EthCC 2 Corbin page

hello hi everybody thanks for making it out for a morning session talking about security tokens thanks to each CC for having me today and actually thanks to Adam from polymath for giving us a good primer I'm gonna be talking about a lot of the same themes but we'll be going into a little bit of a tech more technical deep dive into one specific application of security tokens especially centered around real estate so I work on a project called meridia which is a consensus project to move real estate equity debt real estate funds and wreaths to security back tokens on atheria main net today we're gonna be talking about a little bit of my background and kind of what we've been doing in the space we started out in 2017 when nobody was talking about security tokens everybody was talking about icos and token economics and TC ours and we were like hey you know traditional capital markets can really benefit from this technology as well we should be paying attention to this lo and behold you know the ico cycle kind of went through a bust period and then now security tokens are kind of ramping up as one of the next waves of digital assets that are gonna make it onto public blockchains so I'm gonna touch a bit today on why security tokens are interesting and then how we're using them at a very low level specifically around compliance for different trading restrictions that are traditionally put on these securities and then we'll end with just looking ahead at where the ecosystem is today and where we see it going over the next couple years so first a little bit of my background so I'm Corbin I leave the technical side so you know if you want to get into the nuts and bolts of solidity I'm happy to do that my background is in kind of the findit the traditional financial services sector so I spent several years at some large hedge funds first Bridgewater and then millennium basically corralling a bunch of trade data from different trading venues and different types of derivatives that were being traded all around the world you know what I always like to say is if you're a crypto trader and you have trouble doing your taxes at the end of the year because you have you know trading data across a couple different exchanges a couple different Dex's imagine being a global hedge fund that trades on markets around the world where there are absolutely no standards and you're trying to as best you can to get a real-time view of risk compliance and trading activity across all that massive data set that is what the traditional financial services industry is grappling with today which is why blockchain is so exciting for providing a little bit of a better way where you have one central ledger that has all trading activity that's what excited me about the spaceship originally and I joined consensus at the beginning of 2017 to kind of help bring that vision and make it a reality so what is meridia overall so we basically try to take the entire life cycle of a real estate asset and put as much of that as possible on chain we started all thinking specifically about title doing a couple projects in Dubai Singapore in India but quickly learned that you know title is a big regulatory challenge and it's probably years and years away from actually making it all into a public blockchain we then looked at things like leasing like capital markets activity like real time accounting for these real estate assets and tried to compile as much of that as possible into meridia the reason we're focused specifically on real estate assets is because we believe that they can benefit the most from blockchain technology specifically the fact that they are inaccessible today it's hard to get into these assets they're illiquid it's hard to get out of your position if you are lucky enough to get into you know a hot commercial real estate deal and then lastly just the transaction cost of doing these different trades is incredibly high they're a bunch of brokers lawyers involved when it could be as simple as a token transfer essentially we're a three sided market that connects property owners with investors and then we have service providers whether that's brokerages due diligence providers that kind of fuel the ecosystem our application is live today so we tokenized our first asset midway through last year it's a multifamily asset in Brooklyn actually not too far from our office which is really exciting you can see here this is the investor view of logging in and seeing your portfolio of all the assets that you hold we also built out some other cool tech and I'll go through the smart contracts for these a little bit later but you can do p2p swaps exchanging what we call our asset tokens which are real estate backed tokens for stable coins like dye we were one of the first applications to incorporate dye into the platform itself and then on the property owners side if you tokenize your cap table you then get a real-time view of how that token is trading how your cap table is trading over time and then we also automate a lot of kind of the the traditional security management functionality like sending out quarterly briefings updating your investors on new activities and you know all this is done in a digitally native form and then lastly one of the real benefits of tokenizing securities is providing a secondary market so existing investors have a trading venue even if it's not a full exchange it could just be kind of a bulletin board operated venue that allows you to post and say hey I want to get out of my position all the other investors that have been white listed for that particular asset will get notified and can then fulfill the other side of that trade if they'd like to so I'm going to touch on this probably pretty quickly because I think Adam covered a lot of it as well but why are security tokens interesting the first is just the fact that they're absolutely massive if we look at the cryptocurrency market in relation the even US equities are you even the cash that Apple has on hand just completely Dwarfs the entire cryptocurrency community even the circulating supply within the world of traditional currencies is so small compared to just us-based equities and that doesn't even include a massive amount of debt products and then also a massive massive amount of derivatives and so if we want the maximum amount of value to be put on public blockchains like aetherium that we all care about excluding derivatives debt products equities it's just almost just silly if we want this to be kind of maximally impactful the other one and this is kind of an ethos that's been floating around the crypto community since its beginning is just the fact that blockchain can service the internet of value over the past thirty years we've had the the information internet rise and now you have you know amazing tools for indexing the world's you know info but you know our most valuable assets whether that is land whether that's equities whether that's you know derivatives are hard to find right there they're in silos they're in exchange based trading venues they're in online brokerages and they're not in really a digitally native form there's no underlying protocol we're all value can be transacted back and forth and a lot of us got into the blockchain ecosystem because we believe that this new layer is that internet of value so this is what it looks like today this is a little snapshot of our application of the first asset that we tokenized you can see it has 14 different investors it was just a private placement deal for this asset in Brooklyn and here's what it looks like on ether scan alright it's so full cap table visibility on this public blockchain anybody can go in there and see how it's trading back and forth you know anybody can write web applications to work on you know accounting or tax applications on top of this this is kind of the future that we're working towards so I'm gonna dig into our smart contracts at a pretty granular level up here next but I think this graphic does a job of conness summing up how we view this system from a high level so up there at the top traditionally you have you know two sides of a trade you know the buyers and the sellers and you usually have of you know three-day settlement times and clearing brokers that are involved along the way and then at the end of the month you have this army of accountants and auditors that come into your office they take up a huge conference room and go through all your trading activity to make sure everything was on the up-and-up and then they usually are bothering quite a few people in your back office if something isn't checking out and you have to kind of dive into to the nitty-gritty what blockchain and smart contracts kind of allow you to do is to take the that reactive you know auditing functionality and actually make it proactive by checking off all those different compliance steps before a trade takes place and I'll go into that in a second the common ones are of course whether an investor has been whitelisted to trade a particular security but there is a whole lot more logic that you can kind of automate beyond just white listing so what does the Murray do smart contract architecture look like today so I'm going to be going through our diagram here shortly so I'm gonna start out here at the bottom where we have our proxy tokens and our asset tokens so all tokens all in the meridia platform are upgradable so we have a proxy in front of it so that you can kind of switch out a version at a later date we're pretty opinionated that this is a permission system there is a fair amount of centralization in it just because we know the blockchain ecosystem changes so rapidly so we want to maintain control and be able to upgrade these contracts at a later date a good example of this was you know we built out this architecture before year C 1400 was even a thing and we had we had named some of the functions slightly different than the spec and the general consensus that was evolving over time so we simply upgraded our token contracts to support the updated name nomenclature and so it's important to us to be this kind of this this nimble in the early days even if it allows some kind of centralized control on our asset token specifically everything is completely modular and completely configurable so the biggest thing that we have on there are different kind of trade restrictions that you can point to which are separate smart contracts that live elsewhere on main net you can see the couple examples we have up there are for a whitelist validator which restricts a particular token to only a subset of investors most likely those that have gone through kyc and investor accreditation checks we also allow the ability to completely Paul's trading with our pausable validator out there along with our asset tokens and the proxy in front of them we then use air swaps exchange contract to complete our PAP swaps so you know that takes one of our tokens and usually generally a stable point or you could also use wrapped eath to do trustless swaps back and forth one of the biggest piece of feedback we got when we originally launched meridia was that you know these old kind of more stodgy real estate investors were interested in trading in real time and trading real estate in real time but they didn't want to be exposed to the volatility of ether so you know one of the first things we did was to incorporate stable coins into the platform so stable coins can be used not only for our p2p swaps but also for distribution issuance so we have a distribution issuance contract up there that allows the property manager or the sponsor of a deal to distribute quarterly or annual distributions to all investors we are using kind of an unclaimed distribution system so the the die payments let's say if you're your own you know $100 will get transferred directly into your wallet without you having to log in and sign a transaction to actually claim it also in there we have what we like to call our simple link registry this just allows you to attach any type of metadata to a contract address the most common one that we do is we just take a hash of the operating agreement and attach that to the token contract itself so it's always verifiable what you're actually trading back and forth we're also actively looking to integrate with other real estate providers so you have kind of a real-time data feed that you can always query for a particular asset which is really exciting so next I'm going to dive into these compliance validators a little bit more so the ones that we built out today are whitelist validators as well as sender whitelist validators those are mostly used for regulatory reasons again for only restricting trading to investors that have gone through the right checks we also have blacklist validators the Treasury Department in the United States actually has come out with a pretty robust list of addresses that you shouldn't be transacting with I believe they're mostly Bitcoin based but we have a blacklist validator that you apply to any of the tradable securities so you're ensured that it's not going to be going to kind of the wrong hands along with that we have lockup periods so automated lockup period so a lot of these securities basically have a new year non trading phase and so that's going to expire automatically without kind of any work on our end we also do things like making sure that the investor count is below a certain amount in some instances or above certain amount in some instances I'll go into the code for one of those in a second and then also for real estate assets specifically a lot of them don't allow any one investor to own greater than a 50% share otherwise it triggers all types of operational control and change over and so that's a compliant step that is completely automated and all these different checks if they're attached to a token are checked every single time a trade is made and the trade will literally fail if any one of these rules are violated so this is what it looks like in practice so we originally called this function I think it was validate transfer way back in the day but then we amended the function name to can send to be compliant with ERC 1400 you can see what we're actually doing in here is we are getting all the modules that are a transfer validator and we're looping through them and making a call out to them just to make sure that this combination of buyer-seller token and amount is valid those are the four parameters that you kind of put into all these validators run a bunch of business logic and business rules to make sure all boxes are checked before you actually complete a trade this is done not just for the traditional transfer function but also for the force transfer function which we also support on our asset tokens given there are certain instances where we need to be able to forcibly move these tokens around for instance if somebody lost their private keys again we're dealing with some some not so technical literate first customers on our end or if somebody was to get hacked this one's a little bit harder to see but this is an example of I believe our investor cap validator which actually gets fairly complicated logic so let's say that you know you can only have a max of a hundred of investors in this one particular token most of the time it's pretty simple if you're if you're way below 100 investors go ahead go ahead and start you know allow that new buyer to kind of get into the asset however when you start getting to 99 investors it starts getting a little bit more complicated is the seller selling their entire chair or are they only selling part of their share all these things end up being kind of like the nitty-gritty type logic that we've ended up putting in the smart contract all these have been audited and our deploy domain net today so we get asked to just more broadly than just real estate kind of how you know when is the security token revolution going to come when are you gonna see a you know a price bounce as a result of it and what I always say is that we're still very much in the early days and there's still kind of a lot of infrastructure that needs to be built out before you're gonna see tons and tons of securities moving to maenette I think polymath is one of the ones that have kind of the most tokens out there but we have you know in the tens or hundreds of tokens that have been launched you are starting to see more of an ecosystem pick up around this use case you're starting to see companies like Sto wise and token II basically categorize a lot of the issuances that have happened to date a lot of folks are trying to become that new kind of Bloomberg for security tokens so it's interesting to see that evolve of course there are some things that are slowing us down a little bit the biggest one of course is custody so you need to be a qualified custodian to hold these on behalf of institutional clients in most most instances and there are only one or two companies out there that are in the US that are a qualified custodian and then also have fairly robust functionality for custom crypto so that needs to kind of evolve quite a bit before we're gonna see more robust applications I'm a big fan of dACC and--but go on that front so far specifically bit go they have a great API to work with if you're doing some more kind of uh you know technical things with your smart contracts that you need to support the next one is just institutional adoption so we work with a fair amount of the biggest real estate players because they do see that this is kind of the future of their industry they do believe that you know having a commercial property sale take you know six to seven months in some instances is probably an outdated methodology and they see blockchain is one of the main kind of you know new approaches that could lessen that time considerably however they need things like custody and they need regulatory clarity before they're willing to jump into the space that's why we are watching fidelity quite a bit we're watching circle quite a bit to kind of see some of their moves I hope that wasn't as I mentioned regulation all right thank you everybody [Applause] this is it so there is some issue we have to evacuate the building