Transparency and trust using Blockchain technology
FAQ – Frequent questions
Questions and answers related to Blockchain, Tokenization of assets and how BIMOUNT tools help to be more transparent.
Blockchain translates as blockchain in English and represents a decentralized and ubiquitous (omnipresent) ledger and therefore with access from all nodes of the network to which it belongs. This feature allows participants to record and share all kinds of information (ownership, transaction, identity, etc.) in an immutable and incorruptible way. Each block of transactions closed over a period of time is encrypted and linked to the previous blocks, and in this way,there is a single and true version of the historical record for all members of that network. The code foresees a decentralized consensus mechanism for validating transactions that avoids reliance on trusted third parties that usually require centralized validation processes (notaries, banks, governmental bodies, etc.).
Tokenization is the concept of representing a real asset (company shares, bonds, real estate developments, etc.) as tokens on the blockchain. These tokens are called “security tokens”, tokenised securities or digital assets. In other words, it is digitising an asset by taking advantage of the benefits provided by the blockchain, without relying on third parties to vouch for the transactions made with the tokens.
A token is the minimum representation of digital value within the
blockchain. There are different types of tokens depending on their use:
- Payment Tokens: these are means of payment, e.g. BTC or ETH.
- NFTs (Non Fungible Tokens): They are unique and provide proof of authenticity.
- Utility Tokens: They give access to a service.
- Security Tokens: These are securities, which can represent assets in the real economy
The typical scenario is to create an SPV (special purpose vehicle), or trust fund, then tokenize shares
or units, and offer these tokens for sale to raise money for the development of any investment project (energy, real estate, agriculture, etc.).
In a typical implementation all tokens are held in a single omnibus wallet within the platform. This is to minimise gas fees. GAS is the fee you pay to the blockchain network for transactions
It is a fraudulent scheme, also called a pyramid scheme, that is sustained by the incorporation of new clients, partners, or users. It is only sustainable with a significant sales force that maintains cash flows. The fact is that there is no legitimate activity to support the profits; on the contrary, new members (clients, partners, etc.) are those who pay for the supposed profits of the entire structure.
The lack of traceability of funds is what facilitates this type of scam, very common in the real estate, financial and cryptocurrency sectors.
In the real estate sector, in cryptocurrencies/cryptoassets, in financial investments in general Ponzi schemes occur regularly. The main reason why they occur is due to lack of control by independent auditors that give certainty to investors that the money is being used for the agreed purposes.
However, the independent audit or trusted third party control has three disadvantages:
2.Qualification of the trusted third party.
3.Coexistence with the fund managers cannot be ruled out.
It is for this reason that there is a need for blockchain encrypted codes that allow traceability of
funds autonomously, without human intervention and with real time information.
Investors, lenders and donors are considered the “principal” in agency theory, while developers, borrowers and beneficiaries respectively are the “agents” regardless of the name assigned to them in each industry or sector they belong to (investment project development, financial sector, or NGOs). The problem of not being able to control the use of funds is the same; uncertainty or “moral hazard” about the agent’s discretion exists whenever a principal transfers money or rights to an agent in order to perform certain actions.
Routing is similar to a pipeline that connects the agent’s (investor, lender or donor) BM-Trusck wallet account with the wallet account of a supplier of goods and services that transacts with the agent. These supplier accounts are included in a whitelist of pre-authorized accounts, therefore, the routing function is preemptive, there is no possibility to transfer to another account than the authorized one.
In the funds traceability version, there is more freedom for the agent to transfer to any wallet, but the destination is automatically identified, so as to stop the process or try to recover funds that were not used as agreed.
Technically speaking, digital wallets generate the information that the user needs to use the cryptocurrency. This information basically consists of a public key and a private key. The public key is the address to which the cryptocurrency is sent that is known to the general public. The privat e key, however, should be treated as a confidential password because it signs the transactions and provides access to the funds. The administrator or user of such a wallet must keep their private key safe in order to access their digital assets in the wallet.
Digital wallets can be custodial or non-custodial. In the first one, the responsibility of taking care of the deposited funds is of the administrators of the platform or wallet, since they have the private key. In the second option, when the wallet is not custody, the responsibility is only of the user who is responsible for the private keys.
From a regulatory point of view, electronic wallets that only transact with cryptoassets are not subject to regulation, unless the law of that territory indicates otherwise. Additionally, central bank and other agencies regulations may apply if the wallet performs as an exchange platform between legal tender fiat currency and the crypto-asset. If there is no explicit regulation, the wallets and the cryptoassets circulating through them will be subject to the general rules of the country, which may be more or less ambiguous and of broad interpretation due to the lack of specific rules.