The Physical Backed Token Standard

In early 2018 a new standard was published: EIP-721 or a non-fungible token standard. While NFTs like Crypto Punks existed prior to the standard, EIP-721 codified a consistent way to create unique tokens on Ethereum.

A bean-shaped HaLo chip, the first PBT

We’re pleased to join in Chiru Labs’ announcement of the PBT or Physical Backed Token standard, ERC-5791. A PBT can be thought of as a remixed ERC-721 NFT which ensures that the holder of a chipped physical item can always claim ownership of the digital counterpart.

To date we have helped a number of physical-digital NFT drops where users use the physical to claim an NFT. MetaFactory pioneered digi-physical drops in 2020 that link physical items to 3D wearables. Rags Y3K is defining a new category of soulbound streetwear while Dopamine has created a “bindable” physical spec. Independently IYK and 9dcc have created novel claim mechanisms which maintain a link to the physical while also dispensing POAPs.

In many other cases projects have created “physical” NFTs through QR codes or off-the-shelf NFC chips where the physical and digital assets are distinct entities. The challenge with this implementation is that the NFT no longer has any tie to the physical asset once claimed. How the physical item retains value at this point is ambiguous; this is of course problematic for luxury goods which can be NFTs in their own right.

EIP-5791 is one implementation which aims to resolve this challenge by simplifying and standardizing how a physical NFTs work by operating under a narrow set of constraints:

• Each NFT is conceptually linked to a physical chip.
• The NFT can only be transferred to a different owner if a signature from the chip is supplied to the contract.
• Each NFT is conceptually linked to a physical chip.

Scan-to-own leverages HaLo generated signatures to claim ownership of a PBTs

Like an ERC-721 NFT, each PBT can be viewed in your wallet and will reflect your ownership in other ERC-721 interfaces like OpenSea. Unlike ERC-721 NTFs, PBTs cannot be arbitrarily transferred without a signature — or attestation — from the chip embedded in the item.

The HaLo we introduced earlier this year is distinct from off-the-shelf NFC chips used by most projects as it can generate its own signatures enabling the creation of PBTs. Like the original KONG Cash notes from 2019, HaLos have several features highlighted in EIP-5791 which ensure they are fully decentralized:

• the ability to securely generate and store an ECDSA secp256k1 asymmetric keypair
• the ability to sign messages from the private key of the asymmetric keypair
• the ability for one to retrieve only the public key of the asymmetric keypair (private key non-extractable)

These characteristics are important because many physical NFT projects minted to date rely on chips that require centralized infrastructure which can be shut down, rendering a physical useless.

The Golden Skateboard: 45 lbs of 24K gold and less than 1 oz of silicon

With the Golden Skateboard drop we are pleased to supply HaLos in the form of Azuki’s BEAN chip. And, because Chiru Labs is opening up the PBT spec for anyone to use, we’re excited to help any project create their own PBTs. The power of HaLo’s asymmetric key signing coupled with the Ethereum Reality Service means it’s possible to mint both PBTs alongside other assets like claimable ERC-721 and ERC-20 tokens.

We believe that the era of physical crypto is only in its infancy and that it will radically expand what kinds of IRL NFTs are possible. Reach out at arx.org if you would like to explore creating PBTs with HaLos.