Risks Posed by AI Could Drive Consumer Demand for Blockchain-Tokenized Physical and Digital Wares

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Full-text transcript of David Berlind's Interview with Jonathan G. Blanco, CEO and founder of Niftmint

David Berlind: Today is April 3rd, 2024. I'm David Berlind, and this is the Blockchain Journal podcast. I'm coming to you from NFT.NYC. It's a conference taking place on the West side of Manhattan at the Jacob Javits Center, and standing with me is Jonathan G. Blanco. He is the CEO and founder of Niftmint. Now, before I get to talking to Jonathan - we actually interviewed him last year here at the same event, we talked about what Niftmint was. He's here today and he's speaking at the event. He's talking about a new risk and a new challenge that's confronting enterprises. We'll get to that in a minute. First, thanks very much for joining me on the Blockchain Journal podcast.

Jonathan G. Blanco: David, thank you so much for having me. It's good to see you again. I'm glad we ran into each other, and [I'm] excited to talk some more.

Berlind: Yeah. OK. So, just to remind our audience what Niftmint is, let's go over that first.

Blanco: Yeah. So what Niftmint does is we are a tokenization platform for brands, which means we allow them to create digital products or digital versions of their existing product inventory as well as their own digital products, and we do that through tokenization, but more importantly, is we embed directly into their existing e-commerce platform. So, we're just essentially an application for them, and in doing so, they're able to create these tokenized products, they can offer them to their customers, and we abstract all of the cryptocurrencies. So, the brand never has to have a cryptocurrency wallet, they never have to have cryptocurrency, and neither do their customer[s]. We facilitate all that for them in the background.

Berlind: So, what's a real-world example of this? I mean tokenization, that's a kind of scary topic for a lot of people. When would you tokenize something, create a digital asset, [and] put it into an e-commerce platform? All [of] those things you described.

Blanco: Yeah. So, the reason why it's scary for people is because they just have no idea how to do it. But if you think about it, payments is pretty scary. PCI compliance is pretty scary. But brands actually don't handle their own PCI compliance. They rely on Stripe or a payment provider to do that. So, think of us in the same way. That's what we're experts in, is in the tokenization elements of things. And, you know, from the marketer perspective, all they're doing is just creating a digital product that just happens to be the technology that's behind it. They never have to do anything outside of the ordinary to make that happen. But to walk you through how this would work for a brand is: Say you're a high fashion brand, like a luxury watch manufacturer. When you sell your luxury watch, you [could] essentially give the consumer the opportunity to purchase or acquire the digital version of that watch. That might be something that they give away for free. It's a part of loyalty, or maybe it's just one more sale and includes warranty type of information in there. So, what we do through our product platform is we allow that brand to be able to - one: create that digital product and have it tokenized, and then, two: associate it to inventory; And once it's associated to inventory, that means it can be listed on their commerce site. Meaning that the consumer can then either purchase it or acquire it, whatever that method is. Once the consumer has access to or has acquired that product, now they're able to visualize it by going back to the brand site. So, just like they would go to their account settings, they would have a section there where they can see the products that they have as digital products, and they can visualize it there.

Berlind: OK. So, is that the only advantage for a customer to be able to visualize it or are there other advantages of having this? I think it's called a digital twin, right?

Blanco: Yeah.

Berlind: You have a digital asset, a token that's associated with the physical product I just bought. It's a unique association; there's only one-for-one there. You've got one digital twin or one token that goes with one watch. You can't have another token go with the same watch, or you can have that you can not have that token go with a different watch. So, what's the advantages of this besides just being able to visualize it?

Blanco: Yeah, you're right. So there, there is like that marketing aspect of it. There's a digital closet aspect of it. But more importantly, when you think of what tokenizing means, essentially, what you're doing is you're wrapping code around the content file. In that very nature of doing so, that means you're making something programmable. In making that programmable, you can put a lot of key information in there that's beneficial to the marketer, that's beneficial to the tech side, that's beneficial to operations. That can be everything from the simple authentication of the product, [a] Certificate of Authenticity, warranty information, service level information, manufacturing details, or have it be as a method to unlock loyalty. So, when we think about the history of content, we really think about it from this analog to digital concept - analog being paper [and] digital being that representation on digital devices in different areas. But, digital isn't as digital as we think it is because when you're programming on digital, essentially what you're doing, from a product perspective, is you're programming at the PDP, the product display page. The checkout page, the header, [and] maybe a section of the app. By tokenizing something again, you're allowing yourself to program at the product level because that is where, in fact, the code layer lies.

Berlind: Yeah, I'm thinking about that idea of a Certificate of Authenticity, and there are a lot of fashion brands that right now are having their bottom line eaten away by counterfeit products.

Blanco: Yeah.

Berlind: You could associate one of these NFTs like a Yves Saint Laurent fashion item. You can associate a token with it to guarantee that it's an authentic item and not a counterfeit item, right?

Blanco: $1.7 trillion are sold in counterfeit goods a year, so it's a massive problem. And it's not just a problem when it comes to the actual dollar aspect. It's also the product image of it, right? Your product experience because if you purchase a counterfeit good from a high fashion brand, basically your distaste for that brand starts to essentially grow, right? You blame that brand, even though it might not even be their fault. So right, you're correct. And thinking through the Certificates of Authenticity on token, now you basically have this stamp that is on a blockchain essentially stating so. You have the originator of that being the brand itself, so there's just more layers of trust embedded into that. Outside of that, it's usually done with just a piece of paper and then managed in someone's Excel database or spreadsheet independently on that brand side, but having this also allows it to live inside of the network on the brand platform, but then also outside of the network on-chain.

Berlind: Right. OK. So, I immediately come to some of the risk. I start[ed] to think about this, and I think, well, couldn't this token... Let's say I went out and I bought a really beautiful purse - a Coach purse, for example - and got the token that goes with it, if they have a token that goes with it, I don't know, and then I took a counterfeit Coach purse and just went to somebody and said here I'm going to sell you my counterfeit, this, this Coach purse.

Blanco: Yeah.

Berlind: I'm going to make it look like it's real, and I'm going to give you the token with it that proves that it's authentic. How do you tie the digital item to the physical item in a way that those two things become kind of locked together for the rest of their lives?

Blanco: Yeah, no. You're definitely right. That's definitely a point for concern. That can take place, you know, you know, fraudsters and counterfeiters are always going to think of new and creative ways to make things happen. But through things like NFC chips or RFIDs, [and] QR codes, there's different methods that you can do to help essentially prevent this overall.

Berlind: So, you create an association between some physical, digital thing that's a part of the product...

Blanco: Right.

Berlind: Like an RFID tag or a near-field communication chip, and those two are inextricably linked. And you can't necessarily easily associate [a] counterfeit item that doesn't have that physical chip in it with the digital twin NFT.

Blanco: Right. Like, look. Yes, exactly. That's exactly how it would work. But, someone can essentially cut open the purse. They can switch off... These types of things, of course can happen. But yeah, that that's how that would work. There's some really interesting things happening right now in computer vision around taking essentially product images. When you think about a purse, for example, if it's leather, a lot of leather has, it's almost like a unique fingerprint to it because of the grain in there, and so, taking pictures on that. We're aways away from those sorts of things, of course. But yeah, all things that can be solved, but all things that will, of course, continue to experience counterfeit as it progresses.

Berlind: OK. Speaking of all these risks, you're here talking about a different risk. You're talking about artificial intelligence and how that can influence risk with NFT. So, what's your thesis on that?

Blanco: Yeah. So, AI has been an amazing technology that's really taken off from a consumer context. AI has always been worked on, for decades now. But as far as how consumers are interacting with it, with everything from like ChatGPT and Dall-E 3 and these different image generators, what becomes the risk of taking place is, how do you know what's real with versus what is fake? You know, you see things like deep fakes, or even on the music side, where voices are being copied, and you have songs by Drake and The Weeknd that aren't actually Drake and The Weeknd. It's an AI, and then the person who created is actually submitting it for a Grammy. Very wild stuff that takes place there. What I believe is that AI has only proven the need for tokenization when it comes to content, and when it comes to products overall, because the originator of the content needs to be able to say, like raise their hand and essentially say, "I created this, and I'm willing to prove that I created this and I'm going to digitally stamp that I created this," therefore, tokenize. So now, when you purchase digital content or physical content, or whatever the method be, you only are going to end up trusting items that have been tokenized because if you have the opportunity to purchase a high fashion purse that has a digital twin version of it that's tokenized directly from the brand, or you have another purse that's beautiful, looks amazing, but doesn't have any sort of token behind it, we believe that consumers are going to only want the version that has the digital twin because at that point you know with certainty that it's been approved or authenticated, where other one you're hoping it does, but you don't really know for sure.

Berlind: Sure, OK. I'm totally bought into the idea. Here's where I see a challenge. How do you educate the masses to look for this form of authentication so that they know whether it's a song they're buying, or it's a Louis Vuitton purse, [or] whatever it may be? How do you train them to say, "Wait a minute, I'm going to double-check the authenticity of this." and where are the tools so that they can just go on-chain and figure that out?

Blanco: Yeah. So right now, this, of course, doesn't exist like that. There's not an easy way to do it. But, I go back to thinking about HTTP and HTTPS right? So, your domain when you go and you log into...

Berlind: Those are the protocols of the web; HTTP is the unsecured version, and HTTPS is the secure version.

Blanco: Exactly. So, when you put a domain in, if you don't have that S, often what will happen is the browser will flag that for you, and you'll get a warning sign. It's like, "Hey, this site is not secure. You may not want to proceed," and sometimes, depending on your browser settings, it won't even let you proceed altogether, right? So basically, this just gets solved with simple UI. So, all this stuff has to live on the background, and then when the brand is selling these products, you know, they have a simple UI saying, like, "Hey, this has been certified. This has been..." so that's how the customer knows. Now if someone wants to go [to a] deeper level and see that, now you're just linking to on-chain information. Basically, making the information presentable in a friendly UI is really all that needs to take place. But as far as a consumer learning how to read the blockchain, that doesn't need to happen because there will be UI consumer layers to support that.

Berlind: It would just be like the work that you've done to obfuscate the fact that people are working with crypto in the first place...

Blanco: Right.

Berlind: Like transacting in US dollars as opposed to using crypto, right? So, it's like you made that easy. Now we just have to make this UI layer so that it's really easy for people to authenticate.

I think one thing I saw is that you've got some of these retailers or you've got manufacturers who are saying [that] before a retailer can sell something, they have to actually make sure that it's authentic, and this is a process that can work at least in that channel between the manufacturer, the wholesaler, and the retailer. They [would] have to enforce these rules, and therefore, there's no way that a retailer ends up selling something that's counterfeit.

Blanco: Yeah. Exactly. There will need to be processes set in place to help facilitate this. You know, workflows et cetera. But, at its most basic principle, it is just making sure, hey, is this real? Is this not? Was this created by AI? Was this not? And maybe it goes the opposite way; everything that's been created by AI is automatically tokenized, so you know that an AI created it. I mean, again, it really just happens to... It's going to take place in the regard of, how do people consume this the most. But, if you were an originator of content, you want to make sure that you're laying claim. It's very similar, if you think about it, to when people think about copyright or trademarking their content, right? Like, hey, I want to let people know I was the first person to create this or put this together. I patented something. Same thing. Think of this as a way every single item that I create as products or content, I want to make sure, is like, I'm claiming that is mine, and if someone else claims it... So, let's say someone else claims a high fashion item. Well, it's going to originate from a different place. So, you could have one luxury manufacturer claiming it and someone else claim the other. But, again, you have to trust the original point of origin. So, if something's being claimed in a different point of origin, that's another way of knowing hey, that's not the real thing.

Berlind: OK, well, hopefully this becomes pervasive. I'm assuming it's a problem you're thinking about and how to solve it with Niftmint.

Blanco: Yeah.

Berlind: So, Jonathan G. Blanco, the CEO and founder of Niftmint, thank you very much for joining us on the Blockchain Journal podcast.

Blanco: Hey, thank you so much for having me. I really appreciate it and I look forward to talking with all of you someday.

Berlind: OK. And again, if you want to connect with Jonathan, we'll throw some QR codes up at the end so you can find them on the different social media. Thanks for joining us here on the Blockchain Journal podcast. We'll see you in the next video.