Connecting Web 3 and the Metaverse to the Real World

You may not have heard the term “cyber-physical asset” yet. If you are reading this article, you are probably somewhere in a space where the terms metaverse, NFTs, blockchain, assets, decentralization, digital twin, and oracle problem float around. In that case, the chances are high that cyber-physical assets will be important for you in the future.

Cyber-physical assets exist in the real and digital world and need an implicit connection between these two worlds to function. Cyber-physical assets are the next evolution step of NFTs.

The following article will introduce this new term, separate it from other concepts and explain why we need to work on implementations and research challenges in the context of cyber-physical assets.

What is a Cyber-physical Asset?

We define a cyber-physical asset (CPA) as follows:

A cyber-physical asset (CPA) is an object that exists in the real world and the digital world with an end-to-end connection between the two realms (state synchronization with a cyber-physical bridge). State changes that are introduced in one realm get automatically reflected to the other realm so that real and virtual objects are inseparably tied together.

There are a few concepts related to cyber-physical assets (CPAs): NFTs, digital twins, and cyber-physical systems. Let us look into them and see how they relate to cyber-physical assets.

NFTs

A non-fungible token (NFT) is a unique and non-interchangeable unit of data representing a spectific object stored on a distributed ledger. NFTs use a blockchain (or any other kind of DLT) to create a public proof of ownership or certification of authenticity [1].

Right now, NFTs are typically used for digital objects like gaming items, digital art, or collectibles. The core idea of a cyber-physical asset it to take NFTs one step further. Cyber-physical assets can be implemented by creating NFTs that represent real world assets and a bridge that synchronizes state information between the real world and the digital world.

There are currently approaches out there that create an NFT for a real world assets. For example, some projects create an NFT that “represents” a house and “call it a day”. When you do that, there is basically no connection between the digital world and the real world. What happens when your house burns down? It is not existing anymore, but you can still sell the NFT? What happens when you give the keys to your house for cash to somebody else. You do not have control over your house anymore, but you still own the NFT.

These problems arise when you do not synchronize the state of the physical and the virtual object. We call such a state synchronization a cyber-physical bridge. An object that enables such a synchronized two-way connection between the two realms is more than an NFT. It is a cyber-physical asset.

Digital Twins

A digital twin acts as a virtual representation of a physical object that is a real-time digital counterpart. Digital twins are often focused on this one-way connection of sensing state information from the real world and bridging it to the digital world [2].

An example of a digital twin can be a representation of a parcel in digital form. When sending a package from a sender to a receiver, the parcel gets transported to different checkpoints by different carriers. A digital twin can represent where a parcel is and who holds it. Think of your shipment tracking system as the illustration of a digital twin in a web interface.

The core difference to a cyber-physical asset is that digital twins are a uni-directional view. Digital twins are meant to be used to analyze data, not to change ownership information in the other direction. When you think about your shipment tracking system, you can only use it to trace the steps of your parcel and not to update the real-world position of your parcel.

Cyber-physical Systems

In a cyber-physical system, physical and virtual objects are intertwined [3]. Most commonly, in a cyber-physical system software components can control the state of a real object.

For example, in a digital on-demand shoe factory, a customer can customize their sneakers. In that case a software component controls how the assembly line used that yellow cloth that the user wants for the top of the shoe. You could say, the virtual world controls what happens in the real-world.

In the end this is also a uni-directional state change. Cyber-physical assets can be used in a cyber-physical system to implement a true two-way synchronization.

Connector of Realms

We can compare the different concepts as illustrated in the following figure.

Changes to NFTs are (without a cyber-physical bridge) only reflected in the virtual world. Just by selling an NFT representing your house, the physical locks and keys are not changing automatically.

Digital twins observe changes in the physical world and analyze them in the virtual world. Without anything else, digital twins are read-only..

Cyber-physical systems reflect state changes in the virtual world to the physical world. They are only there for generic state information and do not care about ownership properties.

Cyber-physical assets have an end-to-end connection between both worlds for generic state information and ownership information. Changes that happen in the real world are reflected in the virtual world and vice versa.

Summarizing, a cyber-physical asset is a combination of aspects of all three concepts. It is a special NFT with state changes reflected in the real world. It can also be seen as a special kind of cyber-physical system with a real-world connection. A cyber-physical asset can also be used as a digital twin to analyze data and integrate it into other systems and processes.

Why do we need Cyber-physical Assets?

A viable implementation of the concept of cyber-physical assets creates three main benefits that can help in many different use cases.

1. End-to-end Real World Ownership Traceability

Cyber-physical assets can help us trace back where assets we purchase come from. For example, you can verify if the car you want to buy has been stolen or if the seller is the rightful owner with an NFT.

But it is more than an NFT. If you only have an NFT, you would never know if the NFT’s owner is the asset owner in the real world. We can enable this only by building a cyber-physical bridge that automatically synchronizes the real world with the virtual.

Implementing a cyber-physical bridge is not trivial. In the car example, we could synchronize identity information stored in the NFT with the ability to start the car. Only with a viable implementation of such a bridge can we verify real-world ownership in an end-to-end way.

2. Speed Up Inter-Organizational Processes

CPAs can speed up complex processes that involve multiple actors from different organizations.

For instance, the process of buying a house involves the buyer, the seller, probably somebody else providing the seller a loan, and the land title register office. Each of them needs to synchronize with each other and transfer information.

Creating a cyber-physical asset with an end-to-end cyber-physical bridge can basically be used as a “bulletproof accounting system amongst different partners”. Since there is one single source of truth, integration in complex processes becomes more straightforward. The use of common standards further increases the benefit.

Also, in this case, creating an NFT for a house and calling it a day is not enough. It needs real-world process integration and the implementation of a cyber-physical bridge.

3. Enable Emerging Decentralized Applications

The term decentralized application (or dapp) is most commonly referred to smart contracts and applications built around them. With the concept of a cyber-physical asset, we can create new dapps that are no longer bound to the virtual world.

For example, think about carbon markets and certificate trading. In the very near future, the progressing climate change will force us to keep track of our CO2 emissions and coordinate to not exceed the carbon budget of the planet.

Having a cyber-physical bridge will help to verify that decarbonization actions actually happened. This needs to integrate a lot of IoT sensors into the bridge that enables transparency and trust in the process.

What Challenges do we need to Overcome?

Cyber-physical assets are in an early stage of research and development. To unlock the full potential, two main challenges need to be addressed:

• state synchronization between the virtual and the physical world
• legislation and process integration

We will briefly look into these challenges to understand why they matter.

State Synchronization

The whole premise of cyber-physical assets is that the relevant state information of the physical object and the virtual object are connected in a bi-directional link. Creating this cyber-physical bridge needs to solve the well-studied oracle problem. There are currently some approaches for oracles to a blockchain available (see Chainlink [4] or iExec [5]).

When creating a new CPA or a set of CPAs, it is necessary to define the cyber-physical bridge by creating oracles thoroughly. When it comes to verifying the state information of real-world assets, IoT devices that can act as independent sensors can be used. But state synchronization needs to go further. Eventually, not all state information can be completely synchronized in an automated fashion. Then, we need to find strategies to detect synchronization conflicts and ways to cope with them.

State synchronization is the key challenge that needs to be solved on a technical level for cyber-physical assets to be viable and sound.

Legislation and Process Integration

Cyber-physical assets leverage the core premise of the concept of a distributed ledger. They represent the single source of truth for a certain object that exists in the physical and in the virtual world.

For cyber-physical assets like real estate, land titles, or cars, there are in most countries existing systems to track them in place. There needs to be a change on a legislation level to shift the single source of truth from the centralized databases at government agencies to the cyber-physical asset stored on a blockchain.

But legislation is not everything. As long as the processes that use the cyber-physical assets are not integrated, the single source of truth cannot live up to its full potential. Thus, integration efforts need to be taken in all fields that want to leverage the benefits of cyber-physical assets.

Outlook

In this article, we introduced and defined the concept of cyber-physical assets. We distinguished them from NFTs, digital twins and cyber-physical systems. Cyber-physical assets enable a connection of the state information between the real world and the virtual world with a cyber-physical bridge.

A small selection of use cases illustrated how CPAs could improve existing processes and be enable entirely new use cases. Cyber-physical assets can be a catalyst for the adoption of web3 and the emerging metaverse.

But to get there, work is needed.

There are a lot of challenges to overcome. That’s why we decided to start a cyber-physical assets interest group. In this group, researchers and businesses come together to work jointly to build all the necessary parts to make the vision of this article a reality.

Are you interested in the topic and want to contribute? Hit me up on Twitteror LinkedIn and let’s join forces!

References

[1] $69 million for digital art? The NFT craze, explained Dean, S. Dean, 2021

[2] “A review of the roles of Digital Twin in CPS-based production systems”. Elisa Negri (2017).Procedia Manufacturing. 11: 939–948.

[3] Cyber-Physical Systems (CPS), US National Science Foundation

[4] Securely connect smart contracts with off-chain data and services, Chainlink: https://chain.link

[5] iExec Oracle factory https://iex.ec

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