One of the things that can be challenging to explain to newcomers is how the PRüF protocol is unique and why it matters so much for the future of tokenization.
When we talk about PRüF, we often talk about the different features that it has. PRüF has multiple, permanent, future-proof storage options and built-in business logic. PRüF is a turnkey, no-code solution that mints verifiably genuine, brand-centric, and standards-compliant tokens.
All of these features are important.
But, To explore what they really mean, we need to take a tour of existing systems and find their limitations.
The legacy ERC721 protocol is the de-facto standard for NFTs. What the ERC721 standard does in practicality is to define the “interfaces” of a smart contract, implying its internal behavior by creating certain types of “connectors” for the token. Those “connectors” include ways of checking balances, methods of transferring tokens, etc. These methods are standardized and codified so that tokens supporting these standard interfaces can be seen and acted upon by common marketplaces, wallets, and tools.
Let’s start by using some simple analogies.
The “ERC-FRUIT” standard:
In this example, ERC-FRUIT defines a set of interfaces (external and internal features) for objects to support the ERC-FRUIT standard. In our example, the ERC-FRUIT specification contains specific stipulations.
ERC-FRUIT objects must have:
- A unique shape, size, and structure, not precisely like any other fruit.
- An Owner. The holder of the fruit.
- A stem. Each ERC-FRUIT complaint object has a stem. The stem can be manipulated to transfer the fruit to a new owner using the “THROW” function and specifying the receiver.
- A peel. An external wrapper of the fruit. The Wrapper determines its appearance.
- A tasty part. The Exocarp of the fruit. Determines the culinary texture and flavor.
So, We can see that an orange supports the ERC-FRUIT protocol. It has an owner, a physical structure, a stem, a peel, seeds, and the tasty part.
An apple is also ERC-FRUIT compliant, as is a cherry, a banana, an avocado, onions, potatoes, and many others. They can all be treated as roughly similar from a superficial standpoint.
But what guarantees does this standard really give us?
When life gives you lemons
If we want to make lemonade and use only ERC-FRUIT standard interfaces, we might end up with guacamole instead, because avacadoes are also ERC-FRUIT compliant, and we can’t easily know if an ERC-FRUIT asset is an onion, an avocado, or a lemon. Under the standard, they are all similar. Unweary, we could end up with onion juice or a disgusting mixture of everything. So what do we do?
Since the ERC-FRUIT standard is all we have to go on, we have to trust the farmer of the fruit. We have to check what kind of trees or plants he has, and we need to know how fresh they are. We have to trust that he won’t change his produce from one shipment to another. We are entirely reliant on this trust and ongoing vigilance to ensure our fruit juice’s quality and composition.
This is how NFTs work right now. It is a buyer beware market, and there is very little real interoperability because the incentives are aligned against trust and favor fraud instead. This is how you end up with fake Banksy NFTs selling for 2 million dollars and is one reason why most NFTs represent a questionable value proposition.
What if, instead, we knew of a magical orchard? A special orchard where farmers could pick good fruit, where it was always fresh, and where the fruit was always a good choice for our juice. We trust this orchard because the only things that grow in the magical orchard are good. The farmers, buyers, and juice bottlers that share the orchard don’t let bad apples contaminate their crops.
As long as we know the fruit is from this orchard, we don’t have to worry about which farmer we get it from, and we don’t have to trust the farmers. We trust the trees because we know we can trust the orchard. This is how PRüF works.
All PRüF Protocol asset tokens are minted from a single contract, under the oversight of the PRüF DAO. We will come back to that in a few minutes, but for now, understand that the DAO is made up of Node operators and token holders alike, like the farmers and juice drinkers in the ERC-FRUIT example.
Decentralization and permissionless trust
Since All PRüF Protocol asset tokens are minted from a single contract, each PRüF asset comes with specific guarantees that can be trusted even when the token minter is unknown.
This begs the question: “So, If all tokens in PRüF are minted under a single contract, how can the token issuer be unknown? And is that truly decentralized?”
First, let’s talk about centralization. Ethereum (the environment PRüF is designed for) is highly decentralized and permissionless. As a result, there is no single point of failure.
You don’t need permission to participate in the Ethereum network, and it is designed to work correctly despite the best efforts of bad actors.
The PRüF protocol relies on the same principles. Still, since it is focused on a single goal (asset tokenization within a trusted ecosystem), it has some central elements, such as its shared contract infrastructure. The shared infrastructure is engineered to be controlled by the decentralized DAO, made up of the entire community of Node holders (minters) and token holders.
The PRüF protocol incorporates decentralized control. The shared contract infrastructure is key to making it possible to implicitly trust PRüF Assets, for the protocol to work across different chains, and for community governance to function. The decentralization of control is critical to ensure fair usage, prohibition of bad-faith actors, and to avoid manipulation of the protocol by a centralized entity.
This hybrid model of shared control of a shared resource provides an ideal balance of guarantees and freedoms to enable a vibrant and prosperous ecosystem free from the problems that plague the current tokenization methodologies, which operate through completely centralized exclusive control of a private resource.
In addition to decentralized control, the PRüF protocol is designed to be permissionless. This means no single entity will control who may participate as a minter, user, or holder. This is critical to ensure that the system remains open and accessible to all.
Being permissionless begs the question of how to keep fraudulent users off the platform: The PRüF Protocol solves this using on-chain identity providers and dedicated namespaces for Nodes. An identity provider is a trusted entity that issues tokenized proof of identity on-chain. An example could be our current launch collaborator, Unstoppable Domains (UD). When you get, for instance, the mykool.x domain fro UD, you are issued a token that bears the mykool.x designator encoded into its token ID. Using UD as an identity provider, you can now obtain the mykool.x Node token, which acts as a key to mint and provision assets in PRüF using mykool.x branding.
In this way, it is trivial to know whether a given NFT asset was minted by mykool.x or by some other entity, discouraging fraud and making bad actors easy to identify and censure since any fraudulent tokens would carry THEIR branding instead.
Why does this matter?
This technical detail leads to one extraordinary characteristic for PRüF assets: Interoperability. Just like the Fruit Punch maker in the ERC-FRUIT example, platforms can accept and utilize PRüF-minted tokens in their own systems, as if they had minted them themselves. Moreover, they can do this without having to have intimate knowledge of the origin or organization that minted the token and with strong assurances about its behavior and security. Trustless interoperability is a critical feature for the adoption of tokenized assets, and only the PRüF protocol offers this uniquely designed public infrastructure.
What about the DAO?
DAO means “Decentralized Autonomous Organization.”
Many organizations using the blockchain for governance are calling themselves DAOs, but are, in fact, just blockchain-based centralized organizations or blockchain-based, user-advised organizations. So, what is a DAO, really?
For a DAO to be a DAO, it must be decentralized. This can mean many things, such as physically decentralized for resilient operation or genuinely decentralized and permissionless. In the context of a blockchain DAO, it is expected to suggest that the participants or governance of the DAO are not all from the same organization, company, or cabal within a broader scope of the organization.
Scope matters here. This means that, for example, if you made a DAO to decide and control your family finances, it would be natural that all of the DAO members would be family members. However, if the scope of the DAO was to control the taxation and spending for a city, it might seem very centralized if all of the members of the DAO were also members of your family.
Ideally, the scope of control of a DAO and its voting membership should have nearly complete overlap — which is to say that a true DAO should be accessible to anyone who is a stakeholder.
Unfortunately, many DAOs in the wild today are either centralized to a single organization, invitation-only, or prohibitively expensive to join. Even worse, DAOs are starting to become synonymous with a hybrid gamification model. The purpose of these DAOs is merely the gamification of the DAO itself. This is a game, but not a DAO that actually manages anything but its own gamification.
Aside from being decentralized, a DAO must also be autonomous. This does not mean only that it has a voting system but instead that no single entity is solely responsible for enacting the will of the DAO. The DAO should enforce its will contractually within the system and on-chain. Otherwise, it is merely an advisory voting system. For example, if a DAO decides to change the price of business function X, it should adjust automatically. No one should have to go in and change it. Otherwise, it is not a DAO but rather just a Decentralized Organization.
Finally, a DAO should be permissionless for all stakeholders. This is usually not the case in most contemporary DAOs. In the PRüF protocol, anyone who holds PRUF, a PRüF Node, or a PRüF asset has a voice in the DAO.
The Bottom Line.
PRüF breaks new ground in asset tokenization with a decentralized, trustless, interoperable, cross-chain protocol that brings many more desperately needed features to the asset tokenization / NFT space.
PRüF is a next-generation tokenization protocol deployable on any EVM-compatible blockchain. It expands upon the basic ERC721 protocol to create a DAO-managed ecosystem for tokenization of digital and physical assets, providing inter-platform guarantees so that different platforms can trustlessly interoperate using tokens minted with the PRüF protocol.
We’ve designed the PRüF protocol to be easily integrated by manufacturers, artists, content creators, certification agencies, collectors, and more. Since PRüF is a protocol, not a platform, it is designed to be permissionless and distributed.
Because assets minted with PRüF are created in a shared contract infrastructure, PRüF can onboard enterprises to Ethereum without them even having to write one line of contract code — yet as a protocol, unlike a platform, the enterprise fully controls the minting, monetization, and features of their assets, by virtue of holding the Node token for their brand.
In addition to the innovative design and functionality of the protocol itself, PRüF will bring other, desperately needed features to asset tokenization:
- Standardized, permanent, upgradeable storage using multiple DAO-selected providers.
- High integrity, abuse-free upgrade paths for tokenized media as standards and formats evolve into the future, as well as for use with updateable media.
- The ability to encode and contain other blockchain assets.
- Built-in payment systems and selectable business functionality like auctions, collateralization, royalties, etc.
- Support for fractional ownership and “shares” (with DAO functionality).
With PRüF’s unique model for decentralization and the DAO of stakeholders and users, the PRüF protocol can finally deliver the promise of blockchain-based assets — provably authentic, branded, and durable far into the future — even if standards change or issuers go out of business.
PRüF brings provable legitimacy and enterprise-grade tokenization to an industry that has been shell shocked by the explosive growth of tokenization and NFT based fraud. In 2021, over 25 million in NFT fraud was reported, with an untold amount flying under the radar. Some NFT issuance platforms have chosen to cease NFT trading because of the pervasiveness of fraudulent NFTs, which are estimated to comprise more than 70 percent of global NFT Sales.