Below is a summary of our planned treasury proposal for development of two new Substrate pallets. Your feedback is much appreciated.

**Requested Amount**: $27,300

**Short description**: Development of two pallets in support of several use cases related to a gated marketplace for graded assets and fractional uniques (NFTs).

**Detailed Proposal**: [https://docs.google.com/document/d/1xUliCrFl-uTY8cIbOLhNoyBDvzm32UdoxIftGxJrUXI](https://docs.google.com/document/d/1xUliCrFl-uTY8cIbOLhNoyBDvzm32UdoxIftGxJrUXI)

As more real-world assets continue to make their way to blockchain applications, there is an increasing need to ensure that the assets have been verified or graded by an expert third party/appraiser. This treasury proposal supports Substrate pallets that allow developers to launch a gated marketplace for graded assets that can be fractionalized in configurable quantities.

## Graded Assets and Marketplace
### Example Use Cases
#### Coins and Cards
Sports memorabilia and historic or rare coins have long been collected as a hobby and store of value. Sports memorabilia alone is estimated at $5.4 Billion, but has a reputation for fakes. A common marketplace for these is eBay, and in their buying guide, they recommend having cards graded: 

> These independent organizations evaluate a card for authenticity and quality. Many use a 10-point grade scale. They then secure the card in a sealed, tamper-evident plastic holder complete with a certification tag, grade designation, and other pertinent card information. Graded cards command premium prices and allow collectors to buy and sell with confidence. 

The grading organizations provide a physical representation of their certificate and grade embedded within a plastic holder, but these attestations lack digital verification and trust. 

#### Diamonds
We previously built a blockchain-powered, cooperative marketplace for diamonds. Since it is a complex process requiring a special skill set and instrumentation, and there is a high incentive for fraud, all diamonds must be graded by a community-approved grader (e.g. Gemological Institute of America or IGI). 

Once graded, these diamonds are then purchased by the [Diamond Standard Company](https://diamondstandard.co/technology), where they are molded into pucks of equal value, stored in a secure vault, and minted on the Ethereum main net. See the [detailed proposal](https://docs.google.com/document/d/1xUliCrFl-uTY8cIbOLhNoyBDvzm32UdoxIftGxJrUXI) for more details.

#### Tax Credits
In many areas, tax credits offered by governments are transferable from the credit earner to other taxpayers interested in redeeming the credits. It is often the case that a credit may be earned by a person or company that does not have enough of a tax burden to leverage the credit. However, the validity of a tax credit requires an assessment from a Certified Public Accountant (CPA), lawyer, or other trained professional. 

The grader must review a credit owner’s documentation and evidentiary materials to determine if in fact the credit will be honored by the taxing authority (government). 

### Pallet - Graded Assets and Marketplace
This pallet will support the selection and approval of graders, accounts that will perform asset verification or assessment on behalf of asset owners. Similar to the Identity pallet’s registrars, these parties may have a corresponding fee for their services, and the community’s trust in their attestation is secured by their reputation.

#### Asset Redemption
Some graded assets in our use cases also require a specific skill set or equipment for asset redemption. The pallet will also support this functionality, where again the redeemer pays a fee to a redemption specialist for the service.

The pallet will be compatible with the prebuilt Uniques pallet.

## Fractional Uniques
### Example Use Cases
Some of the above mentioned use cases are fractionalizable, meaning a new asset may be spawned from an existing one and the new one inherits the attributes of the parent. Here are more details on these and other relevant use cases for this pallet.

#### Commercial Leases
When a commercial office space lease is signed, it becomes a future promise to pay the rent from the renter to the owner (landlord). This instrument can be sold or used as collateral for borrowing. The landlord may sell it shortly after executing it in order to receive capital immediately. It would be sold for less than the face value due to the risk and time-value-of-money. The difference between the sales price and the face value is the return awarded to the buyer.

Leases are typically monthly, and each individual month is a separate future promise to pay. The leases can be fractionalized into monthly units where each one has a different value because the time to receipt is different.

#### Cannabis Traceability and Regulation
The 'war on drugs' has failed, and cannabis legalization and regulation is sweeping free cultures around the world. In the United States, cannabis has remained prohibited at the federal level, and the regulation is happening at the state-level. Nearly all 50 states have some form of cannabis regulation, with the trend towards more support for allowing and taxing recreational cannabis.

Although each state applies a bit of nuance to their specific rules, one rule remains consistent. All cannabis material must be closely tracked and accounted for. Growers purchase a bag of seeds, such as 100 seeds of a single strain. These are placed in water to germinate, where some will succeed and others will not. Of the successful ones, some are planted into a cube of potting soil substrate and others are frozen for safekeeping.

The cubed plants are grown to become "mother plants", where the yield, potency, and other traits are closely measured and monitored. These mother plants spawn clones and also flower that is dried and packaged. The flower is sold, often to a dispensary, where it is sold to the consumer.

At each of these steps, a new Universally-Unique-Identifier (UUID) is assigned to each unit, where its characteristics and weight are recorded. Test results, images, videos, PDFs, and other files or content can be attached to each UUID, and by default, each UUID inherits the parent's attributes. These attributes may also be overwritten, and/or uninheritable attributes may be added to each UUID.

In the context of the pallet, each UUID is a fractional unique. We are actively modeling this with [growers](http://nuponixlabs.com) in the state of New York, where recreational cannabis is legal and the details of licensing and regulations are actively being decided. We think a blockchain-enabled platform on Polkadot would be a compelling solution for more transparency and regulatory compliance in this fast growing industry.

### Tax Credits
Tax credits are earned or created with a specific face value, determined by the taxing authority and corresponding asset grade. Buyers of the tax credit may not have a tax liability equivalent to the face value of the credit listed for sale. It is common practice for the owner to split the credit into a child asset in the precise amount desired by the buyer. 

Signaling even more interest in this space, in a [recent report](https://www.benzinga.com/markets/cryptocurrency/22/04/26859007/goldman-sachs-explores-nfts-in-the-context-of-financial-instruments), Goldman Sachs reported that they are “exploring NFTs in the context of financial instruments”.

## Pallet - Fractional Uniques
In terms of data structure and functionality, tax credits, commercial leases, and cannabis units all can be modeled as fractional uniques/NFTs. 

Each use case requires:

1. Attaching any various data elements or supporting materials (e.g. files)
2. A parent-child relationship:
- Each NFT starts as a root and supports spawning 0..n child NFTs.
- Each child NFT inherits attributes and data from the parent, but may also override them.
3. Numerical constraints may be applied to each NFT, for example: 
- Sum of all tax credit children must match the original face value of the root. 
- Sum of the weight of cannabis must be tracked and enforced, even what goes to "scrap". 
- Face value of a lease is the sum of its years, quarters, months, and weeks.

Just like graded assets above, the pallet will be compatible with the prebuilt Uniques pallet.

## User Interfaces
We will build polkadot-{js} style web user interfaces for all functionality. Since these components are general purpose, high fidelity screens and interfaces will be developed by individual use case projects and are beyond the scope of this proposal.

## Documentation
We will provide detailed documentation, including step-by-step instructions, on how to use both pallets. 

## Milestones
Detailed milestones and hours are included in the [detailed proposal](https://docs.google.com/document/d/1xUliCrFl-uTY8cIbOLhNoyBDvzm32UdoxIftGxJrUXI).
### Milestone 1
User on-boarding functionality for registering, configuring, and approving asset graders by an asset class. 

**$10,600 (212 hours @ $50/hour)**
### Milestone 2
This milestone is for developing the Fractionalizable Uniques pallet, including spawning, attribute inheritance, and hierarchical numeric constraints.

**$7,500 (150 hours @ $50/hour)**
### Milestone 3
This milestone is for development of the marketplace and settlement processes, including listing for sale, accessing lineage/descendants and attributes, making offers and purchasing, accepting offers, and settlement with fees and commissions.

**$9,200 (184 hours @ $50/hour)**

#### Contact
hello@hashed.io

- The proposal is requesting $27,300 for the development of two Substrate pallets.
- The pallets will support a marketplace for graded assets and fractional uniques (NFTs).
- Graded assets include things like sports memorabilia and diamonds that need to be verified by experts.
- Fractional uniques allow assets to be divided into smaller parts, like commercial leases and cannabis units.
- The proposal includes milestones for user onboarding, developing the pallets, and creating the marketplace.

#1043 Graded Assets & Fractional Uniques (Pallet Development)