We will have a utility token called Konkrete (KKT) that will be used to power the various activities in the platform such as property selection via voting, exchange of units tracking, and listing fees for properties etc.
Why does this matter? Well, consider a typical investment process which looks like this:
The investment has now started and through the life cycle of the investment the issuer will provide updates to the investor on the progress. This can be adhoc interactions on specific queries, periodic reporting and self serve mechanisms for the investors to gain access to the info they want. All of the above processes are typically manual, administration intensive and often prone to error and time consuming.
On the other end of the investment cycle is the liquidation. This can be in the form of a buy back by the issuer (on maturity) or sale of the units to a 3rd party. Buy back process involves exchange of units for money by the issuer on the agreed upon terms. Selling to a 3rd party requires the presence of a willing buyer who buys the units from the previous owner at an agreed upon price. This is typically done on a secondary market like the ASX for listed securities where buyers and sellers are matched
However being listed requires onerous disclosures and compliance plus can become very expensive. For this reason alone a number of issuers choose not to list on a secondary market.
However this also means that these investments are relatively illiquid and can only be exited through a buy back by the issuer. Liquidity is seen as a very desirable trait by investors and investments that have this option will often attract capital at a lower cost
We propose a Blockchain enabled solution that addresses the key problems in the investment life cycle.
We will be implementing a decentralized system to verify id documents.
Such a system will have 3 participants
Investor, Issuer and Verifier
Similar to an offline system, the investor will approach his nearest issuer and present him with his id documents. The verifier will verify and create a copy which will be cryptographically sealed with the verifiers public key and the investors private key. The investor may then provide this encrypted file to the issuer as part of the application process. The issuer can then unlock and access the id docs with the verifiers public key and investors private key (which the investor would provide the issuer).
No tampering would be possible on part of the investors due to the encryption by the verifier. The verifier would get paid a fee each time these id documents were accessed as part of any transaction. The investor maintains control of who can access his files by giving the private key to only those who need to have it.
We will also put the unit registry on the Blockchain turning it into a Decentralized ledger. All members of the network will have a copy of the registry as well as a transaction history. Any exchange of units between members of the network will be automatically updated across the entire network.
Which means the registry is always updated, without the need to do onerous administrative work. Such an exchange will only be possible between members who have completed the KYC using the decentralized verification process described before effectively turning this network into a decentralized peer to peer secondary market. All exchanges will happen only between verified investors and the registry gets auto updated. This network can effectively function as a global secondary market for securities
Each issuer will address it independently before listing it on the network. There is a potential for creating a marketplace on this network where capital raisers can be connected with lawyers or Responsible Entities who can structure and make the issue as part of this.
The network is proposed to run on the Ethereum Blockchain and comprise of 2 main token types. One will be a utility token which will be used to pay transaction fees when any of the security tokens change hands. It is also used to pay listing fees for any issuer who wants to list their security tokens on this network. And it will be used to pay the fees of verifiers who verify id documents. It will be also used to record votes for securities which rely on votes of share/unit holders for their actions.
Note that the utility token holders themselves are not entitled to voting rights by default. But the utility tokens can be used by the security token holders to record votes on various resolutions related to the activities of the Issuers Offer if applicable. In effect making the utility tokens a mechanism to record votes in a distributed and transparent manner.
The second token is the security token and will be based on the R token standard.. Those who hold the security token will need to have completed their KYC first. AML CTF will be done by having a few always ON jobs running on top of the network. That will monitor any suspicious transactions and flag them for manual review.
The utility token will be called KONKRETE (KKT)
There will be numerous Asset backed tokens that can operate on this network. The first will be a diversified fractional property fund which will help in tackling the housing affordability crisis. This fund will be used to crowdfund home deposits and release equity from homes.
KONKRETE will be used by unit holders of this fund to determine which properties to co-invest in. By recording a vote each time a property is proposed to be acquired by the fund.
We want to design the Token economics to meet the following objectives for the KONKRETE utility token
The tokens will be used to pay transaction fees of all kinds including for exchange of securities, AML KYC CTF, Access, listing etc on the platform.
We want to ensure that the tokens are relatively scarce so that they command some value. We will aim to achieve that by putting a downward pressure on the total number of tokens in circulation by burning a percentage of the fees paid for each transaction.
In the early days 100% of the tokens being paid for the transaction will be burned. As tokens are taken out of circulation the remaining tokens will likely become dearer as they are required for paying transaction fees.
However we cannot continue to burn the tokens forever as that would lead to a state where eventually all tokens get burned up or they become so expensive that the tokens get hoarded and the entire network becomes jammed as no transactions are happening due to the exorbitant token price.
Hence the % burn rate will steadily decline as an inverse function of tokens burnt till date and it will steadily approach 0 so that initially the rate at which tokens are taken out of circulation is high while eventually no tokens are being burnt. A maximum of 20 Million tokens will ever be burnt.