Decentralizing and Securing Collectible Card Grading Services with the Mattereum Protocol
Avoid costly industry deadlocks and gatekeeping with a peer-produced, decentralized alternative to centralized collectible grading and authentication services with the Mattereum Protocol
On March 30, 2020, the collectible sports card world was shaken by the news that the gold standard card grading and authentication service, PSA, had decided to close its doors to new submissions following a vast uptick in demand in recent months that had created an insurmountable backlog. Competing firms may enjoy a new wave of users from this new demand, but as they operate on the same business model and processes — accepting incredibly steep submission and grading fees and using trained in-house personnel — this new window of profitability and growth may inevitably lead to the same path as PSA: incapacitation and immense loss of value.
How can the collectible card world achieve and sustain a level of scalability, resilience, and quality in the expert certification process that can adapt to the ebbs and flows of a growing, global industry?
Enter the Mattereum Protocol, a peer-produced, decentralized alternative to centralized grading and authentication firms that elegantly brings assets from zero history to storied value with built-in legal warranties and dispute resolution.
Before diving into how Mattereum addresses these issues, let’s first unpack the incumbent business model.
Monopolies | High Fees | Gated Markets
Grading companies wield immense monopolistic power. A small number are held as industry standards. A favorable grading from them is much sought after. An unfavorable grading from them is fairly damning. A high rating by a firm like PSA can be the difference between a card valued at $500 versus $50,000 or more. Most of the card sales that make headlines with multi-million dollar auctions feature a PSA grade. In fact, a profitable cottage industry of specialist companies have arisen to offer predictions of what the PSA rating for a card may be. Occupying this indispensable position, grading companies can charge what they like for their services, comfortable in the knowledge that collectors and dealers will pay it.
There is a fundamental imbalance in power here. Disputes over a grading, while not impossible, are very difficult as grading companies are insulated by their Ts&Cs which state that grading conforms to THEIR standards and that graders are authorized to exercise their judgement within these bounds. This is a double edged sword. While it ensures judgement by established criteria, it also grants their objective opinions on certain matters a great deal of weight.
In the legal world, we call these sorts of arrangements contracts of adhesion, situations in which a single, powerful firm takes charge of the contract drafting process and is able to bend the agreements to their favor. This a common instrument (among others) wielded by companies with monopolistic and gatekeeping tendencies.
Yet, despite the value and reputation these firms have in the collectibles industry, the actual mechanics of their business are difficult to scale which can be a stated justification for egregiously high fees. And so it goes.
We propose a different way of doing things.
The Mattereum Protocol in Practice
Peer production of goods, services, and infrastructure has become a powerful phenomenon in the 21st century. With the monumental success of peer-produced operating systems (Linux), encyclopedias (Wikipedia), and financial infrastructures (Bitcoin, Ethereum, and other blockchains), it is not a stretch to imagine other industry verticals that could benefit from a similar paradigm shift. The ecosystem that has built around collectible card grading and authentication is certainly ripe for disruption in a way that encourages economic decentralization and genuine market efficiency.
To accomplish this, the Mattereum Protocol leverages an integrated legal and software system consisting of three main components: Mattereum Asset Passports, Trust Communities, and Real-World Asset Tokens.
(For a more detailed guide of the protocol, we highly recommend referring to the Mattereum Product Walkthrough. For purposes of this article, we will mostly highlight the certification process.)
The Mattereum Asset Passport
In short, an Asset Passport is a bundle of legal warranties tied to an object. While these warranties can vary in accordance to the object in question, the initial warranty is often some form of identification (with data points provided by the owner). Other warranties that may accompany an asset like a sports card may include a reference to the particular tagging system used for in-person authentication of the item (such as scannable NFC chips affixed to the object) or the token smart contract if the card has been tokenized and “uploaded” to an NFT marketplace. In practice, the Asset Passport aggregates warranties and object information using established best practices.
The Asset Passport provides the basis for securing an object’s provenance and value over time through protocols rather than firms. The following are some of the benefits this structure provides for the sports card industry.
- Skin in the game
All expert certification of a card is backed by a legal warranty as well as financial stake, adding weight to an expert’s assessment. Even if they are not employed by one of the big grading companies (and wouldn’t this be a great arrangement for former staff of these organizations?), the fact that these experts are willing to put skin in the game and put their own money behind their assessments will not be overlooked by serious collectors.
2. Trust Communities
By virtue of Mattereum’s method of bringing together multiple third-party sources of information on objects, it is possible for a card’s Asset Passport to contain several independent assessments of its authenticity, provenance, and condition. This would enable buyers to get a broader perspective not limited to centralized firms. Experts can also hold each other to account to safeguard against erroneous claims. Through this distributed framework of crowdsourcing expertise, trust becomes a feature powered by community, not simply a risk to be mitigated.
3. Dispute Resolution
Buyers of the card have much clearer and impartial paths of recourse through the Mattereum Protocol if they have doubts about any information in a card’s Asset Passport. Our dispute resolution procedures ensure that suitably knowledgeable arbitrators will decide each case, and that these arbitrators will be neutral rather than defending the interests and reputation of a company. Fortunately, this mechanism is globally enforceable across 150+ countries by the 1958 New York Convention on Arbitration.
4. Composability
A Mattereum Asset Passport is more than just a grading. It’s an authentication mechanism, a record of provenance, a tokenization engine, and many other things ON TOP OF also being a condition and grading report. This comprehensive record of the card is a living document that aggregates all legal and software components in a single interface immortalized on blockchain and distributed file storage networks. New forms of ownership, commerce, and engagement around collectible cultural artifacts can be designed to create more utility and possibility around an otherwise benign object.
From zero history to storied value
Instead of buckling under the weight of growth and unscalable business models, the collectible cards market can adopt a peer-produced, decentralized alternative that provides the same guarantees at cheaper prices without centralized operations. With blockchain-enabled authentication and tokenization of physical assets with built-in legal guarantees, Mattereum removes the fear, uncertainty, and doubt that has plagued digital commerce for decades.
Follow us as we bring the Mattereum Protocol to an expanding variety of markets ranging from memorabilia, gold, wine, to prized classical instruments, and more.
More at: http://www.mattereum.com
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Telegram: https://t.me/mattereum
