Getting Physical with Crypto: Bring Cryptoassets into the Real World

Transcript

great in this area okay it's more visible gotta let a few more people come in cool so i'm gonna get started here i'm cameron robertson i'm one of the folks working on kong uh i have a background in manufacturing products uh and secure products in iot um played with crypto a little bit and and this is a project that we've been working on which really brings the two together uh and i'll explain a little bit about why we're doing it so uh one of the things a lot of folks at the

conference have been talking about is uh the adoption curve and where ethereum is on the adoption curve um i think it's a really fascinating topic because when we first started looking into this in 2018 uh there are far fewer users actually owning their own wallets using dapps minting crypto assets but this data point which is of course on bitcoin not ethereum seems to indicate that we're somewhere around 1997 internet which which is uh which is great there's a lot of people who are using crypto assets they're buying them selling them um but there's really one huge concern that we have with this and that is that exchanges are the default way that people

interact with crypto um a lot of users who are not savvy enough to set up their own wallets whether they're hardware or in the browser buy crypto on exchanges and they keep it there so effectively they're not participating in the greater ecosystem they're not setting up dapps uh and and they're not holding their own keys most importantly and of course when people don't hold their own keys really bad things happen um you know if mount gox is one of the things i remember a lot of friends who had bitcoin early on in the the 2013 days lost all their funds when when mount gox was hacked and i think relative to all the crypto market at that time that that is still one of the biggest hacks um

and it just it it influences space and so the big concern we have is if people are not holding their own crypto uh and holding their own key material then then that's really problematic um so we start off this project with the the question uh what if crypto could be more like cash um and that might seem sort of like a throwback you know the whole idea of digital money is we're getting away from physical money why would we want to bring it back to this antiquated form but one of the things we realized is that cash has a lot of tremendous benefits everybody no matter the age they are whether they're a kid or really old knows how to use cash cash has a printed face value

so you know exactly how much it's worth if you destroy cash or you lose it the value is gone and in in general you don't have these high transat or variable transaction costs a lot of people say there are no transaction costs with cash that's not true there are transaction costs to hold cash it's very expensive for stores to deal with it so broadly off to the side here uh so broadly we think that the cache is a pretty useful uh way to think about crypto and that's how we approach this problem around 2019 um when we thought about this in our background in manufacturing hardware we looked at existing solutions and one of the the common existing solution is

uh private keys that you print out on a printer and it's great if you want to gift a private key or something to a family member you can give them a qr code they can pull that um and and they're they're set uh but one of the problems with this is obviously they can't then go and spend that private key with someone else because they can steal the funds from it and another problem is that we heard from a lot of people who had solutions like this gifted to them is they lose it it's not obvious that it's worth something and it doesn't feel like it has value so printed private keys just don't really work for transmissibility and nor do they have this this sense of value to them uh the next one was hardware wallets hardware wallets are

great they're they take your keys away from your computer which has a larger attack surface so your hardware wallet in theory has a smaller attack surface but in terms of something like cache the problem with hardware wallets is they're they're really expensive they're fairly complex they have a lot of code running on them they need to support screens and buttons and communications via usb with your computer and when you add complexity you add a tack surface so you increase the likelihood that someone can pull the keys off of a hardware wallet maliciously um and of course you know if we want to distribute these things in the millions again it's just very costly to do that the last one one is this thing called a java card a java card is is effectively something

like you have in your wallet uh the thing about java cards is that they have a lot of attack vectors to them so they're really useful because they're programmable but unfortunately there's there's many many different papers that have been written by security researchers on how to get the keys out of java cards they're really useful for other cases where you don't have to pass the java card onto somebody else is say a hardware wallet but in the case of mimicking cash uh as as people have been in the hardware business for a while we didn't really like the idea of using java cards and so what it really boils down to is trust in physical crypto means trust in the keys the keys allow you to sign proof of ownership they

allow you to transfer the asset and so how you store the keys matters a huge amount so the product that we developed and we showed off at devcon in 2019 is kong it is a physical crypto cash note it looks and feels like money um it has a printed denomination on it as i mentioned it has a secure element chip on it which stores and generates the private key material and more interestingly unlike a hardware wallet the private key associated with this doesn't directly control the asset but instead it's proxied through a smart contract the smart contract holds the asset

and it has certain sets of rules on when that asset can be retrieved so in the case of cash we didn't want to make this like a a gift card where you could immediately pull the value off of it because if you go out there and you receive a euro note or a dollar bill you have you know a great degree of confidence that you can take that to a bank and deposit it and so in the case of concash in order to emulate that to make it feel and work like money we actually lock up the funds via a time lock in the contract so these notes expire in 2022 which means until that point in time you can spend them like cash you can store them like cash you can burn them but you can actually you cannot pull the digital kong token off of it

uh until that expiration date um so all these qualities we thought were were really important it was really great to get the product out there at the end of 2019 at devcon a few people saw it also at ecc3 um but it was you know we had a few challenges since then and one one additional thing to point out so the the key aspect of how we manage the keys versus say the java cards and the the hardware wallets is a specialized chip called a secure element a lot of hardware wallets have secure elements in them but they're only used to validate the firmware they don't actually generate and store the key material and the reason why secure elements are really important is because their functions are encoded

in hardware effectively as opposed to software and that means they're not upgradable and they're not malleable and so in our case every kong cache note actually self generates its own ecdsa key pair and that private key is never accessible and that's why we also use the smart contract because since we can never sweep the keys off of it you need to have the smart contract be able to release it upon signatures from the chip and that's the only thing you can do effectively is generate signatures and so in terms of the the structure of how a kong note looks you effectively have the chip here which is the signer you have the smart contract in between we've now done a few different

iterations of what the smart contract looks like but effectively it just needs to be able to check the pub key and then the one thing that's really important to note here is these chips unfortunately off the shelf today do not support the native ecdsa key type in bitcoin or ethereum but rather they support the nisbak standard p256 and all that means is we have this translation problem where we can't use these built-in functions in ethereum and we had to write this very expensive contract to be able to process these signatures uh and that's that's using the p256 elliptic curve um so since we we announced this product and we got it out there

uh obviously a lot of things have happened uh you know at the beginning it was really tough because we have a physical product and and we show it off to people and we bring it to conferences and obviously all of that was canceled high gas prices so when we first developed kong in 2019 we were fairly new to ethereum and at that point in time both ethereum and gas were very cheap so each kong note cost us i think it was around 25 cents to deploy um but fast forward to uh defy summer and our our cost started to spike beyond like 10 and then 50 per note and 100 and it just wasn't viable so we had to totally rewrite uh how we manage our contracts and that took a little time to figure out because we're

not uh we're hardware people not really ethereum developers um and and took us a little bit of a learning curve and then lastly the thing that we're still facing today is chip shortages so once we had resolved our smart contract issues um we started to run out of chips and that's obviously impacting everyone luckily we have a source of some chips and we've been exploring new options but it has been a little bit challenging since then of course since then the upside has been tremendous everybody is knows what's been going on apart from d5 nfts have been exploding l2s are finally shipping which helps us with our gas problems and so we had a lot of confidence that even though we were facing these issues it was interesting for us to keep building

the biggest sort of meta thing that we got from uh from showing this off at devcon and ecc was really that the the notes were interesting but other crypto assets were more interesting so by that i mean uh getting physical crypto assets whether they're nfts or property or collectibles and and using our chips for that purpose were really really uh interesting to a lot of different people out there and and folks came out and started asking us for the chips and we decided to start exploring a few of these things so um since then we realized that you know kong is really really only the the tip of the iceberg and um i'm super

excited to say that at this point in time between kong notes and additional chips we've shipped 10 000 of these uh what we call silos and a silo is just our term for a silicon lock contract so any physical crypto asset so we've been able to deploy a lot of these and i just want to talk about where we're going today with that and and how we're directing from there um so our conclusion from from talking to a bunch of customers and learning from everyone out there is basically a lot of people are super skeptical about crypto then they're superscriptable about nfts uh and then they're like yeah you know everybody's just gonna be in the metaverse consuming this stuff that's it like we're just gonna be plugged in all the time

but reality our conclusion is that yes the metaverse exists and we're gonna access it in online places but it's also going to be ubiquitous around us as in objects around us will also be objects that will participate in the metaverse and the most important thing to be able to do that in our minds is making sure that those objects have a really strong way to store their key materials so you can identify them on chain and i'm going to explain a little bit more about that with a few of the the early folks who've worked with kong so what we're launching today is what we're calling kongland and it's basically an opportunity for anyone else out there to come build using this chip technology uh so

if you have physical projects that you want to work on kongland is effectively a dow of daos that's that's engaging with the community and shipping out different interesting stuff um we're calling it a an experimental crypto state because kongland in and of itself is not uh intended to be a dow around some sort of protocol to begin with um we want to put the technology out there as a public good uh one way to approach this is we're just one company selling these chips but we'd rather engage with everybody and get the chips out there at cost for really interesting projects to scale the tech up and there's there's a few interesting reasons why scale is important for us and the the end mission is that uh we

think that physical user experiences back to our kong cache notes are incredibly useful for individuals to onboard to crypto and be able to hold their own key material so let's talk a little bit about uh what a konglan endowed looks like and then a few examples basically the idea is we're bringing in chips ideas uh other tokens and then we're embedding them into you know fashion merch pieces of art collectibles um fairly simple uh but but the idea is you know we want to be able to make things physical that are crypto so uh the first and and most amazing example project that we've been collaborating with is meta factory uh

meta factory is incredible and they're they're doing just like insane stuff around merch um if you haven't heard of them you need to check them out but they realized very early on before we did uh that tokens and merch interacting together are really sort of the future of engaging entirely new customer bases getting people attached to brands curating different different products in the market and meta factory has also been like uh helping us long through this whole path of you know becoming a dow effectively so huge shout out to those guys but one of the cool things the reason i want to point this out is a number of the original meta factory goods have our chips in them so

the the meta factory genesis bomber jacket here has them and we've been working with them to build out experiences that based on you scanning the chip and the jacket are exclusive to you as the holder of the jacket at that point in time and if you sell the jacket onto somebody else maybe you no longer have access to those experiences the next one is materium materium has been working on real world asset nfts and they've been in this space for a long time what's really interesting about materium is they also have a whole legal framework that they're designing so that in the real world you know how assets are managed are done so with both smart contracts and contracts written by lawyers

and so they have this really interesting framework and they launched uh a few months back with these uh william shatner star trek collectibles um and they embedded our kong tags uh under the signature that bill shatner himself signed so it's another example of these tags are giving authenticity they're tracking the collectible and the really cool thing is ultimately with some of the materium stuff that you can actually pull those assets back into d5 you can say okay i have these materium tagged assets maybe it's a shatner collectible maybe it's a gold bar maybe it's something else if i can scan and validate it that helps me then to actually use that as collateral in some sort of defy

construction so super excited to be working with them as well uh on this coming up is uh we do have a second version of kong notes um they're not actually gonna be used as the slide says for stable coins right away they're for a different a different token altogether and the reason i bring this up is we learned a lot in terms of sourcing chips and scaling up and these kong notes are more resilient than the first generation kong notes they're a little bit cheaper to manufacture they have slightly different security guarantees uh but we're super excited about those those are coming soon in the next few months and they point towards something where which we would like a kung dao to engage with the community on is a is a stable coin um physical crypto note and there's a lot

of reasons for this that i don't have time to get into my talk so hop into our discord if you want to chat about making physical stable coins there's really really cool ways to onboard people to defy using this kind of physical note even if they have zero clue about you know private keys and uh uh crypto altogether uh i mentioned one of the things about scale and why scale is important to us and why we want to make this a public good and get everybody on board and that's because we actually took sort of a detour a couple years ago into the open ship world and we basically were super concerned with how chips are manufactured because even if you have really fantastic software that protects your keys and then really

fantastic hardware that protects your keys if the chips are manufactured in a way that's untrustworthy you don't you don't know who manufactures them you don't know where then someone can build an extra set of gates and they can steal your private keys so the idea behind this is you might have a very secure chip design whether or not that actually gets implemented is a big question there's a lot of open source tooling coming here it's going to take a long time before we have truly open audible chips but our hope is that if we're all building a bunch of uh physical real world crypto assets out there that we can source things in the millions which is really what you need to design custom chips and then open those up for all sorts of applications maybe not

uh not only silos but also crypto wallets laptops smartphones things like that um so this kind of reinforces i like that this tweet is from 2019 because bellagio brought up that effectively in the future you know key management is everything and a lot of folks have now been saying sign in with ethereum like today that's happening like we know that's the case um so i think when i when i brought this up a year and a half ago was kind of like well maybe but now everybody is really understanding the importance of how you manage your key material and we think that especially on your hardware also how you manage your key material is really important so the thing that we're launching today that is a physical piece

which is how we're launching the kung lan dao is a kong passport card basically this is uh the same chip technology that we have on our kong notes instead in a card form factor and uh we're launching this at kong.land the idea behind this is it's sort of an invite for everyone to to buy what we're saying is citizenship to the kongland dao it's also going to generate a sort of nft did uh which you can either use pseudonymously um you can take it off and sell it to somebody else uh but we're kind of playing around with the idea of here's a physical crypto device that maybe at some point will let

you into a crypto party because you can just tap it onto an nfc scanner and because you have citizenship in kung lan dao you can be granted access and again this isn't something we want to keep exclusive to us we'd really like to work with did projects projects around ubi about getting this technology out there at scale because again that lowers the cost for everybody so we're launching this today that there's some tokens in a pool that you can purchase and then they're going to be redeemable i think next month and we'll be shipping out this physical card to you in redemption for that along with the nft um this is a preview of one of the nfts one of the things about kong and the aesthetic of kong is there's a lot of

mystique that we built into it uh we're focusing on classical statues for the nfts uh which are pretty fun um but yeah a little bit of what i just explained there in terms of uh how we're how we're approaching this and also we're finally moving on to discord we've been on key base for a couple of years and not many people use key base anymore so super easy to hop into kong so today's a shout out if you want to learn more about this or you're super interested in playing with the technology or you're an artist or a builder or you're super intrigued hop into the the discord take a look at kong.land kong.cash i'll be around with my briefcase at the

conference for the rest of the day so if you want to take a look at kong notes or have some ideas let me know um yeah so again this is this is what we want to do we want to make crypto super usable we want to let you hold your own keys and kongland is effectively the vehicle by which we're doing that and we want to engage with everybody out there to do that thanks do we have time for questions or oh yep thank you hi cameron great talk

um so i actually am familiar with meta factory um i didn't know that kong was like the technology that was used um for their products so i guess my question is like what is the user journey um when someone gets the meta factory there's a chip and you mentioned that once how does it get washed in the dryer like what happens the chip someone resells it like i want to know the full journey thank you yeah so that's a really good question uh about the the user journey of someone buying a meta factory product with the embedded chip in it so thus far it's only been a few of the high-end goods it has been every meta factory good and we haven't really announced uh to all the users how that works today because the user journey is something that we're still in progress on

we've talked about a lot of ideas around it right now today every person with one of these chips can scan them and they can verify that it's a kong authentic chip but the the next steps there are we propose kind of a lot of ideas with meta factory on like oh we think that this might be interesting to build or this might be interesting but the really cool thing is meta factory has a lot of other really interesting ideas that i don't want to spoil in terms of how they're doing that so it's kind of up to them um i would i would say long story short you can imagine it as you get the good uh your you scan it and that may give you access to a digital asset right away that you're able to mint

or it may track the existence of other assets it may be a place where they can immediately drop you additional things over time because that's a big part of meta factories is getting the robot drops um so yeah i realize that's sort of a vague answer to that there's a lot of different aspects of what might happen there but the the out of box experiences you get the good you scan it and then you're brought into the meta factory digital experience right away no it is on the on the clothing so it's mounted under the tag uh the chip is washable i realize that's the other part question uh yeah so the first gen chips are limited wash ability but they have been through some wash tests but that's sort of a scaling problem we can get them to be

super washable um so yeah so uh hello uh a great presentation thank you uh so i wanted to ask that with the kong notes i guess there are two cases two distinct things that you might want to do with them electronically one is to verify that it's a genuine note and the other is actually transact with it so how do you like what's the what what's the user interface like how how do you how do you tell the note what to do yeah yeah so uh the interface is via nfc so all the notes are inductively powered when you tap your phone to them so there's no battery required and

through the process of you tapping your phone to them with the kong app you can also feed in a random number and by feeding in a random number and knowing the public key you can then verify it so you can verify the authenticity in terms of actually interacting with assets in the smart contract we're we're actually having you sign recent block hashes so we're saying okay if you want to claim this note we want to see that you've signed a recent block hash of a certain height because if someone else previously has signed a block cash you don't want them to be able to claim it so so the claim mechanism is based around let's sign recent information from the chain and again it's as simple as you tap the app we feed that information in the chip and we get a signature out

and a cool feature of the chip is that the one that we're using now we can actually generate both external signatures from nonces that we feed into it as well as signatures from data about the chip internal to itself and those are two different distinct key pairs and that gives us really a great capability to audit the chip and say okay here's the chips configuration signed by the chip by this key which by design can only sign internal data so there's additional capabilities there one of the other things that we haven't really used also is we have some keys which are set to expire so there's one key that you can only use i believe it's five times on the chip in total and then it will refuse to sign additional data

so that gives you some interesting properties around claiming assets but yeah the ux is very simple you tap on it ios or android using the kong mobile app we get signatures out and we use those in the smart contract thank you i think that's it well thanks a lot uh and find me with a briefcase if you want to take a look you