An asset token platform on Cardano

Building an asset token platform on Cardano, mixing with a barter exchange, brings a good solution for illiquidity issue of real assets.

Mr. Nguyen Thanh Binh (team leader): Ph.D degree in Economics (Virginia Tech, VA, USA), 22 years working experience in banking & finance.

[See full draft version in the attached file]

I. What is asset token?

According to Fokast.News [Fokast.News, December 2020,The Unstoppable Rise of Digital Assets, https://forkast.news/digital-asset-report/]:

- Asset token (or tokenized asset) is defined as "a blockchain token that represents a physical, tradable asset or commodity" .

- The tokenization of assets refers to "the process of issuing a blockchain token that digitally represents a real tradable asset".

According to Shermin Voshmqir [Shermin Voshmgir, November 2020, Token Economy: How the Web3 reinvents the Internet, https://github.com/sherminvo/TokenEconomyBook/wiki]:

- Asset tokens allow the creation of a digital representative for any physical asset or securities. Asset tokens, in general term, include any asset, such as commodities, real estate, securities, artwork.

- There are two types of asset tokens: (i) Fungible tokens represent ownership of any fungible physical goods, like fiat money, silver, gold, petrol, shares in a company, or any collateralized debt instrument; (ii) In-fungible tokens represent unique goods or assets, such as real estate, collectibles, artworks;

II. Why asset token?

[Shermin Voshmgir, November 2020]:

- Meaning of asset tokenization:

"Tokenizing economic activities, from real assets to digital assets and all types of access rights, could impact the role of central bank money as a geopraphical monopolist providing a medium of exchange (…). The speed at which these tokens are being issued is an indicator that a new tokenized economic system is emerging. Such tokenization of the real economy could gradually lead to the merging of the money system, with the financial system and the real economy."

- Asset token vs DeFi applications:

• "The term "DeFi" encompasses any decentralized and permissionless financial application builds on top of distributed ledgers, including privacy-preserving payment systems (privacy tokens), stability preserving payment systems (stable tokens), P2P exchanges (token exchanges), P2P fundraising (token sales), P2P credit and lending (decentralized lending), P2P insurance, and a growing list of P2P derivatives."

• "Combining various DeFi solutions, such as "stable tokens", "decentralized exchanges" , and "decentralized lending", [with "asset tokens"] can produce completely new products available to retail investors and the general public."

• "Any private person could, in such setup, tokenize their real assets and use them as collateral for P2P lending solutions without bureaucracy by using a combination of simple DeFi applications. Such new services could, in the long run, (…) contribute to the merging of the real economy and the financial system,".

• "Any non-bankable asset such as commodities, securities, real estate, artworks, or SME shares could, in the future, be tokenized and collateralized, which could lead to a convergence of financial markets and the real economy."

- Trend and opportunities of the digital asset market:

[Fokast.News report, December 2020]:

Three key trends in the digital asset market are:

(i) Tokenization of widely traded traditional assets, such as stocks and bonds;

(ii) Tokenization of previously untraded or under-traded (illiquid) assets, such as real estate and fine art;

(iii) Institutional adoption and trading of digital tokens.

- Tokenized asset market size: (this calculation excludes cryptocurrency and DeFi projects' tokens) :

Total market size of tokenized assets: USD 18.1 billion (of Quarter 4th, 2020). In comparison, the total digital asset market size is approximately USD350 billion.

III. How does it work: How to do asset tokenization?

Reviewing some use cases relating to asset tokens: Digix (gold), Latoken (illiquid assets as real estate, artwork), Elephant (private shares), Barter:Smartplace (real estate, car, artwork).

1. Digix.io

- Digix provides a use case for tokenization of physical assets (gold) through its Proof of Asset (POA) Protocol . POA protocol utilizes Ethereum blockchain and IPFS (Interplanet File Storage) to track the asset movements.

(see Digix's whitepaper at https://cryptorating.eu/whitepapers/DigixDAO/whitepaper.pdf))

- Digix's key products:

o POA asset cards: these cards contain metadata of the physical assets (gold bars); they are kept in an Ethereum wallet;

o Digix tokens (DGX): minted via a Minter Smart Contract; being held in an Ethereum wallet.

- Tokenization process:

The tokenization processes include four main ones as following:

(1) POA verification process:

• Recording and providing an audit trail of an asset on Ethereum to create PoA Asset Cards;

• Asset Cards are certified using sequential digital signatures from the entities in the chain of custody (Vendor, Custodian, Auditor).

• Regular Audit process.

(See Figure i: Digix Asset registration process; Figure ii: Audit process in Annex)

(2) Minter Smart Contract

• Creating fungible DGX tokens, that accepts or holds PoA Asset Cards in exchange for DGX tokens

(See Figure iii – Minting Digix Gold Asset Cards into Digix Gold Tokens in Annex)

(3) Recaster Smart Contract

• Used to exchange DGX tokens back into PoA Asset cards

(See Figure iv – Recasting Digix Gold Tokens into Digix Gold Asset Cards in Annex)

(4) Redemption process

• Redeeming physical gold bar with PoA Asset cards

(See Figure v –Digix Gold Redemption in Annex)

2. Latoken.io

- Latoken is a platform to tokenize real assets, including real estate, artwork, commodities, financial assets.

- Asset tokens on Latoken platform are linked to prices of the real assets;

(See Latoken whitepaper, 2017, https://cdn-new.latoken.com/common/files/whitepaper/latoken-whitepaper-en.pdf )

- There are two types of token on Latoken platform:

(i) Platform token (LAT): LAT is a utility token, designed to support transactions on LAT platform. LAT tokens are issued on Ethereum platform, on the basis of ERC-20 standard.

(ii) Asset tokens: tokens created on LAT platform and linked to prices of associated real assets. Asset tokens can be issued on LAT platform or on Ethereum platform by a 3rd party Trustee, which will hold the actual assets.

- Tokenization process for illiquid assets: LAT platform allows asset owners and crypto holders to easily create and trade tokens linked to the price of illiquid assets, such as real estate and artwork.

The general process of the asset token creation and sale on the LAT platform consists of 4 steps:

Step 1: Asset owner signs an agreement with a LAT-certified custodian transferring ownership rights to the custodian.

Step 2: The custodian issues tokens linked to the price of the asset and sells them to cryptoholders on the LAT platform.

Step 3: Crypto holders may sell asset tokens on a secondary market.

Step 4: The asset owner buys back asset tokens on the settlement date or the custodian sells the asset at a fiat auction.

(See Latoken_Diagram_Real Estate Tokenization process in Annex).

Note: The Latoken tokenization model is similar with the P2P decentralized lending one.

3. Elephant.io

- Elephant is a blockchain platform for creating security tokens (private shares-backed tokens) (See https://thelephant.io/ ).

- The Elephant's token model is comprised of two Blockchain based tokens:

(i) PEC (Private Equity Coin): an Ethereum-based token. It is the platform token, used to share the revenues of the Platform.

(ii) Dedicated Tokens (i.e., private shares-backed tokens): Ethereum-based tokens, which representing equity-backed smart contracts.

- Tokenization process:

(1) PEC issuance:

During IEO, investors purchase PECs after transferring funds to the Account of the Platform Operator

(see Elephant_Figure 1: Stage 1 – IEO in Annex).

(2) Asset token (Dedicated Token) issuance:

• PEC holders will be entitled to convert some of their PECs into Dedicated tokens.

• Dedicated Token Offerings is a list of Ethereum smart contracts published by the Elephant platform.

(See Elephant-Figure 2: Stage 2 – Participation in Dedicated Token Offering; Elephant-Figure 3: Dedicated Token LifeCycle in Annex).

4. Barter:SmartPlace

- Barter:SmartPlace is a barter platform for tokenized assets. It provides a service of tokenization for real assets such as real estate, cars, artwork, etc.

(See Barter:SmartPlace whitepaper, 2019, https://barter.company/pdf/BARTER_WP1.pdf )

(For Barter Business, see file attached "An Introduction about IRTA and Barter Industry")

- The technologies applied include:

• Ethereum (Plasma protocol)

• Ox protocol

• Enigma protocol

• Zk-SNARKs privacy protocol

Barter:SmartPlace uses the Ethereum platform with D-POS consensus.

- The following tokens are used in the ecosystem:

(i) The ERC-20 standard: using to tokenize liquid currencies used for trade. ERC – 20 is also used to issue the Barter platform token (BRTR) as a utility token.

(ii) The ERC – 721 standard: to issue unique inseparable token, using to tokenize real valuable assets (such as movable and immovable properties, jewelry, luxury goods, collectibles, etc.)

(iii) ERC – 1155: to issue Lot token (using to tokenize more than one real valuable asset, such as car and real estate, artwork).

- A sample of Barter transaction on Barter:SmartPlace:

Alice and Bob conducted a barter agreement to exchange a house versus an apartment (the difference of asset values is 10%).

IV. How does it look like on Cardano?

Build up an asset token platform on Cardano: (use case of Vietnam)

- Vision and mission:

• Vision: to build up a platform to tokenize assets

• Mission: Create liquidity for real asset markets

- Three main components of the asset token platform on Cardano:

• Asset tokenizsation service

• Barter exchange

• P2P decentralized lending

- The Vietnam asset markets:

• Commodity inventories (of SMEs)

• Real Estate

• Corporate bond and equity.

(See file attached: Asset token market and Asset markets in Vietnam)

- Token model: Issuing two types of token.

(i) An utility token: working as platform token (fungible token).

It may use to pay transaction fee, or using as condition for qualified users (as PEC in Elephant platform).

(ii) Asset tokens: issuing by smart contracts on Cardano platform (similar with ERC-20, ERC-721 for NFT, ERC-1155 for Lot as in Barter:SmartPlace).

- Token metrics:

• Name of platform token: VNBT token

• Number of platform token issuing: 100 million VNBT

- Token allocation:

• Platform development: 30%

• Admin: 10%

• Marketing: 20%

• Legal advisor: 10%

• Investors: 20%

• Others: 10%

V. Roadmap (Timeline & KPIs)

- November – December 2021: building up development team

03 DeFi developers, 01 legal expert, 01 banking and finance expert

- Jan – March 2022: Writing technical document and making MVP v.0

MVP (minimum viable products) including:

• Wallet application

• Exchanges:

o Crypto exchange(s): for trading asset tokens and cryptocurrencies (including stable coins);

o Barter exchange: for trading asset tokens.

- Apr – June 2022: issuing whitepaper and making MVP v.1

- July – December 2022: running test-net (building up a barter exchange with 100 SME members)

- Jan – June 2023: running main net (expanding member number of the barter exchange up to 500 SMEs; connecting with the global barter network)

- July– December 2023: increasing member number of barter exchange up to 1000; connecting the platform with the global crypto exchanges.

VI. Budget

- Catalyst project-Fund 7:

• Set up a development team (05 members)

• Fund to write technical document and make MPV (from Jan – March 2022): USD 30,000

(5 member x 3 months x USD2000)

Requested Fund in USD: 30,000

VII. Attached files/links

1. An Introduction about IRTA and Barter Industry

2. Asset token market and asset markets in Vietnam 

3. Annex

4. Draft proposal_full version