Phynite Protocol

A protocol which essentially allows people to securely trade ownership rights of physical assets digitally. The Ethereum blockchain provides a part of the solution, as it is a transparent and decentralized network that allows for smart contracts, specifically the ERC-721 (Non-Fungible Token Standard) smart contract, to be uploaded onto the Ethereum network. Organizations, like Phynite, can create legally binding contracts with entities, and the contract will have conditions that such organizations will be legally obligated to execute based on how such entities change the state of the ERC-721 smart contract. The legal binding of an NFT’s state to a party’s actions causes these NFTs to be Contractually Bound Non-Fungible Tokens (CBNFTs). Organizations like Phynite will be responsible for securely storing physical assets, and these assets will have CBNFTs which it corresponds to (throughout the rest of this white paper, such organizations will be referred to as guardian organizations, or guardian companies). Owners of such CBNFTs will be able to exercise legal rights through cryptographic functions that only the rightful owners may exercise, whether that is selling the CBNFT, burning the CBNFT to redeem the physical item, or etc. The validity of the legally binding contracts can be proven through the use of the Elliptical Curve Digital Signature Algorithm (ECDSA), and signatures created by the ECDSA can be stored on the Interplanetary File System (IPFS), a distributed and immutable file system, to serve as digital receipts to the signatures. These signatures along with other possible data can be stored on the blockchain by storing the IPFS files' Uniform Resouce Identifiers (URIs) onto the blockchain through the Protocol's specialized CBNFT smart contracts.