The Hidden Expiration Date in NFC Chipped Goods

The holy grail of NFTs is the opportunity to link real-world assets with digital counterparts. While the concept of digital twins can be traced back decades as a tool for product lifecycle management, the immutability of blockchains means that for the first time the data maturity of a digital assets can be matched with the longevity of their corresponding physical items.

More recently brands and creators have started using low-cost Near-Field Communication or “NFC” tags in order to more effectively tie digital and physical assets together. These “phygital” or digiphysical goods are garnering attention for their ability to prove authenticity and provenance, streamline peer-to-peer sales as well as facilitate connections between communities and creators who were traditionally IRL.

When Costly Phygitals 404

Unbeknownst to holders of chipped items, most NFC tags have a massive, hidden centralization problem: they require private servers to verify authenticity. Similar to the $1.5M of Coachella NFTs that went down when FTX imploded, the moment an NFC supplier goes out of business or gets acquired, expect your expensive phygital merch to go offline.

The reason most blockchain NFC providers work this way is simple: they use off-the-shelf chips which were not designed for blockchain applications. The most common NFC chips you can find today are either based on easily duplicated UIDs (“unique identifiers”) or symmetric key cryptography – a form of cryptography whereby an encryption key needs to be known by a counterparty in order to decipher messages from the chip.

Put simply, in order to validate a chip using a symmetric key scheme a secret must be known by two parties: the chip itself and, in most cases, the company that sold the chip.

There are two major issues with shared keys: duplication and availability. Once a shared key is leaked through a hacks or bugs (or captured during enrollment by malicious factory) it could be used to simulate taps, or worse yet, counterfeit a tag. Keeping the key safe becomes more difficult with the second challenge – availability for authentication via a centralized API for the entire life of the NFC tag.

That expensive chipped sweater you just bought? When the company who sold the chip moves on and the hosting bills are left unpaid, don’t expect to claim drops, attest to its provenance, mint POAPs or transfer ownership. Symmetric key NFC chips are effectively custodial in nature – however, unlike custodians like exchanges that make money off of your trades, NFC suppliers have no incentive to keep the lights on after initial chip sale.

Luckily it is possible to leverage the same tools that underpin public blockchains in along with secure element chips to offer a new paradigm: self-certifying things.

A New Paradigm: Self-Certifying Things

We first encountered the problem of linking digital assets to the real world when we created KONG Cash in 2019 – a physical cash note backed by cryptocurrency. We explored the challenge of creating “sound physical cryptocurrency” and landed on a self-custodial solution: a secure chip designed for asymmetric cryptography that can generate signatures without a third party or server; effectively a self-certifying chip.

Self-certification is a process whereby the holder of a given cryptographic key can attest to their own authenticity using asymmetric cryptography. In clearer terms, a thing with its own keys can prove its authenticity without an intermediary or counterparty.

In effect, any physical thing that is self-certifying can outlive its issuer; if an original Barcelona chair from the 1930s could generate cryptographic attestations you wouldn’t need its long deceased creators Ludwig Mies van der Rohe or Lilly Reich to tell you that it’s authentic. By comparison, an off-the-shelf NFC chipped chair would have simply popped out of existence the moment Mies van der Rohe or Reich died.

The oft replicated Barcelona chair originating from the Bauhaus era.
The oft replicated Barcelona chair originating from the Bauhaus era.

With a self-certifying thing, brands can leverage one or more public blockchains to attest to the fact that they were the creators of said things, without ongoing costs and with the same immutability guarantees that secure billions of dollars of cryptocurrency and NFT transactions.

Designed for Decentralized Authentication: Enter the HaLo

From our learnings with KONG Cash, we launched the HaLo (“Hardware Locked Contract”) last year. HaLos are the first NFC chip based on asymmetric cryptography enabling the creation of fully self-certifying things.

Small, durable, waterproof and fully customizable.
Small, durable, waterproof and fully customizable.

Each HaLo chip self-generates a unique asymmetric keypair, the public portion of which can be shared widely without the threat of it being used to duplicate or counterfeit a chip – as would be the case if symmetric cryptography keys were leaked or exposed.

Practically this means public keys of chips can be stored anywhere – in a distributed ledger, decentralized storage or a traditional database – all without requiring a third party to permanently secure a copy. A chip’s public key can be linked in smart contracts to create claims, mints and airdrops that are available into perpetuity.

Out of the box HaLos will soon be integrated with the Ethereum Reality Service (“ERS”) – a set of open smart contracts that allow any brand to enroll chips against things they have created. ERS is similar in concept to the Ethereum Name Service, except that it’s optimized for resolving large batches of chips while providing information about the nature of a chip: who manufactured it, what it was embedded in and apps that have enrolled the chip.

Crucially, all HaLo functions can be used entirely via a web browser without the need for a dedicated app. HaLo scanning apps can be bundled, stored and distributed on IPFS or Arweave giving them strong guarantees of longevity, unlike native apps which require constant updates are under constant threat of app store removal for being “crypto” adjacent.

PBTs: The Gold Standard Physical to Digital

One example of the HaLo in action is the Physically Backed Token or “PBT”. The PBT is a standard created by Chiru Labs who sought to create a physical NFT that couldn’t be rugged by an NFC authentication server going down. Chiru Labs leveraged the signing capabilities of HaLo chips to create an entirely novel crypto asset which can be authenticated without any centralized third party.

The Azuki Bean, a fully custom HaLo.
The Azuki Bean, a fully custom HaLo.

The PBT embeds the public key of a chip alongside the token ID of a digital asset; only signatures from the chip corresponding to the public key can transfer the asset – no external APIs or services required. It’s also a completely open standard that can be modified to include novel transfer policies, chip replacement methods and links to other assets.

Immutable, Composable and Decentralized

The PBT is just one example of how a HaLo chip can be used in a smart contract. HaLo’s signing capabilities make them interoperable with any protocol like Delegate.Cash, Ceramic, Unlock Protocol and standards like account abstraction or token bound accounts. HaLo chips are fully composable; they can integrate with any smart contract directly without middleware, oracles or APIs.

For instance, a creator might start by using HaLos to authenticate a limited edition fashion PBT. On day one the holder claims ownership of the PBT to reflect their ownership onchain.

Swipe your HaLo to collect.
Swipe your HaLo to collect.

At a later date the brand hosts an event with an exclusive perk for those who attend with the piece – an NFT minted directly to the owner simply by swiping their chipped sleeve over an NFC reader.

Without the overhead of maintaining dedicated native apps, the creator is free to update and upgrade the scanning experience as new protocols and standards emerge. HaLo tooling is open source allowing for custom experiences and even novel platforms to be built on top of them without requiring ongoing service fees or hidden dependencies.

Create Self-Certifying Things Today

Grab some HaLo chips today for your first project – we can help whether you need just a few chips or a few thousand. HaLo chips can be white labeled for any custom dapp, brand or platform.

Our libHaLo library offers straightforward integration for a range of environments like mobile web, desktop CLIs and React Native apps. We’ve helped projects large and small to build digiphysical experiences that are completely bespoke, upgradable and fully decentralized.

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