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Contractually Bound Non-Fungible Tokens
Contractually Bound Non-Fungible Tokens, or CBNFTs are a variant to normal NFTs, and they are essentially NFTs which can legally obligate a party to carry out actions based on what happens to the state of the NFT. Although there can be different ways in which two parties can be contractually bound to an NFT, the Phynite Protocol simply requires a guardian company and a prospective buyer of a CBNFT to sign a legally binding contract. The legally binding contract will need to cite specific information such as the address of the Ethereum smart contract, the tokenId, and the physical item which is being contractually bound to the corresponding NFT. The details of the standard legally binding contracts will be explained in the next section of the white paper.
It is important to note that although Phynite will only use this technology for the Phynite Protocol to implement a system of physically backed NFTs, CBNFTs are a technology that can be used by other entities for virtually any contractual agreement between two parties that depend on the state of an NFT. The blockchain is a great tool for ensuring that only the rightful owners of specific crypto wallets, which essentially hold cryptographic keys, have the power to implement functions that can change the state of smart contracts in specific ways. Later in this white paper, we’ll talk about how we can further increase the security of CBNFTs by uploading the signatures of legally binding contracts onto the blockchain, the specific smart contract we have designed to allow this feature, and how we plan to deliver this technology in the near future.