there’s a one in 20 chance you’ll screw me using the eBay dispute system, I want $1050. So there’s now a $350 gap, which means we can’t do the trade. Too big a gap. 

So now Bob comes along with an insurance policy, and he’s like, ‘I’ve examined the goods. I’m going to sell you a warranty on how this thing works. That’s gonna cost you $30 and you guys can split it 50/50. And that will then bring your price estimates together, because it will get the fraud out of the equation.’ We can each pay $15 to do the deal at $1000, or we can not pay the $15 and not do the deal. Well, if we wanna do the deal, it’s worth that small overhead to sell the risk to somebody who wants it. 

I see how that might help in super-expensive things, like fine arts. But can you give another example of how this would add value in reality? 

Gupta: So take electronics. Let’s say you buy a Mac. You’ll buy it and then you’ll use it for a while and then you’ll sell it. And then you’ll buy another one. Because there’s so much distrust in the secondhand market, the prices are lower than they ought to be, because of the doubt discount. 

When you first bought the Mac, it costs you $2,000. You know if you’re going to sell it, you’ll only get 1000 bucks for it. So for you, your effective cost is $1000. If the doubt discount is entirely removed, on the secondhand market, it might sell for $1600. So you won’t be paying $1000, your effective cost is only $400, based on the high quality of information in the secondary markets.

Ah, I’m starting to see where this is going… 

Gupta: It took five incredibly smart people two years to figure this out. We don’t expect people to get it immediately, which is why we’re starting with collectibles and toys. It’s the thin end of the wedge. But it goes from toys being reused to nuclear power stations in a few years.

How so?

Gupta: Imagine that the laptop is now six or eight years old, and it has been sold a third time, fourth time, fifth time. It has gone through a bunch of hands. On eBay, its value is $50. It’s just a hunk of junk because at that point, you’ve got no accurate information about it, other than its model name and year. You look at that laptop and you think, hunk of junk. 

Now if somebody who actually knows old laptops looks at that, and says, “We’ve swapped out the SSD for a new SSD. And we’ve upgraded it to Windows 10, and it has a current license.” That machine is fully useful, and it goes from $50 to $250. What happens [today] is that objects lose so much trust and so much information that they wind up in the landfill while they’re still useful.

We’re going to go through areas where there are big glaring problems, and work our hardest at solving those problems. So for about a year, it’s going to look like a really, really weird high-end flea market.

So the idea is that by restoring trust to previously assumed useless items, you’re squeezing more use out of them?

Gupta: You’re tying the object back to the story. The object and the object’s data get reunited. 

But I would think that things like laptops only make up a small slice of landfills…

Gupta: Oh yes. I mean, landfills…it’s entirely things like plastic cups and napkins.

So the bulk of the landfill problem won’t be dented by this, right? 

Gupta: The landfill problem is not the problem we’re solving here. The problem we’re solving is all of the people who want laptops, but can’t afford them. There’s a huge unfilled need for stuff in society. And we’re not reaching that need because the stuff is being roped into landfill, rather than being roped into people who want to buy them.

And this is only the first of the three things we do. So the asset passport is the first brick. The second brick is a thing called an Automated Custodian, or an automated title holder. And the third is Smart Property Register. [Note: These are fully explained in Gupta’s manifesto.] 

This is all pretty abstract. How do you explain this to a mainstream audience? 

Gupta: It’s a lot of moving parts because it’s in the abstract. Right? But if you’re a collector of Star Trek stuff, this becomes really concrete. Because you look on eBay. And you click on the asset passport link. And it comes up with a valid asset passport. And you put a nickel into the insurance contract. And then you buy the object. 

In the next version, you take out the insurance contract, you push money into the smart contract. Now you own the object. So what happens is we gradually blockchain-ize more and more of the transactional space, until eventually, what you wind up with is an API attached to every physical object of value, and you can just push data and money into the API to control the asset.

When do you think that will happen?

Gupta: I think we will have a limited form of that done in the next year for sure, and very plausibly this year, depending on our fund-raising. 

How about at scale?

Gupta: There’s a kind of dot-com rubric which is, “It’s better that 1,000 people love what you do, than 10,000 be kind of lukewarm.” So I think we’re going to go through collectibles. We’re going to go through wine. Antiques. We’re going to go through areas where there are big glaring problems, and work our hardest at solving those problems. So for about a year, it’s going to look like a really, really weird high-end flea market. 

And how does it expand beyond those high-end niche items? 

Gupta: I think the place where this will really show up in most people’s lives is… I don’t have a good generic name for this yet, but let’s say “experimental clutter.”

How so?

Gupta: Let’s say you got it into your head you want to go fly-fishing. So you buy a bunch of fly-fishing gear. You spend about a year and a half fly-fishing. Then you discover that fly-fishing is kind of time-consuming. And you’re a bit busy because you’ve got a new baby.

Ah, right, this reminds me of how in the 80s, everyone bought dumb infomercials for things like “thigh-masters,” and then the thigh-masters languished in the attic, never used. 

Gupta: [Laughs.] That’s the one. Precisely. So all of that stuff, you buy it as an experiment. I’m the kind of person who does this all the time. And the liquidity crisis on the second-hand sale costs you 50, 60, 80 percent of the object’s value, often to the point where it’s no longer worth trying to sell the damn thing.

But I’m still fuzzy on the mechanics. In the case of the fly-fishing rod, do you have some actual person, like a bored teenager, who’s like, “I’m going to come to your attic and verify that this thing is in good condition?”

Gupta: Start simpler. Think of Patagonia. You know Patagonia?

Sure. We’re in Denver, after all. [Note: Patagonia jackets are to Denver what body paint is to Burning Man.] 

Gupta: So if every Patagonia jacket has an “asset passport,” you walk into the store with your used Patagonia jacket. They spend a minute and a half looking it over to verify the condition. Patagonia stamps your asset passport, and now you sell it on eBay.

Got it. So maybe you have a “hub” of authorizers…

Gupta: Yeah, that’s right. And a lot of those people will be experts in the field. So if you’re doing things like collectibles – 

They’re almost like notaries!

Gupta: Almost like notaries. Bingo. 

We gradually blockchain-ize more and more of the transactional space, until eventually, what you wind up with is an API attached to every physical object of value, and you can just push data and money into the API to control the asset.

This could even be a gig for people. 

Gupta: Yes! Boom!

They’re experts, and they have their expert shop. 

Gupta: Yes, yes, yes!

People come to this shop to get their asset passport “stamped.” To get credentials. 

Gupta: Passport “stamped”! That’s a good way of putting it. We’re taking that.

It’s yours! Okay, I’m getting this now. What would you say is the biggest risk for not scaling?

Gupta: You know, Barnum said, “Nobody ever went broke underestimating the American public.” The strong possibility is people just don’t care at scale. So we might wind up in a position where we rule very lucrative corners, like French wine older than 30 years. But younger wine than that, people are just willing to take their chances. So it might be something where we get stuck at the high-end, and it’s hard for us to push that. 

So what’s the end-game? Boosting the value of the secondary market? 

Gupta: If you make the secondary market efficient, the goods are used till end of life. How many of our goods are actually used till the end of life? Most of it winds up sitting in attics, or being thrown away. Or it winds up in thrift stores, where it sells for 1 percent of what it’s worth. So all of that structural inefficiency goes away when you just maintain a record of what the damn thing is. See what I’m saying? 

Kind of. How does this get back to the refugee camps? 

Gupta: So think of those inventory screens that you get in [Massively Multiplayer Online games]. You never wind up with a thing in the MMO inventory where you’ve forgotten where it is, because the bloody computer keeps track of all your assets. And that’s just how property should work.

Now take your refugees camps. All the property in the camp is tagged, which means we don’t need 14 10-millimeter wrenches. We need three. Because when you need one, you can send a message directly to the person who currently has it, and you can pay the contract price for buying or renting a wrench from them.

And what’s the connection to helping the environment? 

Gupta: What we’re talking about doing is unpacking the destructive part of consumer society, the part where we make things usable and throw them away like they’re junk – when they’re not junk – is a vast unnecessary river of damage. 

We’ve got enormous numbers of poor people in this society that would love access to that stuff. But eBay is so flaky. And charity shops are such an enormous waste of resources, that a lot of times, people are just throwing stuff away.

The actual conscious, active re-utilization of things that people no longer desire is incredibly slack. And if we tighten that up, there’s no environmental impact associated with the satisfying of those human needs, because all the impact was when the thing was first made. The second, third, fourth, fifth, and sixth uses, these are free environmentally.

[Laughs a bit.] 

You see how this looks like an enormous free lunch?

It does indeed. 

Gupta: Yeah. We nearly fell off our goddam chairs when we figured this out. When I sat down to present my conclusions to the team, I was like, “Guys, there’s like 20 percent of the global economy sitting inside of people’s garages and boxes they haven’t opened in ten years.”

So let’s imagine the big picture, the “pie of needs” of all the people in the world. What slice of the pie could be cut with this?

Gupta: My guess is it’s as big as 10 percent. It might be 15 percent. 

Are you not worried about forkage? What are your barriers to entry?

Gupta: So right now, the main barrier to entry is that no one is taking it seriously. In the long run, I expect that we’ll have 10 to 20 percent of the market, which is basically five to ten times the size of Visa. We’re certainly not going to be the last people in the world to do this.

UPDATE: Since our conversation, a far more topical – if tragic – example of Mattereum use case has emerged: ventilators. 

In a March 20 Medium post (“Reliably solving the ventilator crisis?”) Gupta writes, “The challenge here is ensuring that the ventilators, oxygenators, masks, and other equipment produced meets the necessary functionality, reliability and quality standard required to save lives, and figuring out what to do when they do not.” 

In other words, it would be helpful to have the “Authenticator,” or “Asset Passport,” like in our above examples of laptops, Patagonia jackets, or Star Trek collectibles. “These auxiliary [ventilator] manufacturers have a steep learning curve ahead of them, and it is important that they nail it and are able to prove that their products are ready to save lives,” Gupta writes. “It’s realistic but not yet certain that the Mattereum Asset Passport could help them do this.”