4K’s Physical-Digital Bridge: Giving the Internet a Sense of Touch
Maximillius
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March 22nd, 2022

TL;DR

  • Blockchain technology is creating a more equitable and robust financial system
  • The 4K Protocol enables physical assets to seamlessly interact with the blockchain and this new financial future
  • This technology is transformative because it makes financial services for physical assets more democratized and accessible
  • Marketplaces, “Provably-Fair Drops,” “Tokenized Merch Drops,” DeFi applications, inventory management, and ecosystem interoperability are just a few of the potential use cases for the 4K Protocol

Introduction

When I pitch 4K, I’m confronted with a choice: do I describe 4K as a marketplace or do I call 4K a physical-digital bridge?

Pitching 4K as a marketplace is similar to pitching someone on an iPhone in 2008 by selling them on the music store. The music store was a great business, but it was the iPhone that ushered in the mobile revolution. Similarly, our marketplace will be a great business, but it’s our physical-digital bridge that will revolutionize the way people engage with physical assets.

To understand the change that we are helping to usher in, I will cover the tools at our disposal, how these tools inspire 4K’s philosophy, and how 4K translates its philosophy into action.

Foundational Tools

The first tool is Bitcoin. Similar to how we have a separation between church and state, Bitcoin offers humanity a separation between money and state. It is digital gold.

Bitcoin is great at sending money from one person to another (e.g., Alice sends 5 tokens to Bob), but it is not great at doing so programmatically (e.g., Alice sends 5 tokens to Bob if the Yankees win the World Series). To solve the programmability problem, Vitalik Buterin and others built Ethereum.

With programmability came a core piece of infrastructure with a potential that is difficult to overstate. With this tool, we have the opportunity to reinvent core financial infrastructure from the ground up. Over the course of the brief period since Ethereum launched in 2015, enterprising people have used Ethereum to build composable blocks that anyone can stack together in bespoke ways, similar to how someone can build a bespoke Lego castle with composable Lego pieces.

Concepts such as liquidity pools, bonding curves, and automatic market makers can be combined to create decentralized exchanges (DEXes). Rather than relying on a centralized entity, such as Coinbase, to facilitate trades, teams such as Uniswap created DEXes. They are similar to Coinbase, except instead of interacting with a corporation, traders interact with software. Because DEXes like Uniswap are natively software, they are easier to scale and build upon because instead of needing to convince a human at the centralized exchange to open an account for you or partner with you, you can simply plug directly into the software.

Composable Tooling Ecosystem

Creating these composable pieces is not just a public service, but also an effective business strategy. Each new piece makes the ecosystem as a whole more valuable, which benefits the public commons. Those that invent the new piece also tend to create valuable businesses because they open new markets that benefit from network effects where early movers have a significant advantage (e.g., Uniswap, Compound).

The power of these tools is what makes this financial revolution increasingly inevitable. People have had a taste of a financial system that is not gated by banks and they do not want to go back. The genie is out of the bottle.

We could do everything in our power to stymie crypto’s growth to preserve the status quo as long as possible. Alternatively, we could embrace the change. We can shift our attitude away from fearing what change might bring to an attitude of doing everything in our power to ensure the change reflects our values as truly as possible.

The latter is the route that we choose to take at 4K.

The Tao of 4K

What are the biggest barriers to crypto’s growth? What can we do to support this emerging system? How can we do so in a way that is consistent with our values? These are questions we regularly ask ourselves, and it is this line of questioning that led us to build 4K.

A holy grail for the blockchain ecosystem for the past four years has been to figure out how to bring physical assets on-chain. By “on-chain,” we mean the ability to interact with the aforementioned composable tools. If a digital token exists that says someone owns something, what are the guarantees that any features built into the token will execute as ordered?

4K’s mission is to become the decentralized coordination layer for the physical world. The infrastructure we are building is designed to ensure that digital tokens representing a physical item are accurate, actionable, and enforceable. 4K acts as a Physical-Digital Bridge™, allowing anyone to create a set of digital property rights for physical goods.

The digital tokens we use for this bridge are non-fungible tokens, also known as NFTs. When most people hear “NFT,” they usually immediately think of digital art. Unlike art NFTs that are backed by nothing more than the digital image associated with it, our NFTs are backed by a physical asset. If you possess a physically-backed 4K NFT, you not only possess the photos we attach to it, but you also own the physical item that underlies it.

When we issue NFTs, whoever possesses that NFT can do whatever they want with it. They can take the NFT to a lending protocol and leverage its value to back a loan, they can use a fractionalization protocol to share ownership of the NFT, they can flex the NFT in the Metaverse as an accessory for their digital avatar, or they can sell the NFT on our 4K Marketplace (or any other NFT marketplace). Until now, all of the above use cases were only accessible to purely digital assets.

A New Blockchain Primitive

To restate our core competency even more clearly, 4K can be boiled down to the following 12 words: “Physical item in, digital token out. Digital token in, physical item out.” Our whole business is about being the best in the world at this very simple feature. We work with the world’s top high-security storage facilities, logistics providers, insurers, lawyers, accountants, engineers, and operators to ensure that every time someone with a 4K token clicks that redeem button, they will receive their physical item every time.

Because this physical-digital bridge is such a simple feature, it can serve as a foundational primitive that is compatible with other crypto building blocks such as lending protocols, exchanges, and marketplaces. By bridging the physical and digital worlds, we enable more people to access financial services for their physical assets and interact with the Metaverse in a more seamless way.

Use Cases for a Physical-Digital Bridge

Now that 4K offers the blockchain ecosystem a new foundational building block, what are some of the new things that people can use this building block to create?

4K has already launched a physically-backed NFT Marketplace and a “Provably-Fair Drops” product, which you can learn more about in our launch announcement here. Our next application of the 4K Protocol is tokenized merch drops.

Tokenized Merch Drops

Our Tokenized Merch Drops product is inspired by Uniswap’s Unisocks, which pioneered a new way of getting merchandise into the hands of a community’s most devoted members. Incentive mechanisms baked into the merchandise enable members to benefit financially from the popularity of the items, making them all-the-more viral. These incentives transform a community from a group of passive consumers to a group of active partners.

Decentralized Finance

Since assets on the 4K Protocol are stored as digital tokens on the blockchain, there is an inherent level of DeFi interoperability baked into every NFT we mint. Just like cryptocurrencies can be leveraged in swap pools, AMMs, and secure lending protocols, 4K’s physically-backed NFTs can be used in a wide variety of novel financial applications.

Using NFTs as collateral for loans is one major use case. Let’s say Alice owns a collectible sneaker and needs some extra cash for an emergency. She can use 4K to mint her own token that represents ownership of that sneaker. She can then take that token to a lending protocol to get a loan based off of the value of the sneaker. Since the NFT is guaranteed to be backed by the physical asset since it is under 4K’s custody, the loan collateral is trusted and secured.

Inventory Management

Online resellers face a multitude of challenges when transacting their goods online. One of the biggest headaches for those operating online storefronts is around inventory management and shipping logistics. Every time someone buys an item from a traditional internet marketplace such as eBay, the seller must manually ship the package and properly update their inventory. This is a time consuming, labor-intensive process. The seller would be better off putting that time back into promoting their business, developing their product line, or building their brand.

Imagine you have a collection of classic baseball cards. You’d like to sell them, but the thought of printing out address labels for each card and taking them individually to the post office is exhausting. Selling the entire collection card-by-card could take weeks, and would require hours of shipping logistics.

The 4K Protocol makes it easy for sellers with large inventories to put their entire collection on-chain in one fell swoop. Sellers can ship their inventory to a 4K storage facility via standardized packaging, and 4K will mint NFTs of every item. Once the items are NFT-ed, the seller only has to worry about selling. The manual process of shipping out items on a 1-1 basis is purely handled by 4K’s shipping partners and the asset’s buyers.

You could have an entire storefront with thousands of items listed across NFT marketplaces without ever having to deal with the physical items once they’ve been stored with 4K. Pretty neat, eh?

Open Ecosystem

Similar to how Apple built the first applications for their iPhone, we at 4K built provably-fair drops, a marketplace, and tokenized merch drops. As good as Apple’s core applications are, entrepreneurs leveraged iPhones to add value to people’s lives in ways that Apple never dreamed possible, such as Uber and Snapchat. Similarly, we look forward to seeing how entrepreneurs use our physical-digital bridge to add value to people’s lives in ways that we never dreamed possible.

Wrapping Up

Bringing this back to where we started, 4K’s physical-digital bridge is our version of Apple’s iPhone. Our marketplace is an application of the physical-digital bridge in much the same way the Apple Music Store is an application on the iPhone. We built this bridge because we believe that blockchain will play an increasingly large role in our lives and we want to do everything we can to ensure that this technology is used in ways that are consistent with our values.

I hope that this post has given you a better sense for what we do at 4K and why we’re doing it. More importantly, I hope it has given you a comprehensible perspective into an intimidating subject matter and that it has piqued your curiosity enough to continue your own journey down the crypto rabbit hole.

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