Will NFT Smart Contracts and Cryptographically Unique Identifiers Replace Notaries?

We're on the cusp of a new era in finance. With the advent of blockchain technology, tokens are increasingly becoming an integral part of our financial lives. Even more so, with NFT standards like ERC-721 giving us the ability to tokenize basically anything we can imagine. But one of the most interesting applications for these digital assets is their use for notarization purposes.

NFTs combine two of the most important pillars in any society; property, and law. These concepts are intrinsically linked together, as property laws define what objects people can own while enshrining into law that ownership of said object must be respected by all members within society (and beyond). The certificates used to prove legitimate ownership (such as contracts) are then put into a batch and hashed with other notarization data into an immutable ledger.

The process of notarizing property is one that transcends time itself. From the moment an individual acquires property, they must prove their ownership at all times to avoid any issues with it later on. This is especially true in cases where disputes arise over an object's legitimate owner, for example, if two people are convicted of stealing a car but can't agree who gets to keep it afterward. In these types of situations, the courts will use the "chain of custody" method to determine what happens with said asset on behalf of society.

The idea behind this method is that each person involved in the transaction would be required to provide evidence of their involvement to the courts. From the initial investigation of the crime, all the way up until a verdict is reached, it would be possible to recreate a timeline using this data as a reference point. This should allow any court to validate if certain claims made by involved parties are accurate or not.

In short, this method basically boils down to the chronological order and trustworthiness of each person's statements based on their demeanor and evidence provided at that time. The more evidence there is from trustworthy individuals, the less likely it is that someone's respective statements could reflect anything but reality. By putting those statements into an immutable ledger, we can construct an objective record of events.

In fact, these notarization methods have been used for centuries by governments all around the world. Because of the history and stability afforded by this type of notarization technology, it's unlikely that it will be replaced any time soon (at least in its traditional form). Even though the blockchain industry has made great strides to create new forms of notarizations like proof-of-existence, they haven't fully replaced processes like these.

However, there are many challenges with using NFTs for notarization purposes. For one thing, they aren't necessarily unique per se; you might own thousands of tokens representing different objects or items simultaneously. Without your private keys, you wouldn't necessarily have control over each object individually either since an attacker could just "take" them from you.

So then, how do we protect these assets outside of the physical world?

To solve these problems, we can turn to cryptographically unique identifiers (or CUI). CUI's are essentially data points that are used to identify an individual without requiring you to divulge any additional information. For example, if I wanted to send you $100 USD, it would be possible for me to determine your home address based on your social security number. But because this data might be compromised by identity thieves or sold by corporations like Equifax due to their lack of a profit motive, this method isn't as secure as it seems.

Instead, a more reliable way would be for me to ask you directly where you reside and send it there. This way I wouldn't have access to any of your personal data and you could receive a payment from anyone anywhere in the world. The only information I'd know about would be your address, which is all that's needed to complete a transaction. The same goes for any kind of notarization process involving NFTs.

In this way, it's possible to prove ownership without having you disclose anything more than what's absolutely necessary (i.e., the specific tokens an individual owns). This means that there wouldn't necessarily be any need to divulge identifying information like social security numbers or private keys here either since CUI offers us an alternative solution; it puts legitimate power back into the hands of individuals while keeping everyone else out.

However, identity verification isn't the only benefit that CUI can provide. For instance, this type of application allows us to store and share information in a way that's totally automated and doesn't require any human intervention. Since we can use CUI to collect information about what happened when we only need the data itself to be able to reconstruct an accurate timeline of events.

Unfortunately, most examples we have today don't work like this because they're just digital representations of paper records rather than digital certificates that can actually validate themselves (i.e., without having to rely on another agency or party). Even though you could technically just take a picture of your driver's license online, there are plenty of ways for it to be faked or manipulated afterward. The same goes for other forms of identification as well.

This is why CUI's are far more effective when it comes to authenticating information or verifying that something actually happened in the way you claim it did (i.e., time-stamping services). And because they can be automatically generated without human intervention, these processes become both fast and cost-efficient1.

Since digital certificates like this are basically impossible to fake, there would no longer be any need for intermediaries like notaries or lawyers either since Blockchains aren't necessary in order to validate them (this type of verification cannot be faked regardless of where the CUI comes from). Likewise, there's no risk of identity theft with CUI's since they're used exclusively for verification purposes.

Although smart contracts could theoretically automate these notary tasks, it's unlikely that they'd do so in the way most people think since you can't simply replace human involvement with an algorithm. Even if token transfers are automated, it still requires someone to act as your legal representative when sending an NFT.

Hopefully, this article has given you some important insight into how CUI's work and why they're needed for certain types of notarization processes. Although smart contracts will likely be used for managing NFTs at some point in the future, it's more likely that we would want humans to determine their validity rather than leaving it up to code alone (which cannot account for every potential scenario or exception).