TECHNICAL WHITEPAPER. Your Commercial Real Estate Business on the Blockchain. realestatedoc.io

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1 TECHNICAL WHITEPAPER Your Commercial Real Estate Business on the Blockchain realestatedoc.io

2 IMPORTANT: YOU MUST READ THE FOLLOWING DISCLAIMER IN FULL BEFORE CONTINUING The Token Generation Event ( TGE ) by Real Estate Doc Pte. Ltd. (Singapore Company Registration Number: Z) ( RED ) of Real Estate Doc Token ( REDT ), the exchange medium for participants of the RED Ecosystem (as described in this Whitepaper) is only intended for, made to or directed at, only certain persons for information only. This Whitepaper is not a prospectus or offer document or similar document and is not intended to constitute an offer of securities of any form, units in a business trust, units in a collective investment scheme or any other form of investment, or a solicitation for any form of investment in any jurisdiction. No regulatory authority has examined or approved of any of the information set out in this Whitepaper. This Whitepaper has not been registered with any regulatory authority in any jurisdiction. References in this Whitepaper to we or us refers to the RED and our shall be construed accordingly. You refers to any person accessing, perusing or reviewing this Whitepaper and your shall be construed accordingly. By accessing and/or accepting possession of any information in this Whitepaper or such part thereof (as the case may be), you represent and warrant to RED that: a. you are not located in the People s Republic of China and you are not a citizen or resident (tax or otherwise) of, or domiciled in, the People s Republic of China; b. you are not located in the United States of America and you are not a citizen, resident (tax or otherwise) or green card holder of, or domiciled in, the United States of America; c. you are not located in a jurisdiction where the TGE is prohibited, restricted or unauthorized in any form or manner whether in full or in part under its laws, regulatory requirements or rules; d. you agree to be bound by the limitations and restrictions described herein; and e. you acknowledge that this Whitepaper has been prepared for delivery to you so as to assist you in understanding REDT and RED Ecosystem. The information set out in this Whitepaper is for information purposes only and do not constitute any form of financial or other advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances and is not intended to be relied upon by you in making (or refraining from making) any specific decisions. IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX OR OTHER PROFESSIONAL ADVISOR(S).

3 Table of Contents 1. Architecture Preview a. Core Middleware b. Provider Middleware c. Ricardian Contracts, Smart Contracts, Non-Fungible Tokens d. Custom Sidechain e. Cloud Hosting & Public IPFS Gateway f. User Interfaces Why Use the Blockchain? a. What is the Blockchain? b. Benefits of Using the Blockchain... 12

4 1. Architecture Preview The solution needed by RED can be roughly broken into the following categories, which are detailed below: Core Middleware Provider Middleware Ricardian Contracts, Smart Contracts, Non-Fungible Tokens Custom Sidechain Cloud Hosting User Interfaces Let us take an example when of a commercial lease transaction between Landlord and Tenant. The process is illustrated via the diagram above: 4

5 Step 1: Commercial property owners and managers (Landlords) who are operators of the RED Application shall create a new digital contract on the RED Document Engine. Through the contract collaboration function on RED, both Landlords and Tenants are able to collaborate with each other to determine the terms and conditions of the contract. Finally respective signatures are obtained on this contract document. Terms of the contract will be encrypted on cloud and only these users could use their respective passphrase to unlock to view later on. Step 2: Once contract is signed by both parties, Landlords (Corporate) will submit the contract proposal to the RED sidechain via an SDK running on top of the middleware. It is expected to have a newly created smart contract for rental, which is associated with the digital one. We shall design this smart contract with the following functionalities: Extended from ERC-721 non-fungible token to ensure uniqueness of every rental contract generated. A hyperlink is embedded as an attribute of the smart contract in order to look up additional information on cloud. However, transfer and approval behaviour might not implemented. Rental smart contract also keeps a SHA-256 hash of the digital contract for later verification. Escrow function to receive/release payment With the rental Smart Contract Creation, identification and the Commercial Leasing Contract is triggered to save the hashed KYC, ownership and payment history for later use. Step 3: There will be a cross-chain converter between the two blockchains. Users will be able to exchange REDT to the RED Payment Gateway on the sidechain, powered by Plasma, to commence the funding of their transaction. Every transaction that takes place will be recorded and tracked respective to each smart contract. Step 4: Participants can access a report application based on the permissions granted. The report serves as a primary KYC due-diligence source, as well as a secondary source of analytical insight and market statistics. Sensitive competitive-specific information is 5

6 anonymised. The application will frequently fetch data from the Commercial Leasing Contract and do aggregation, before updating the Cache Layer. 1a. Core Middleware This portion of the application runs on servers controlled by RED and handles the core user identity features throughout the platform. In this way, RED keeps direct control of all user KYC data. This ensures a renter who does business with multiple providers only needs to create one identity within the system. As it is expensive to keep all data on blockchain, this layer will take most of heavy tasks and data so that only essential transactions (and hash data) are placed on Public Blockchain. Moving forward, identities will be decentralized totally on the RED Sidechain, allowing peer-to-peer sharing identity, which resides in the smart contract section below. Some user features which are global to the system, and so accessed through this middleware, include: Register user account Upload KYC documents Search available public details of vendors, agents, providers Administrator functions The core middleware will publish an API which can be consumed by the provider middleware instance, enabling them to validate user credentials. This software will always be hosted directly by RED. 1b. Provider Middleware Each RED client (or provider ) of the solution will have their own instance of a server application which can be customized to suit the provider s use case and branding. This is the primary interface through which renters will access the listings available through a provider (properties available for rent), and through which they will access the document processing engine. Depending on design, these instances may also publish a back-facing API, where the provider middleware can be directly queried by the central middleware to pull general data. This software may either be hosted by RED, or deployed directly to the client s servers. 6

7 Some features available to renters through this interface include: Reviewing and signing documents Leaving reviews of providers or agents Viewing property listings with the provider Reading reviews of renters 1c. Ricardian Contracts, Smart Contracts, Non-Fungible Tokens Ricardian Contracts The Ricardian contract is designated to track legitimately signed agreement of both parties. It is robust through use of identification by cryptographic hash function. In the RED system, one Ricardian contract represents one single prose contract in such format both machine and human readable An implementation of Ricardian Contract will be based on JSON format, a friendly form to developers. A commercial leasing contract schema could be illustrated as below : Each contract should be uniquely identifiable by its hash and recorded into Smart Contracts running on the RED Sidechain, to automate self-executing of an agreed contract instance.there are 3 types of smart contracts which will be running below : 7

8 Rental Contracts One single digital contract will be tokenized respectively to a Smart Contract designed in format of non-fungible ERC-721 token. This will help to track ownership, that the conditions are met, and relevant information Digital Contract associated to this asset (unique hash code) Current owner/renter of an asset Terms and Conditions Other relevant information Information will be hashed and encrypted in such a way that only participants (private key holders) can decrypt and read. Identity Contract Another ERC-721 token will represent the identity of parties involved in contracts. Identities are encrypted by AES-256 encryption. Information could be shared and granted only under authorization of the Identity Owner, unlocked via passphrase. Fundamentally, application users are able to control their information and with whom to share. Identities are especially useful to help corporate users recognize businesses, reducing cost from repetitive KYC steps. Commercial Leasing Contract Commercial Leasing Contracts benefit from historical transactions of assets, depending on the owner giving the relevant permissions. A report application may be built to support producing periodical reports and market statistics, such as total number of leasing contracts generated quarterly, and payment scores. 8

9 1d. Custom Sidechain A blockchain with custom consensus logic will be deployed to support the applicationspecific functions required by the RED platform. Data stored on the blockchain is transparent to the public, unless it is specifically encrypted, so care must be exercised in deciding which records are stored this way. The blockchain is also the most secure trustless portion of the application, so data that is used to enforce document finality and user privileges should be stored there. The sidechain also ensures lower transaction fees compared to The Public Ethereum Blockchain, which has scalability issues. The blockchain is a decentralized set of servers or nodes which use a consensus algorithm to collectively agree on the truth of a set of data. We recommend the use of a proof of stake blockchain to reduce computing power, and also to retain greater control of the distribution of the network s voting power. Good candidates to run nodes are parties who have a stake in maintaining the network, including: RED Providers who run the RED software Investors The public (depending on design considerations) Custom consensus rules can securely govern flows such as: Whether a user is authorized and has validated KYC via RED Whether a property is available for rent, and on which conditions Who can rent a property, and if the RED Payment Gateway can be applied to modify price Whether documents are in a final or intermediate state Tracking the reputation of spaces, agents, or renters This layer and smart contracts related should be open-source, maintained by RED team and interested developers community. 9

10 1e. Cloud Hosting & Public IPFS Gateway Documents which need to remain private, or are large files, must be hosted in storage which can be accessed with a conventional security model by RED middleware applications. This is also to avoid heavily computational tasks running on blockchain, either sidechain or public and only Unique ID (Hash) are used to link up. In this way, access can be controlled to the files based on user privileges through the appropriate middleware application, although as noted earlier, the user permissions themselves may be encoded into the blockchain portion of the solution. Some examples of documents stored this way include: PDFs of contracts (in complete or intermediate states) Images (for example, used in rental listings) Large text descriptions or news updates User KYC documents Contract metadata (JSON format) The RED Team envisions a future that where entire platform is completely decentralized. Nowadays, there are still number of limitations from shifting entirely centralized apps to decentralized world. For example, there are no true implementation of sidechain as well as decentralized storage as viable products. As a result, heavy computing and storage costs are especially expensive on public Blockchain. Thus, using Ethereum Blockchain and The Interplanetary File System (IPFS) combined is economically viable solution. IPFS is a content-addressable, peer-to-peer media sharing in a distributed file systems. Storage on the IPFS network is expected significantly cheaper than on public Ethereum Blockchain. A demo application will illustratrate how to interact with the public IPFS gateway for content contract storage (JSON format) and link up with respectively cryptographic hash stored on public Ethereum Blockchain 10

11 1f. User Interfaces RED s user interfaces is currently available in the form of a web app. If it is appropriate to the target users of this system, mobile application will also be developed to support key features. As the RED solution involves blockchain, the client application, whether web or mobile, will generate and sign valid transactions to be submitted to the blockchain. Examples of actions which might (depending on the system design) originate from transactions signed on the client interface will include: Changing a user s privileges (such as approving KYC) Signing a contract document Spending tokens Reviewing a provider 11

12 2. Why Use the Blockchain? 2a. What is the Blockchain? The blockchain is essentially a decentralised and distributed digital ledger that records transactions into blocks across many nodes. Each block contains a hash of the previously block which makes them immutable in the sense that they cannot be altered retroactively without the alternation of all subsequent blocks. Being a decentralised network, the blockchain is secure by design as each node is incentivised to ensure that blocks being put up on the blockchain are validated before being accepted. The blockchain takes advantage of decentralised consensus and game theory to make sure this happens. 2b. Benefits of Using the Blockchain The blockchain has inherent properties that could massively benefit the commercial retail industry. Here are the three key benefits of the blockchain that we will be taking advantage of with our RED platform. 1. Immutability and Enhanced Security Blockchains are inherently more secure than other methods of record-keeping. Each record or transaction has to be approved and verified before being placed onto the chain. Once placed onto the chain, it is also encrypted and linked to the previous record. The decentralised nature of the blockchain acts as an added layer of security because the records no longer sit on a centralised server. These two factors effectively make it extremely difficult for any hacking attempts to compromise the transaction data. The blockchain makes records placed on it immutable, since they have to be verified and approved by many different nodes. This makes the blockchain an ideal technology for record-keeping and data storage. The RED platform takes advantage of this aspect of the blockchain by securing and placing signed documents and KYC records onto our private permissible blockchain, ensuring that the documents and records are safe and no longer reliant on a single central server. 12

13 2. Improved Traceability and Greater Transparency Transaction records are much more transparent with the use of blockchain technology. Because the blockchain is essentially a distributed ledger, all nodes (or computers) will share the same record as opposed to individual copies. The shared record can be updated only with the consensus of all participants in the blockchain, which means everyone has to agree to update the record. All participants with permissioned access will be able to view a particular record and verify its authenticity. Thus, any updates done to a particular record has to be with the consensus of all participants which will lead to vastly improved traceability of the historical changes and updates made to a record. The fact that everyone will be viewing the same updated record contributes to greater transparency as no one individual's copy of records can be unique, eliminating the possibility of disputes. The RED platform takes advantage of this by allowing for KYC records to be updated only with the consensus of all permissioned participants involved. This builds a verified KYC record over time, which improves efficiency tremendously compared to the arduous manual methods by which individual KYC process are currently performed. Contractual documents can be viewed with permission and their histories can be traced through all updates, giving greater accountability to all parties involved in the transaction. The blockchain acts as a centre of truth where participants are able to verify the authenticity of a record simply by sending a query to the blockchain. 3. Increased speed and reduced cost Record keeping is traditionally a very manual, paper-heavy, and time-consuming process that is prone to human error. By leveraging the blockchain, this process can be streamlined and automated. Transactions can be recorded much faster and more efficiently than ever before. With a blockchain, there is only one digital ledger that automatically updates for all parties. Therefore there would be less clutter since multiple ledgers would no longer have to be reconciled. 13

14 When everyone has access to the same information, it is easier to trust that information without the need for multiple intermediaries. The blockchain provides indisputable data that participants require to transact securely. Checking records on the blockchain would be expedient. No longer would there be a need to manually search for a particular record that would then need to be pulled out and sent to the person requesting for it. Instead, a simple query can be sent to the blockchain and the record will be instantaneously retrieved and sent digitally. Another advantage is that businesses would be able to reduce the costs associated with having multiple intermediaries to manage records. Physical space can also be saved since there is no longer any need for paper records to be kept. For most businesses, reducing costs is a key priority and blockchain technology can save money in a number of ways. 14

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