Trying to understand something that may be VERY powerful.

Mattereum is a London-based startup, founded in 2017. It aspires to do something that, if it happens even partially, may change the world (for better or for worse, that is a separate topic). So I put together this synthesis of the official Mattereum White Paper, to remember what Mattereum is about, both to myself and as a public service. Any mistake in what follows is mine, if you find it, please tell me.

Starting with some of their own slogans, Mattereum is:

• Creating digital identities for the world of physical goods
• Organizing the world’s property and making it universally accessible and useful
• “Turning (software) code into law”

How Mattereum would change the world

What the slogans above mean is that Mattereum aims to bring real world assets (violins, homes, whatever) under the full, legal control of a distributed digital ledger (blockchain), that keeps tracks of the status of all those assets, and the related legal obligations, in a non-corruptible, but easy to use way.

Today, for example, you cannot put the whole payment for a house on the table, in whatever form, and be done with it, in that moment. To be actually acknowledged as the new and only owner of that house at all the levels required by laws, from the cadaster down, you will have to wait many weeks, if not months, and likely pay extra, non-negligible amounts of money. You cannot “own” the house instantly, because that’s just not how houses are legally transferred.

Mattereum has created the legal, technical and commercial infrastructure layer to make without those delays and extra expenses. Or, in their words, to make property transfer and control happen directly in, and through, a blockchain, in order to “actually move assets in a way the law recognizes”.

This makes “smart property”, that is (my definition) property that is automatically defined, enforced, transferred and generally managed directly by software, a reality.

Hail the automated custodians

So, Mattereum aims to connect physical, real world assets to a blockchain, in order to manage their property rights, maintenance, leasings, everything, through that same blockchain.

To actually make this vision work, Mattereum has studied how to create a system that prevents disputes over property from happening, as much as possible, and then placed:

“a razor-sharp focus on enforcement - removing the legal obstacles between an arbitrator making an award and the successful counterparty actually receiving compensation”.

This approach is based on the creation of a new business process and legal entity, called “automated custodian”.

An automated custodian is the perfect legal counterparty to a smart contract, that is a contract written and then automatically executed just as if it were a software program.

In practice, an automated custodian acts as “a legal extension of the blockchain into everyday reality.” It is the entity that becomes an asset’s legal owner and registrar, maintaining the authoritative register of all the interests in the asset. This enables the unbundling of legal ownership, financial beneficial interest, and possession or use of the asset.

Under the supervision of the automated custodian, all the interests in some asset (e.g. who can use it, when, how, who gets money for that, etc) become tradable, and use becomes licensable.

Being the asset’s legal owner, the automated custodian/registrar is in the strongest position to enforce these constitutional requirements in respect of the asset.

The problem that Mattereum wants to solve with this “automated custodian” thing is the fact that, in the real, physical world, you cannot “program” or force a generic object to automatically behave in a certain way, for example to prevent it from being used by unauthorized parties.

So Mattereum says “let’s create these custodians/registrars “which take legal title to the assets for (at least) the duration of the contract’s execution” and program them to respect and enforce contracts about those assets.

Since the custodian is the legal owner of an asset, that is the entity that is enabled by law to exert property rights, there is no need for any new legislation.

In software terms, what the custodians are is a “programming interface” for physical assets that, not being digital, could not be directly embedded into a blockchain.

Automated custodians can engage into smart (that is, again: software-defined and software-enforceable) contracts of any kind, allowing for the creation of “entire programmable economies for controlling the real world”.

How do you know who owns what? With ASSET PASSPORTS

Each registrar must identify precisely which assets it owns and who holds legal interests in each asset. All this information is stored into asset passports, that act as “contractual containers”, and identify property in the same way that URLs identify information.

MATTEREUM SMART PROPERTY REGISTER

Together, all asset passports maintained by all registrars in accordance with the Mattereum Protocol comprise the Smart Property Register. This the one and only authoritative record of the complete legal status of all the assets it indexes, including all the rules regarding their mantenance and uses.

The Smart Property Register is authoritative because the registrars, that is the automated custodians, are authoritative. Remember? They hold legal title to the registered assets and act in respect of those assets.

Being a digital database that is updated in almost real time, the Smart Property Register would also make “double-spending” any kind of assets (e.g. selling the same house to two different people, at the same time) impossible. And again, it would achieve this without requiring any changes to the current legal framework in any jurisdiction.

Increasing the value of physical goods

Stuff like the Smart Property Register, or Automated Custodians, has another effect, that may be the most important (and worrying) of all: they make the discovery of availability of assets, and of their place, immensely more efficient.

This should “radically changes the value” of many physical assets, by making them almost immediately, almost automatically discoverable by new customers, without relying on intermediary platforms, like Airbnb or Uber, that capture most of the value they expose.

Remember: in a Mattereum world, assets are directly linked to automated custodians, who legally own them, and transferred or regulated by smart contracts, instead of proprietary platforms.

This places all those assets permanently “on the market”, by allowing to automatically advertise their availability on decentralized marketplaces, in all possible ways: in everyday language, this means that if you saw a specific car you like in the street, you may rent it for two hours, lease it for two months, or just buy it, always through the same digital interface, without other procedures. And you could do the same with homes, clothes, or anything else owned (on behalf of some human being, or company, of course) by an automated custodian.

In this scenario there are no “sleeping assets”, that is stuff that may be rented or bought, but nobody knows it is available. It is this that can make each asset much more valuable: everything is on sale all the time, including stuff for which no marketplace was accessible, or feasible before.

Under Mattereum, everything is both in use, and also being warehoused for other potential users.

Summing up…

Mattereum has created commercial infrastructure to turn smart contracts into legal contracts that can be efficiently enforced all over the world, without needing new legislation, creating liquidity for $50 trillion of assets globally.

(continues here)

(This post was drafted in May 2020, but only put online in August, because… my coronavirus reports, of course)