Codex Protocol: Blockchain For Collectible Authenticity
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There will be a lot of sore têtes in France today following its football team’s resounding victory over Croatia in Sunday’s World Cup final; the second time Les Bleus have won the tournament.
International sporting events are red-letter days for the world of sports memorabilia. Kit worn on the day, such as shirts or football boots – especially if it adorned by celebrity strikers – can fetch tens of thousands at auction. The shirt worn by Pele in Brazil’s 1970 world cup win fetched a record $157,750 at auction back in 2002; in 2010, Englishman Nobby Stiles’ 1966 World Cup medal sold for nearly $290,000.
Hugo Lloris’ shirt might not fetch so much after his hilarious howler, but how much might a Kylian Mbappe pair of boots be worth in 30 years?
The high-value some of these items can be sold for has led to a growing problem with fakes. Research commissioned by the FBI last year found 90% of all sports collectibles were counterfeit. This isn’t exclusive to sports memorabilia: the Fine Arts Expert Institute estimates that over half of artworks in circulation are fakes. Considering the sector is valued at $63.7bn, phony art is a multi-billion dollar problem.
“One of the main complications faced by auction houses is establishing whether an item is the real thing”, says Codex Protocol CEO Mark Lurie. “A lot of unnecessary time and money is spent on validating objects about to be auctioned”.
The Codex Protocol is a decentralized registry that creates and holds comprehensive records for individual collectibles, like a football shirt or painting, on the blockchain. This can include information on the item’s provenance (identity and chain of ownership), when and where it was validated, specific information like shipping records as well as claims on the item, past and present.
Speaking from New York, Lurie explained that building up complete profiles on collectible items is currently very difficult, especially as information is often incomplete or imperfect.
Although determining the identity and history is crucial for an item’s valuation, there is no established procedure for doing so. When an item comes up for sale, most auction houses use their own validators, charging upwards of $500 every hour. As most don’t share their records, if the same item is put up again the entire process is repeated. Not only is this inefficient, it discourages sales because of the large overheads involved.
There have been attempts in the past to create some sort of shared registry for collectible items. However, these have all been centralized, and failed because auction houses were concerned with placing their entire businesses in the trust of a single entity. Centralized record keeping is too vulnerable in a sector where fraud is all too common.
Instead of assuming responsibility for collecting and managing the information, auction houses and validators create and update records on the shared registry themselves. Codex utilizes its own native token, the ‘CodexCoin’. Used to access and pay for the upkeep costs of the registry, they also incentivize accurate and up-to-date record keeping on the platform.
“Validators are reimbursed for the time and expertise in CodexCoin”, explains Lurie. “But to ensure as accurate an assessment as possible, validators have to stake their own coins first as collateral. Once the work is completed the funds are held in escrow and released over time; if they’ve missed something, either by mistake or on purpose, they can be held accountable”.
Like many other projects, Codex is based off the Ethereum platform but its development progress hasn’t been hamstrung by issues to do with scalability. Unlike other blockchain ideas that rely on high-volume, low-value transactions, the opposite is true for Codex. High ETH transaction costs – which spiked to $0.49 last week – are far outweighed by the savings made with a shared, public registry.
Using the title registry as a base to determine fundamental information about an item, enables other applications to be built on top of it. Lurie says that Codex is in the process of developing a bidding app – appropriately named ‘Biddable’ – that can be used to buy items with its own CodexCoin as well as other popular cryptocurrencies, like Bitcoin and Ether.
Also in the runnings is an app that can be used to get accurate quotes from insurance companies before purchasing the items as well as shipping. “Obviously both buyers and sellers are keen to know whether an item is genuine or not,” said Lurie. “But insurers need information to determine how much to cover it for; those involved in transporting the item like to know in advance the exact size of the object so they can work out whether it’ll need a custom crate or not”.
Established only last year, the Codex Protocol has the support of over 5,000 auction houses worldwide who are looking to incorporate it after the registry goes live sometime this month.
There is a clear use-case for Codex: the sector needs a shared and reliable data source that can determine whether a purported Pele shirt was worn by the man himself and how much it had previously been valued for. That auction houses have already expressed substantial interest confirms this.
This publication covered the unveiling of the first crypto sculpture in London not too long ago; made entirely of bronze, the statue celebrates the new birth of a new generation of tech. If Codex catches on, it could be used to verify and protect its identity and value in the future.
This author is invested in BTC and ETH, which are mentioned in this article.
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