INNOVATE. DISRUPT. DELIVER. CROWD-SALE & TRADING OF GLOBAL PROPERTIES WHITEPAPER V7.0

Transcription

1 INNOVATE. DISRUPT. DELIVER. CROWD-SALE & TRADING OF GLOBAL PROPERTIES WHITEPAPER V7.0

2 Contents 1.0 CEO Statement p Introduction p The Traditional Real Estate Market p Etherty- Enter the Disruptor 5.0 Etherty Technical Solution 6.0 Etherty Token p.9 p.22 p Regulatory Terms Disclaimer p.38 p.39 2

3 1.0 CEO Statement I would like to thank you for your interest in our company. We at Etherty are a vibrant team whose ethos is to innovate, disrupt and deliver - and with our exciting new platform we will do just that in the real estate market. We are a part of the tech movement that innovates and makes services and transactions simpler and more accessible, and we are therefore inherently bold in our approach to servicing the real estate market. Nevertheless, we remain grounded in our bottom-line objective of providing increasing year-on-year value for our investors, customers and stakeholders. The Etherty portal will become the one-stop solution for all global or local property transactions from a laptop or smartphone, and enable you to network and share your successes and learnings with fellow real estate investors. Our team of highly skilled experienced advisors have been carefully selected to ensure a pre-existing network is in place to further our business expansion. Our future collaborators will be similarly selected to ensure that implementation is swift, effective and geared to maximise the success of our entry into new markets. Our business concept capitalises on the increasing local and international investment movement in the real estate market. We make purchasing property much more accessible and easy by breaking the minimum threshold for investment using crowd-investment of Tokenized real estate units (property shares traded as Tokenized units) and by creating a marketplace on our platform to trade their Tokenized real estate shares. We provide all the tools and services necessary for our users throughout the transaction chain starting with assistance to create the right type of listings, inspecting and gaining valuations of properties and providing stock market type indicators on Tokenized properties, through to completing the transaction by ensuring security and transparency through the Blockchain engine using smart contracts, and putting in place the correct legal in-country documentation and framework in case of multiple owners. With our ICO listing the utility tokens can be used on the platform to trade and exchange. Our future property tokens will provide immediate returns for our initial backers from rent, appreciation and trading done on our platform once live. Furthermore, to continue providing year-on-year value, our business model is designed to be scalable and revolves around creating value-added partnerships to implement our solution in every country on our strategic growth plan. My team and I are very excited to embark on this project, and I am positive that after reading this document you will share the same excitement and join us in this opportunity. Best Regards, Murtaza A. Khan Etherty 3

4 2.0 Introduction Real estate is historically the most stable form of investment and one that involves the least risk as an investment mechanism. The global total value of developed real estate is over 217 trillion USD 1, which is higher than the total global traded equities and securitised debt instruments put together. In 2016, global transactions volumes reached 661 billion USD. Given the size of this market, and the fact it is very fragmented and has not advanced sufficiently in the tech age, we believe it offers many opportunities. Whether someone is an investor building up a portfolio, a newly wed buying their first home, a person building up capital for their ultimate retirement home, someone building up a secondary investment to gain a steady monthly rental income, or someone who just wants to get into the rush of an exciting property boom, there are plenty of reasons to invest in the property market. But the cost for entry is huge. Many people are content to just buy their own home, but what if there was a solution to enter the market with as little as 1000 USD? And for those investors with more what if there was a solution to make it quick, effortless, efficient, transparent and secure? Etherty addresses all of the above and will provide a platform for the buying, selling and global trading of properties from first time buyers, to seasoned or new investors. By offering a portfolio of properties backed by standardised indicators to our users to crowdsale, buy and trade just as in the stock market, and coupling it with all the necessary services to facilitate their investment, Etherty intends to break all barriers for seamless international property trading. Imagine being able to gain access to a country s property boom from anywhere in the world, without the need to get involved in local bureaucracy and processes, using straightforward and transparent transactions secured by blockchain and smart contracts. Etherty will ensure all the above is possible

5 3.0 The Traditional Real Estate Market The Real Estate Market is a vibrant one, with subsectors offering a portfolio of services, and hence opportunities. P2P TRANSACTIONS TRADING Long Term Lease Legal Services Tradesmen Interior Designing & Furnishing Land & Mortgage Setup Quick Purchase & Sale Rent SERVICES Real Estate Investment Trusts Lease Purchase Property Management Inspection & Valuation Listing & Advertisement Investment Groups Figure 1 - Real Estate Market Sectors 5

6 From the perspective of a buyer, be it for investment or personal use, the basic options available for a property are as follows: Basic Property purchase with option to rent - Purchase property for residence - Purchase a property and wait for value appreciation - Buy a property and rent it to tenants Real Estate Trading - Short Term Property Flipping (quick purchase & sale with no improvements undertaken) - Property Flipping by purchasing undervalued properties, making improvements and selling Real Estate Investment Groups - Real Estate Mutual funds, e.g. TRREX - Investment groups managing properties through companies Real Estate Investment Trust Type of security that invests, owns and, in most cases, operates real estate properties for returns, e.g. ESRT There are variations in the above, but with each investment model, depending on the type of buyer and the reasons for investment, there are both upsides and challenges in terms of handling and returns generation, as well as ownership. A few of these are listed below. INVESTMENT TYPE Property Ownership Ease Of Transaction Capital Requirement Due Diligence Requirement Basic property purchase with option to further rent Easy to Medium* Full Purchase or Mortgage Medium to High* Real Estate Investment Groups Difficult Full Entry Portion or loan (high capital req'd) Medium to High* Real Estate Trading Medium Full Purchase or Mortgage Very High Real Estate Investment Trusts Very Easy Very Low (1000$) Medium to Low *Depending on country, structure of investment, with or without property management and other factors. Figure 2 - Real Estate Investment Types 6

7 If the transaction involves a cross-border investment, it becomes much more complicated. Traditional purchase procedures are optimistically along the lines of: 1. LOCATE Locate home through a real estate listing in a newspaper, or on an Online portal. 2. INSPECT Once having shortlisted a few possible options, physically visit the place to ensure everything is satisfactory (involves applying for a visa, creating bank accounts, etc. For international transactions. 3. OFFER Place an offer and wait to hear back. (1-3 Weeks) (1-2 Weeks) (1 Week) 4. VALUATE Once a price is settled, engage a 3rd party assessor to inspect property and ensure valuation is what it should be considering work that needs to be done. 5. SETTLE Once having shortlisted a few possible options, physically visit the place to ensure everything is satisfactory (involves applying for a visa, creating bank accounts, etc. For international transactions. 6. TITLE DEED Place an offer and wait to hear back. (1 Week) (1-2 Weeks) (1 Week) Figure 3 - Traditional Purchase Procedures 7

8 3.1 Challenges The above work requires a lot of time, effort and know-how on the buyer s part, including research on the property, an understanding of the nature of the market along with the potential outlook, sourcing trusted facilitators for the process of the transaction, and a physical presence to ensure everything is done to a satisfactory level. Let s not forget the tedious process of qualifying for and obtaining a mortgage or other types of loans, and if financing is through partnerships, then it is not only difficult to find trusted partners, but also laborious to negotiate and execute agreements through the life of the contract. 3.2 Further Challenges Once purchased, the property may need to be improved, rented or leased. This can be done by the investor himself in which case, if improvements are required, their physical presence is required to identify the need, and the right people must be sourced to complete the task to acceptable standards, and once complete inspection must be carried out before payment can be released. If the requirement is to find renters or someone to lease, adverts must be placed and paperwork properly completed for the renters, and once the renters are settled, the tenant s requirements must be handled in the event of any essential repairs or maintenance. Property management firms are also available to handle these day to day issues, and hence trusted property management companies need to be sourced that can manage the property on the investor s behalf for a certain percentage of the rent. 3.3 Even More Challenges Trying to sell a property can be an arduous task. The process is long, time consuming and complicated; from finding the right realtor to list your property, with enough of a customer base and experience of looking at ways to make your property attractive, to negotiating offers and going back and forth should a deal encounter hurdles for any reason. 3.4 Seeing the Light Perhaps all of these challenges could be avoided if there was an integrated full-service real estate trading platform that was absolutely secure, transparent and provided a holistic solution, incorporating all of the requirements that any buyer or seller would need, bringing the real estate market into the modern age. In addition, making a previously unaffordable and complicated to acquire commodity accessible would create an unprecedented drive, creating growth and profitability like this sector has never experienced before. Conceivably, this is the next big transformation required in the real estate market. Many, if not all of the brilliant ideas of recent times have come from making the complicated time-consuming acquisition of a commodity or service so simple that anyone sitting at home can acquire or sell it with the touch of a button. 8

9 4.0 Etherty Enter the Disruptor With our ethos to innovate, disrupt and deliver, we are excited to introduce a portal that will forever transform the way we deal in real estate. Etherty commoditises property for everyone and provides a platform that makes it accessible for them. To better describe Etherty, three basic questions can explain it all: What is Etherty? Why is Etherty revolutionary? How will Etherty make money? 4.1 What is Etherty? Following months of research, planning and development we have designed a real-world solution to a global issue that people face when wanting to buy, sell and trade property. The traditional real estate market as detailed in the section before as a summary has the following issues: Tedious and very involved process for purchasing property. Time consuming to gain trusted providers for purchasing properties. Even more complicated when purchasing properties internationally. 3. High capital required to invest in real estate Additional involvement needed to get contractors to improve real estate property, to get someone to rent, and to maintain property while being rented. Further complicated process of selling property. 9

10 Etherty solves all the above through its global Real Estate market solution which will empower our users with everything they need to make the right deals and to make global property trading accessible through their handhelds and laptops, through the Etherty portal. Etherty will cater to all the segments of the real estate market, as follows: P2P TRANSACTIONS TRADING Long Term Lease Legal Services Tradesmen Interior Designing & Furnishing Land & Mortgage Setup Etherty Trading Platform Rent Support end to end for buying & selling Real Estate Quick Purchase & Sale Lease Purchase Property Management Inspection & Valuation Listing & Advertisement Real Estate Investment Trusts Investment Groups Figure 4 - Real Estate Market Sectors on Etherty Through our partners and affiliates, Etherty will span the entire range of services needed to finalize a property deal. The chart below shows how Etherty s process of buying and selling properties is simplified and made accessible through our portal. Etherty handles everything from the intention to buy/sell through to closing a deal. 10

11 1. User browses Etherty Listings or registers property for purchase through portal for : - Residence - Diversifying Investment - Interest due to growth in a different city or country s real estate sector - Secondary income from rental - Etherty property Token purchase for share in property within leaser s available fund. 2. User references Etherty analytics for pricing fluctuations, area trends, etc for assistance with decision Etherty provides inspection and valuation service on request. Offer submitted and price finalized. If mortgage or loan required through Etherty, affiliates are referred On amount being paid through escrow in the Etherty portal, legal documentation complete and transaction close finalized. Upon user s request property improvements and management undertaken by Etherty through its network of skilled trusted suppliers, and user receives rental income. Figure 5 - Purchase Real Estate through Etherty 11

12 Tokenized Property Required START Property inspection & Valuation handled by Etherty Property rated for standardized indicator: - Condition - Location - Valuation - Neighborhood Etherty packets are linked with market analysis: - Price Fluctuations - Trading Volumes - Market value of property User registers property for sale or Tokenizes property through portal for: - Simple sale - New Development launch through Etherty Tokens - Property Tokens of partial share sold to raise money for propery improvement, partial liquidity or creating investment opportunity - Sale to purchase real estate in other countries due to higher price appreciation - Etc. Listing created and marketed. Property aesthetics improved for listing at user s request. Property Viewing handled and organized by Etherty. Offer submitted and price finalized. If mortgage or loan requested through Etherty, affiliates are referred. Figure 6 - Sell Real Estate through Etherty On user s request property improvements and management undertaken by Etherty through its network of skilled trusted suppliers, and user receives rental income. On amount being paid through escrow in the Etherty portal, legal documentation complete and transaction close finalized. 12

13 The Etherty platform will enable crowd funding for property breaking the threshold of minimum investment to get involved in the property market. With a minimum requirement of 1000 USD, our users can become international property traders. Our exciting offering provides a market place for trading tokenized property assets, shown in the diagram as the Etherty Trading Platform (ETP). Property tokens will be ranked and indicators provided so that users can perform seamless transactions on our trading platform. Whether the intention is to raise money for the development of a property, or execute a simple purchase or sale all needs can be catered for on our platform. The integration with Ethereum smart contracts and property registrations on the block chain provides a quick, transparent and secure method to complete these transactions. We will provide investors in our network a platform to share their experiences and trading techniques and connect with each other. In the future we may also add in rankings based on the number of properties, to display the experience of individual users. This will then enable people to network with experienced investors and help Etherty maintain a healthy portfolio of investors. Cryptocurrencies are normally viewed as a very volatile investment medium, but we at Etherty back our tokens with properties so that the tokens themselves have material value, as collateralised buildings will not just disappear. This limits the user s risk in buying our tokens and will provide returns from rent as soon as a property token is purchased. Furthermore, the traditional illiquidity in real estate markets is made relatively easier to liquidate by the Etherty trading platform, where buyers and sellers can quickly purchase and sell. Beyond the platform, Etherty, coupled with a scalable business model, will allow transparent, secure and easy transactions with the ability to quickly deploy in any market. Ultimately, this will provide Etherty users access to new markets with ease and peace of mind and allow seamless capitalisation of growth trends in different markets. 13

14 4.2 Why is Etherty Revolutionary? Among the components of our offering, three will be game changers in how property deals will be done in the future: 1. Integrated One Stop Solution for Real Estate Transactions 2. Crowd-Sale of Properties powered by Blockchain 3. Etherty Trading Platform In contrast to the tedious and involved process of real estate purchasing and selling, Etherty enables everything to be done in the comfort of the user s home. In these transactions, in which trust is the key to ensure the right decisions are made, Etherty s business model - that pursues volume transactions rather than just margins - ensures that users have a trusted partner for their real estate requirement. Our range of services cover all the possible services required: users will not have to go elsewhere. Etherty s crowd-sale component will allow a user with 1000 USD to create an account and invest in properties on our platform globally. By using a process of keeping an intended bid in escrow, we will then facilitate the sale of the property to multiple shareholders by creating the right legal structure for the transaction, all powered through smart contract in our Blockchain engine, to ensure rights are properly maintained in a secure and transparent method. Add in Etherty Trading to the platform where property tokens can be traded, in an open transparent market in which the buyers and sellers have all the information they need to make the right decision all in one place, and we have now shaped the world s first truly real estate trading market. Properties can be examined according to sector, property type and location. This empowers the users with all the tools necessary to be a truly global property dealer right at their fingertips. 14

15 4.2.1 Integrated One Stop Solution for Real Estate Transactions Our unique one-stop solution for a global property investor makes it easy to deal in all stages of the transaction cycle. Our services will include: Launching properties and development for crowd funded partnerships and/or individual sale Creation of Smart Contracts and usage of Blockchain technology for secure and transparent transactions Creation of advanced Sales Listing fit for the modern era rather than just photos Services for advertising and promotion of properties Service for Remote Property viewing Valuation and Inspections Setting up the right legal framework and business setup for the type of investment Government verification and completion of transaction Delivery of Ownership documents Offering skilled tradesmen for improvements and property services: Tenant Sourcing & Property Management Insurance, Legal, Loan or Mortgage facilitation 15

16 4.2.2 Crowd-Sale of Properties powered by Blockchain If our users have a spare 1000 USD sitting in the bank, then there are limited options for investing in real estate which are traditionally very stable assets in terms of appreciation and returns. This is far below the required down payment for a property, and even if this is possible, then the frustrating process of applying for a loan or mortgage, being rejected in the event of other obligations, and additionally increasing personal obligation for payments may seem a tedious option that is not worth spending time on. This is where Etherty comes in, by offering a platform for such users to increase their returns, and make their money work for them. Etherty will enable an easy and seamless way to tokenize and hence trade in property tokens by creating a Property Trading Platform, much like the stock markets that are common to every region. Etherty will offer properties that will be tokenized and available as a crowd-sale for investors via a smart contract. Buyers will be given the option to pay in fiat and cryptocurrency (based on the buyer s location). Funds will be held in an escrow account until the sale is complete. Once the property is registered for ownership, the tokens are distributed and listed on any exchange as well as the ETP Etherty Trading Platform (ETP) What Etherty s Trading portal will offer is the ability to understand market trends and invest money in different markets, to capitalise on gains year on year from anywhere in the globe. As a case study, let s examine different countries market trends for the historical property price index. As you can see, separate countries have separate trends and in some countries where real estate prices fell, other countries kept going strongly. 16

17 International house price indices 1 Full sample = 100 Advanced Economics Advanced Economics Emerging Asia Emerging Europe Latin America Figure 7 - International house prices indices For example, following 2008, while real estate markets in the United States, Denmark, the Netherlands, etc. fell, other markets such as Australia, Brazil, Hong Kong and China kept rallying strongly and increasing year on year. But the process is cumbersome and very tedious to gain access to such markets, as detailed earlier. With Etherty, however, we will bring these markets straight to our user s hand held or laptop. Sources: National data BIS long series and selected property price database. Bank for International Settlements 1 Figures are CPI-deflated and seasonally adjusted. 17

18 To demonstrate the power of this, we created a simple cash simulation scenario. Derek, for example, has the financial capability to invest 10,000 USD and deposit a 5,063 USD yearly payment. Using this, he has three potential scenarios: 1. Purchase and rent house worth 100,000 USD over 30 Years. With the returns, rotate the cash back into additional houses worth 100,000 USD. 2. Purchase and sell rented house yearly worth 100,000 USD over 30 years. With returns, rotate the cash back into additional houses worth 100,000 USD. 3. Take a mortgage with the initial, and rent house worth 100,000 USD over 30 years. With returns, rotate the cash back into additional houses worth 100,000 USD. The assumptions for the cash simulation for our users is as follows: Houses appreciate in value by 5% yearly based on the average of global positive market in 2017, and user is able to maintain this by trading house tokens in different countries over the Etherty Trading Platform. Figure 8 - Real House Price over the Past Year Real house prices increased over the past year in most countries. (2017:Q1 or latest, annual percent change) 2 Sources: Bank of International Settlements, European Central Bank, Federal Reserve Bank pf Dallas, Savills, Sinyl Real Estate Planning and Research, and national Sources Brazil Ukraine Qatar Kazakhstan Macedonia Vietnam Singapore Greece Morocco Thailand United Arab Emirates Croatia Indonesia Korea Cyprus Chile Italy South Africa Finland Belgium Switzerland France Japan United Kingdom Turkey Peru Austria Spain Germany Denmark Poland Malaysia Mexico United States Israel Colombia Luxembourg Sweden Netherlands Australia Slovenia Estonia India Portugal Norway Latvia Malta Ireland Lithuania Slovak Republic Bulgaria Hungary China Czech Republic Canada New Zealand Hong Kong Philippines Iceland Serbia

19 Rental income is 4% of house value, based on conservative figures of rental yields factoring for expenses and taxes. Figure 9 - Galobal Gross Rental Yields 3 5,063 USD yearly payments are based on 3.85% interest rates on loan of 100k USD with down payment of 10k USD over 30 years The graph below shows the net worth for a user with the different scenarios. Year Figure 10 - Etherty Investment Options 3 Source: Global Property Guide 19

20 The graphs demonstrate that if access to markets is increased, which is the purpose of Etherty, and the minimum threshold for purchasing properties is reduced, the returns for the investment are accelerated for our users. Derek s 10,000 USD initial and yearly payment of 5,063 USD, which totals 161,890 USD over the course of 30 years, has increased by up to 10 times when invested smartly through Etherty rather than left sitting in a bank. 4.3 How does Etherty intend on making money? Etherty has a very simple business model our objective is driving market investment. Etherty therefore needs to provide value for our customers through smart investment decisions, getting into markets with growth trends and by providing exciting projects with great potential. In addition, we transfer value to our clients by bypassing the costs of middle-men and driving down prices due to our reliance on volume of transactions, which ultimately means that our clients will perceive Etherty as their only source of real estate service. By achieving our objective, we will be able to make mass transactions, and Etherty will make money by taking a small percentage of each transaction. These payments will be done either through traditional currencies or through crypto currency, where regulations allow us to do so. With a 340 billion USD market size 4 of all cross-border real estate acquisitions and dispositions trading annually, and a 217 trillion USD market size 5 globally, the target market is huge for gains and for transitioning into the new age. There are four main revenue sources for Etherty: 1. Property Development Launches and Investor crowd funding: Percentage of value (depending on project) 3. Trading of Property Tokens: 0.5% of Trading volume 2. Regular commercial and residential unit sale and tokenization: 1% of unit value 4. Services provided for sale and purchase of units when required. For our users, our business model is based on transaction volumes. The larger the numbers of trading in our portal, the more we can take our platform globally. Hence creating a network of subscribers is really important, and what this means for our users is that we have to translate increased value to retain users. This can be in the form of improved services or breaking the costs in markets. Our ultimate goal is with the power of increased volume business we can take a commanding position to drive down costs. Disrupting traditional market costs of middle men, high surcharges and fees and simplifying the transaction process by liaising with government authorities to implement blockchain through our partners, will help us achieve our ultimate goal of not just being a facilitator, but being our user s only required tool for a truly open real estate market. 4 Cross-border capital flows to thrive as world grows older, JLL, Savills, Around the World in Dollars and Cents,

21 Our current Financial Projections based on a successful ICO provides the Net Income Projections shown below: Figure 11 - Etherty Business Model Financial Projections Disclaimer. The information in the economic model is based on the authors subjective opinion and projections and may not reflect events that will happen in the future. We ask you to apply your own analysis based on recommendations from experts you trust in the field of economy, finance and real estate when assessing risks related to token purchase. This model is not a guarantee or an offer and as an investment mechanism implies a risk 21

22 5.0 Etherty Technical Solution Traditionally buying a share in a property means you can only do it with people colleagues, family and friends you trust. This is because of the difficulty in making decisions about rentals, shares or sale of property. With the emergence of the blockchain and smart contract technologies, the same transaction can be conducted with people unknown to you in a secure & trust less manner. Transaction data is securely stored on a distributed ledger and is virtually impossible to hack or corrupt. This is due to the distributed nature of the ledger there is no central database that a hacker can target. Copies of this data are spread across millions of nodes hosted by independent users of the system and nodes keep each other in check to ensure that data is true at any given point in time. Any corrupt or malicious activity will need to be verified as true by more than 51% of the nodes on the chain, which is virtually impossible considering the amount of computing power and collusion required to achieve this. As mentioned, Etherty will enable an easy and seamless way to tokenize and hence trade in property tokens by creating a Property Trading Platform, much like the stock markets. The properties sold through the Etherty Portal will be tokenized and made available as a crowd-sale for investors. Buyers will have the option to pay in fiat and cryptocurrency (based on the buyer s location). Funds will be held in an escrow account until the sale is complete. Once the property ownership is registered, the tokens are distributed & listed on the Etherty Trading Platform (ETP DEX is an exclusively real estate decentralised exchange). There will be a Hold period on all property token sales for a limited time once they are made available on the ETP based on the regulations of the country where the property is located. On the expiry of the Hold period, every property token holder will be able to sell or exchange their property on the ETP. Our goal is to make this a global platform which in the future becomes the most convenient way for users to buy or sell property whether it is sole ownership or part of a crowd-sale. Our strategically located teams/partners on the ground will have access to the system to ensure all property transfers & rental payments and proceeds are distributed to the property token holders in proportion to their share of tokens all governed by smart contracts. Etherty will provide services through affiliates for advertisements & rental property management on behalf of property buyers via the portal where the rental agreements will be managed by smart contracts including rental payment distribution to token holders. 22

23 5.1 Etherty Technology The Etherty portal will be available for users on the Web, and through Apps on the ios and Android devices. The Etherty Portal will consist of 4 main components: 1. Smart Contracts (Solidity, Ethereum) 2. Etherty Portal (Web/Mobile Apps) 3. Etherty Trading Platform (Decentralised Exchange, Blockchain & Smart Contract integration, Web/Mobile Apps) 4. Etherty Services (Facilitated via Web/Mobile Apps) The following are the technology components of the Etherty Portal: WEB PORTAL (React, Node, Cloud Hosted) MOBILE APPS (Native Android, ios) SMART CONTRACTS & BLOCKCHAIN REGISTRY Listing & property ICOs Listing & property ICOs Listing & property ICOs Etherty Trading Platform & Investor Network Etherty Trading Platform & Investor Network Property Tokenization Contracts Rental Contracts Service Contracts User Dashboard & Portfolio Management & Services User Dashboard & Portfolio Management & Services Property Register Wallet Integration supporting Bitcoin, Ether, Altcoins & Fiat Currencies Wallet Integration supporting Bitcoin, Ether, Altcoins & Fiat Currencies Decentralised Token Exchange (Property Tokens) Figure 12 - Technology Components 23

24 5.1.1 Smart Contracts A smart contract is basically a computer program that executes the exchange and transfer of digital assets or tokens based on pre-defined conditions. The contracts are stored on a decentralised ledger (blockchain) which makes them unambiguous, transparent and immutable. A smart contract can include not just rules, but also penalties and actions that need to be executed in specific scenarios. This is achieved when the contract accepts input inputs that are mapped to values in the contract and executing clauses in the contract relevant to these values. This allows for a wide variety of use-cases including governing transfer of value between users, ownership ledgers, insurance & claims contracts, store application related information & act as a utility for other contracts. Smart Contracts are autonomously deployed and executed as buyers purchase property tokens during the live sales. Etherty will develop the interfaces to allow real estate sellers to initiate the creation of a smart contract via the web and mobile applications. All terms & conditions of sale including target sale price (validated by valuations from reputed industry professionals), token code, token price, sale period, start & end dates for the property ICO, specific Know Your Customer (KYC) policy and Anti-Money Laundering (AML) requirements and minimum contributions required from buyers will be set prior to the approval of the listing. Once the Etherty team verifies the listings and data provided, the approval process triggers the smart contract which is deployed on the chain based on the particulars of the listing. The contract goes live on the dates specified and runs through to the end-date or until the sale price target is achieved. Failure to achieve the sale target will result in all funds being reimbursed to buyers at the conclusion of the sale period. On a successful sale the newly minted tokens are listed on the ETP to allow fast and secure trades. 24

25 5.1.2 Etherty Property Portal This section of the Etherty Portal contains all the listing which includes: Projects which require Investments New Developments for Release Individual Housing or Commercial units for sale 4. Groups of Housing or Commercial units as a portfolio 5. New Properties tokenized for partial sale Sellers and buyers will use the Etherty web and mobile apps to list, view, interact and manage their assets. The portals will also provide access to the ETP and wallet integrations for a seamless experience. For all tokenized assets and portfolios, Etherty will provide our platform users with standardized indicators to trade in these properties. The project specific tokens will be traded on the Etherty Trading Platform. All transactions, improvements, repairs or inspections done on these properties will be registered on the blockchain so that that there is a clear transparent history. During the tokenization of a development or property, a 10% Provisional fund will be created, included in the token price and maintained in escrow to pay the property management company, service charges of the property, property tax on property or rental income if applicable, insurance fees, property renovation, legal costs, maintenance or any unexpected costs associated with the property. If a cost exceeds 2% of the property price, a vote of the property owners will be initiated, and if 51% of the votes received are positive, the cost will be undertaken. When a token is traded, the provisional fund money will be reimbursed to the seller and replenished from the buyer. In the event of a sale, the provisional fund will be liquidated and proceeds will be distributed to the token holders proportionate to the percentage of ownership. The web portal will allow users to also rent properties on short or long-term leases. If required by the users, a Property Management option can be selected for the property in the Etherty Services section. In this case, Etherty will manage the property directly or through affiliates and the rental income will be distributed automatically using the property contracts. Rental income is distributed to the property token holders after fees are deducted by the management company and the property provisional fund is replenished should it be less than 10% of the property price. The web portal will allow users to also rent properties on short or long-term leases. If required by the users, a Property Management option can be selected for the property in the Etherty Services section. In this case, Etherty will manage the property directly or through affiliates and the rental income will be distributed automatically using the property contracts. Rental income is distributed to the property token holders after fees are deducted by the management company and the property provisional fund is replenished should it be less than 10% of the property price. In the event that the Provisional Fund is reduced to 3% of the property price, and the rental income is not sufficient to replenish in the required time for additional expenses, liquidation of the property will commence. Once liquidated, proceeds of the sale and the provisional fund minus any brokerage or legal costs will be proportionately distributed to the property token holders. All decisions regarding rentals and relevant due processes will be voted on by the property owners for transparency and control. These decision votes can be initiated by Etherty or by the users themselves. There will be rules in place whereby voting for a certain decision can only be done within a certain timeframe unless there is due cause for an emergency decision, in which case the rule may be bypassed. These guidelines will be created and distributed to users. Users will be notified in their portal of important decisions and deadline for decisions. Majority of total votes submitted by deadline will be used to determine the outcomes. 25

26 A property owner may wish to sell their property as per the below cases: Case 1 Developer wants to raise investment for development. Depending on requirement, framework of deal may include fixed returns after a certain period, or returns from sale or rental of units. This will allow the Developer to raise investment for a project on pre-owned land. Tokens will be released which will equal to pre-set dollar value and will provide promised returns after specified time period on being returned to developer. Case 2 Developer wants to sell off-plan properties. These properties will be tokenized and sold as units. The tokens can be traded in the Etherty Trading Property, and the release of funds to the Developer will be done as per the regulations of the country. If the local law stipulates that only 10% will be released for off-plan properties, the funds received from the users will be held in escrow and will be automatically released once conditions set by the law will be fulfilled. Additionally, the tokens for the units can be traded as per the regulations, i.e. if there is a hold period for trading is stipulated by law, trading of the unit will not commence until the set period. Case 3 The Etherty Portal will allow sellers and brokers to list properties for crowd-sale. Our real estate advisors will post information with standardized indicators of the listed property and Etherty will convert the property into fixed number of tokens with its own unique symbol via our smart contract system. The property tokens are made available for purchase to potential buyers in a time-limited sale. The sale of the property is considered complete once all the tokens have been sold or when the timer runs out. All funds received for unsuccessful crowd-sales if the minimum cap is not reached are returned to the participating buyers from the escrow account immediately after the sale deadline. Case 4 A property owner wishes to liquidate only a portion of the property as he would like to improve or develop the property further. Etherty will allow the user to initiate tokenization of the property by generating a smart contract. The new token will be listed on the ETP with details of the underlying asset - and the owner can show intent of sale by placing a sell request via the market. Part sale will allow property owners to quickly generate cash when needed by selling off some of their property tokens rather than offloading the entire property. Case 5 A seller may use Etherty to sell their property but may want to sell without splitting ownership. The buyer in this scenario would need to purchase the entire lot of tokens for this property as per the owner s requirement. This transaction will be more traditional in nature where one buyer would have to bid for the entire property. Etherty will facilitate the transfer and registry of the property to the buyer followed by listing of the new token on ETP Case 6 Etherty will source properties and create a portfolio containing multiple housing or commercial units which will be sold as a lot to help buyers diversify and improve their investments. This will work similarly to Case 3 except that this large portfolio (as a single unit) is made up of several smaller property units. Case 7 Platform as a service for real estate investment funds & trusts to tokenize and grow their subscription base. This offering will allow the operators of these funds to setup and launch their own smart contracts for real estate portfolios under their management. Etherty will provide the tools and access to the platform while the operators retain all responsibility for managing properties and distribution of revenues from these investments. 26

27 5.1.3 Etherty Trading Platform The ETP is a custom-built token exchange platform that is currently in development. This exchange is based on the principles of a regular stock exchange where the Property Tokens can be liquidated or exchanged for other crypto-currencies or fiat currency. We believe this ground-breaking way of selling and trading in property shares will open up the market to the masses. With a mobile first strategy, access to the platform will be via Android, ios and web-based apps. Trading will always be available no matter where a user is. The user experience will be simplified to ensure a high level of participation from a large user-base. High on the list of features is our Investor Network implementation. The ETP platform is envisioned to be the social network for buyers who are new to the property market to mingle with seasoned and experienced investors. Trading information and data from highly successful investors will allow the new crowd to assess and copy trades of these top performing traders (traders may choose to hide ID) to reduce risk and improve returns. You don t have to be a Pro to do well with your property investments. The exchange platform will come with a suite of tools and privacy options that will allow users to maintain a public or private (anonymous) profile on the platform. The ETP application will be integrated with our Ethereum interface to track all property token holders. Every trade is recorded on the chain to ensure a truly open and transparent trading market. The historical information of each real estate asset will provide accurate data to assist traders with their decisionmaking process Property Tokenization Etherty will enable the creation of custom Tokens for each project. This will ensure that any value generated by the user s informed decision will not be diluted by a portfolio spread of returns. This will mean that a user who has invested in a successful project in Thailand that, for example, offers 10% returns will be able to receive the complete value of his investment and will not be penalized due to an unsuccessful project elsewhere. Tokens of projects, developments and units can be traded like for like in value across the globe through the ETP. This will give our users control over realising the returns they are looking for, and also allow them to participate in exciting new global developments that we will release with their existing investment amounts. There will essentially be two major types of real estate tokens depending on whether the project provides a fixed return after a specified period/time or if each coin represents a unit of property. The two tokens will be: 1. Project Conception Investment C Type Tokens 2. Project Launch Tokens D Type Tokens Etherty will work closely with the developer to launch the type of token that best suits the developer s requirement. The decentralisation of the platform will allow Etherty Token holders to become a vital part of the system. Active nodes will be rewarded for verification and validation of transactions by earning the right to a percentage of the fees collected for each trade that takes place on the platform. Fees are distributed to these nodes from a pool of funds on a monthly cycle. 27

28 Project Conception Investment C Type Token C Type Tokens will be launched for projects at concept stage, and developers are looking for investment once they own the land. Launching these tokens, the developer may choose to provide a fixed return following a certain stage of development, for example, 50% sale of property at say 15% return or provide rental returns from the project. These tokens will be usually launched as 1 USD (or currency of country where property is located) = 1 token. All conditions of the investment coin will be specified at the time of ICO launch and available to potential investors to view. Queries can also be sent to developer prior to making a decision. Some of the scenarios that can play out using these coins are as follows: a. User wants to buy an apartment or unit with their token - To be discussed with developer on discounted rates for token buy back. Conversion to Property Launch D type coins can be offered if developer opts to launch a D type coin. b. Property is complete - Depending on the terms and conditions of the investment, trigger point of distributing investment return will be established by the Developer. For example, some developers will specify at time of ICO launch that if 50% of the development is sold investors will be getting their returns back. Investors will have to trade their tokens back to the developer to claim their investment returns. Certain Developers may also choose to specify that after notification to investors if tokens are not traded after a certain period of time the tokens may perish. If currency is higher in value than the Developer promised property return (Investment +15% for example), user may choose to sell at higher valuation or cash-in their token for the developer promised return. c. Property goes overbudget and contract specified return is not possible - All investments contain inherent risk. If the property does not generate the returns set by the contract depending on the conditions set in the smart contract the recourse terms will be adhered to. d. Property is rented and rental returns are being generated - Rental returns will be distributed to investors as set by conditions in the contract and proportionate to investment. This will only be covered by D Type currency when the developer is renting out the property and returns are being distributed across the coin offering. 28

29 Project Launch - D Type Token D Type Tokens will be launched for projects ready to be sold at either pre-launch or launch, or as developed units. This type of currency will be similar to buying a complete unit or share in a housing unit or multiple units. There will be subsets of this type of token depending on the project type. If the project contains units 1 housing/hotel unit = 1 coin, or if property is sold by square feet in floors then 1 sq. ft. = 1 coin depending on developer requirement for sale. A unit sale can only be complete if a complete token is sold. Money will be refunded for a partial unit at close of token sales. In addition, while a partial unit is being sold, if a buyer arrives for a complete unit sale priority will be given to complete unit sale. To accommodate this prioritization, token distribution will only happen after successful sale of a unit. Some of the scenarios that are envisioned while using these coins are as follows: a. Property Rental Return Generation - The coin is a property ownership token. In the housing and commercial sale the token will have an underlying ownership document provided by Etherty which can be easily traded in an exchange or Etherty Trading Platform. Rental income from individual units will be provided to users and if someone trades in between a quarter proportion of rent will be split between the different owners depending on time held. b. Property required to be sold on market by 51% of tokens holders - Voting regulations would apply, where if majority agree on sale or rent or proposal for modification to property for increased yield, decision will be upheld based on majority. c. User wants to delist property - User has to hand in token to Etherty smart contract. The token will be destroyed by Etherty. Administration and ownership of property will be handed over to the owner with administration costs being charged to the user. 29

30 Buying and Selling Property Tokens Every property asset will have a smart contract governing the trades of the property tokens. Token holders will indicate their intention to sell at the current market price. Buyers will be able to purchase using fiat and cryptocurrency (based on regulations of countries of residence). A small fee will be charged by the platform for validating, verifying and processing the trade which will be included in the final purchase price (paid by buyer & seller). The transaction is immediately recorded on the platform and property tokens are transferred to the buyer while the funds are released to the seller. Ownership information is sent to the chain and tokens are locked until transfer of ownership is completed. BUYER Place Buy Offer or Accept Seller Offer Transfer Funds (Including transaction fees) Summary of purchase Intention to sell or Accept Buyer offer Qty to Sell Summary of sale SELLER Lock tokens Transfer of funds Ownership Ledger and Smart contract updated Transfer Tokens and Funds to Seller Figure 13 - Buying and selling property tokens ETHERTY 30

31 5.1.4 Etherty Services The price of a property at any given time reflects all the available relevant information for the asset in question. This is what makes property trading tricky, as the purchase of a particular property is often driven by qualitative assessments. This is where Etherty services intend to bridge the gap to make assets tradable. Relevant information like inspections and valuations will be done periodically through local affiliates for the tokenized properties that are registered on the blockchain to ensure the right value of the assets is being provided at the time of trading. In addition, user requests for the services will also be catered for through this business segment. Our service portfolio will include: 1. Creation of advanced Sales Listing fit for the modern era rather than just photos 5. Setting up the right legal framework and business setup for the type of investment 2. Services for advertising and promotion of properties 6. Government verification and completion of transaction 3. Service for Remote Property viewing 7. Delivery of Ownership documents 4. Valuation and Inspections 8. Offering skilled tradesmen for improvements and property services Tenant Sourcing & Property Management Insurance, Legal, Loan or Mortgage facilitation Through this segment, all user concerns for property trading in our platform will be handled and all requested due diligence will be carried out through vetted affiliates in the local markets. 31

32 6.0 Etherty Token SYMBOL ETY NAME Etherty Token DECIMALS 0.18 SUPPLY 240,000,000 BLOCK CHAIN Ethereum ERC Etherty Token is a utility token that enables seamless transactions of a wide range of property assets on the ETP whilst also acting as a medium of exchange and a store of value. You can use the Etherty Token to become an active node on the decentralised exchange to earn a share of the transaction fees for the provision of computing power required for the transaction verification service You can use it through the trading activity that Etherty is offering, which essentially is assisting properties to get tokenized or listed on the ETP. Token holders may also be able to use the Etherty Token to purchase new real asset tokens by participating in property token offerings. There will be a total supply of 240,000,000 ETY tokens. All the tokens will be distributed following the completion of the ICO. New tokens cannot be created and existing tokens cannot be destroyed. As there is a steady rise in the use of the Etherty platform, demand for ETYs will continue to increase, resulting in value appreciation of ETY as more users join the Etherty platform to participate in property sales and perform trades. Our network growth programme will also reward new users and partners to earn Etherty tokens for their contribution in growing the platform. Token Distribution Available for Pre-sale & ICO 120,000,000 Retained for Team & Advisors 30,000,000 Reserved for Future Development 85,000,000 Reserved for Growth Pool 5,000,000 32

33 6.1 ICO Offering The Etherty token (ETY) is based on the ERC20 protocol which makes it compatible with all wallets that support the standard. For our backers, 30% of all trading fees collected in the ETP will be distributed to token holders in proportion to their total ETYs as a way of thanking them for supporting us, provided that they are active on the decentralised ETP by running a node and validating & processing transactions. To capitalise on any appreciation, the ETY token will also be exchangeable for our other real estate tokens once the ETP is live (as mentioned in 5.1.3). The price of ETY token will be determined by supply and demand. The ETY tokens are released only during the Etherty ICO stage and will not be additionally created after the ICO release. The demand for ETY tokens will be determined by the following: 1. Properties can be tokenised and listed with ETY tokens. 2. The use of tokens to purchase complete properties, developments or shares in properties and developments to capitalize on booming markets. 3. The use of tokens to purchase Etherty s wide array of services for their traded properties. 4. Trading fees can be paid by ETY tokens. 33

34 In addition, due to the growth of our property portfolio over multiple markets and increased offerings by participants, alongside fixed total number of tokens enables stable long term growth of ETY token value. Our token value projection are calculated using two scenarios : Base Scenario: This scenario assumes steady sales following a first sale and steady growth in multiple markets as regulations are being obtained and access are being granted. The risk is that token release governmental permits for properties are not obtained quickly and hence properties will be dealt with as an investment trust. This will impact trade volumes. Optimistic Scenario: This scenario assumes quick adoption and growth of the portal in multiple markets. Token release permits are easily obtained enabling higher trade volumes. For quick launch of developments in the portal, a portfolio of properties are being obtained and displayed on our website ( before the ICO sales and regulatory permissions in Mexico, Dubai and Australia are being sought after. Once the regulatory permissions are obtained, the properties will be launched. Base Scenario: Base Scenario: Token Release & Transaction By Users (USD) Year 1 Year 2 Year 3 Year 4 Initial Development Token Offerings (C Type) 60,000, ,000, ,000, ,000, Initial Housing Token Offering (D Type) Annual Housing Token Offering Expected Total Annual Trade Volumes 32,807, ,533, ,600, ,375, ,842, ,160, ,580, ,712, ,649, ,693, ,180, ,087, Base Scenario: Token Price Forecast (USD) Release Year 1 Year 2 Year 3 Year 4 Total Turnover 120,649, ,693, ,180, ,087, Receivable Turnover Coefficient Token Volume in Market at Start of the Year Token in Market Supply Cost Estimated Price of Tokens Cost of all Tokens ,000, ,000, ,000, ,000, ,324, ,846,898,50 181,090, ,043, ,000, ,649, ,693, ,180, ,087, Optimistic Scenario: Optimistic Scenario: Token Release & Transaction By Users (USD) Year 1 Year 2 Year 3 Year 4 Initial Development Token Offerings (C Type) 90,000, ,000, ,000, ,000, Initial Housing Token Offering (D Type) Annual Trading of Tokens Expected Total Annual Trade Volumes 37,494, ,636, ,565, ,750, ,747, ,818, ,282, ,375, ,241, ,454, ,848, ,125, Optimistic Scenario: Token Price Forecast (USD) Release Year 1 Year 2 Year 3 Year 4 Total Turnover 191,241, ,454, ,848, ,125, Receivable Turnover Coefficient Token Volume in Market at Start of the Year Token in Market Supply Cost Estimated Price of Tokens Cost of all Tokens ,000, ,000, ,000, ,000, ,620, ,227, ,424, ,062, ,000, ,241, ,454, ,848, ,125, *Disclaimer: The information in the projection models is based on the authors subjective opinion and projections and may not reflect events that will happen in the future. We ask you to apply your own analysis based on recommendations from experts you trust in the field of economics, finance and real estate when assessing risks related to token purchase. This model is not a guarantee or an offer and as an investment mechanism implies a risk. 34

35 6.2 ICO Sale Structure The Etherty ICO will be conducted in 4 stages, as defined below: ICO Stage 1 24M Tokens 36M Tokens Pre-sale ICO Stage 2 24M Tokens 36M Tokens ICO Stage 3 TARGET: $ 20,000,000 Minimum Contribution = 1 ETH Maximum Contribution = 5000 ETH Due to fluctuation in Ethereum valuation, please refer to the Etherty website at ico.etherty.com to get the latest ETY token price. 35

36 6.2.1 Funds Allocation 40% - Operational Costs 37% - Marketing 15% - Legal Costs 5% - Admin Costs - Country Offices, Expenses 3% - Development + Equipment The success of the ICO dictates the number of countries we will be able to expand to. With a successful ICO hitting our upper target, we are projecting quick entry in 10 countries The Growth Pool Users will also be rewarded with ETY tokens for using the platform and encouraging use by referring to their networks. The only other way to obtain ETY would be to purchase them at one of the supported exchanges. ETY Tokens can be earned (until the growth pool is exhausted) by the following methods: 1. Sign Up & List Property for crowd-sale 2. First successful contribution in a crowd-sale 4. Referral based - Sharing Etherty with friends & family resulting in a sign-up and listing or purchase 5. Brokers and Property Developers for launching projects on Etherty 3. Buying or trading property tokens via the trading platform 6. Real Estate Funds & Schemes for Tokenisation of portfolios 36

37 6.2.3 Future Development Of the total tokens, 85M are reserved for future development of the platform. It is understood that a high-volume trading exchange will require significant improvement in the underlying architecture to improve scalability and speed of transactions. These tokens will be made available in a vesting schedule as per follows: 1. 20M unlocked 12 months from the ICO end-date 2. 20M unlocked 18 months from the ICO end-date 3. 20M unlocked 24 months from the ICO end-date 4. 25M unlocked 36 months from the ICO end-date Etherty will reserve full rights to distributing or selling these tokens at their sole discretion at the prevalent market price when available. Tokens may also be transferred to the network growth fund based on the success of the platform. Some portion of these reserves may be made available to existing token holders for purchase at a discounted rate. Funds generated from these reserve tokens will be utilised in the further development of the platform, including architecture, performance improvement, design of new features to enhance the service offering and growth in new markets. 37

38 7.0 Regulatory Terms All transactions will be performed in our portal in compliance with a solid Know Your Customer (KYC) policy and Anti-Money Laundering (AML) checks. In addition, all regulations of the countries where the property is located will be abided by, proper permissions will be obtained, and smart contracts will adhere to the requirements as necessary, per the local laws. Should pertinent regulations change, Etherty will immediately comply with regulations and will communicate any implications of rule changes to our users and token holders. We intend to continue to work closely with the regulators to ensure the long-term viability of the platform. 38