Real Estate and Peer-to-Peer Rentals .. Transformed

ATLANT

Our brand-new, upcoming ICO for this week is ATLANT, which is launching the ICO on September 7th,  and has all the markings of a successful ICO. I would be very surprised if this ICO didn’t knock it out of the park.

The main reason for this is because of the size of the vertical market the ICO plans to disrupt, professionally planned cadence of activity leading up to the ICO, the fact that there is something to actually log into,  the whitepaper, and the team behind the project. The CEO is named Julian Svirsky and he’s a Wall Street veteran  who introduced the project at FinTech 2017 in New York (August 21-24) – in fact they investing in a sponsorship of that event, and the team has, so far, hit all of the marks that go into a solid ICO. Since this is the Episode 1, I’ll explain the format.  Each week, I will need to cover the following points:

  • The Concept
  • The Company
  • The Team
  • The Whitepaper
  • The Road Map
  • The Network – Ethereum, plus ATLANT (secure communication between)
  • The Presale, if it exists
  • Offering Details
    • Platform
    • Token/Coin
    • Structure of the Offering
    • Exchanges Supporting the token/coin
    • Pre-ICO Price, if available (~$6.00)
  • SEC Compliance
    • Hawley Test (Token Holders can change elements of the network)
  • Community Response and Anticipation
  • Possible gotchas
  • Overall Take

The Concept

  •   The Concept – This is project takes on the real estate market. The first point is that the real estate market is the largest market on the planet, dwarfing all others, with $1.4 trillion dollars in transactions on an annual basis. This ICO takes on two fundamental components of that market:
  • Real Estate Transactions, which are opaque, notably complex and terribly inefficient to begin with, particularly the ability to sell partial shares in real estate asset, and
  • Peer-to-Peer rentals – specifically the likes of AirBnB, VRBO and other peer-to-peer rental exchanges.

The project aims to use certain aspects of blockchain technology, combined with traditional aspects of real estate transactions to improve these processes and most importantly, drastically reduce fees.  The ultimate question for all  ICOS’a s well as this one is, simply – what is preventing the solution of these problems now, without a blockchain platform? How will blockchain help?

  1. With respect to the first – that is, monetizing and exchaning partial shares of a real estate property, the main vehicle that exists for this now is the Real Estate Investment Trust (or REIT.)  Now this vehicle bundles properties together to into a tradeable instrument and allows an investor to invest partially in real estate through this REIT mechanism. But while this can be used for a single property, it’s prohibitively expensive to list on existing exchanges. The registration of a REIT can cost up to a million dollars a year. So you can see how this would be impossible for the majority of real estate assets – even large ones. The use of a distributed blockchain ledger hosted on a secure network made of peers will remove this barrier to entry, because exchanges that run on blockchain do not need to charge prohibitive fees for the inclusion of properties on their exchanges. Not only that, but the legal, contractual and administrative information can be made immutable and trusted by using crypto-technology that cannot be reversed. Thus providing great efficiencies as well as transparency in transacting real estate. Concepts like escrow can be built into smart contracts, as well as both machine-readable and human-readable contract equivalents knows as “Ricardian Contracts” introduce major efficiencies into the process, and that leads to lower fees.  The projected fee to list and complete the transaction is projected at 7%.
  2. Now let’s consider the second – the Peer-to-Peer Rental platforms like AirBnB and VRBO are absolutely disrupting the traditional hospitality market, essentially by making it easy for just about anyone to rent their real estate property to just about anyone. But there are some dreadful inefficiencies in these models that are only mitigated by very high transaction fees. Between all parties, as much as 15% of the transaction can go to fees to the administators of the service – such as AirBnBand uip to 30% for services like Expedia.  The use of blockchain can reduce these fees by using built-in escrow, and an efficient method of arbitration for disputes.  The sponsors of this ICO claim that transactional fees for peer-to-peer rentals on a blockchain based platform might be lowered as much as 90%

    The Company

 

Let’s talk about the company. The web page for the ATLANT ICO specifically states that there is a legal structure, with a company named TENSIGMA registered in the British Virgin Islands. The BVI is an offshore jurisdiction, and details about the filing are only available through a paid search.  Whether this is a red flag or not is not something I am qualified to comment on. All I can say is that a lot of ICO’s use this structure, and I imagine it’s mainly due to the tax advantages in countries like the BVI, which is pretty important for a startup.

The Team

I would submit that the team is more important than company structure. There is much more information about them.  This team consists of 4 executive business leaders with a respectable amount of experience at enterprise levels. The advisory team is composed of men and women with significant financial and real estate experience – leaders in their respective fields. The technical team appears solid – young, of course, but solid in the sense that you could imagine that they would be capable of pulling this off.  The CTO was instrumental in building digital currency exchanges, and as you’ll hear in a moment, the team has already completed a somewhat working exchange platform, using open source technology, which can be examined on GitHub – which is system where developers can store and maintain their source software.

The Whitepaper

It’s interesting about these ICO whitepapers.  You might think that a whitepaper offered in the English language that was worth potentially worth millions of dollars would be checked and re-checked for grammar and usage at least as much as a half-page New York Time article, but you would be wrong.  Even the most impressive and sensible of these papers sound like they were written and then reviewed by people who use English as a second language.  But of course I’m quibbling – showing my age, I guess, since we now live in a sort of post-literate phase in human development. ANYWAY .. as an ICO whitepaper , this one comes in a 40 pages, and it’s mostly well-thought out and sensible. About a year ago, there was a notorious Twitter post when the whitepaper of Steemit came out  – a full 90-page, line-by-line rant – and while I suppose it could be possible to rip this apart like that was, I think you’d have to be a pretty aggressive troll to do so – like that poster was. Some significant and beneficial aspects of this concept expressed through this whitepaper is that there is a work component – people will be able to perform work in arbitration of disputes in the peer-to-peer rental network and collect fees. Ostensibly, this is currently done by employees of companies like AirBnB. A token mechanism running on a distributed network not owned by any one company will allow for these workers to collect money for what they do directly from the network. This kind of concept in an ICO whitepaper lends credence to the project. Another aspect that we like to see in whitepapers is the ability for token holders to vote to govern the platform. This egalitarian concept is another that should be in an ICO whitepaper, and is well-expressed in this one. Finally, the mechanism by which real estate is converted into a tokenized and tradeable asset through the use of a Special Purpose Vehicle, followed by a Property Token Offering and using an Ethereum-based Distributed Autonomous Organization is clear and makes sense – at least to me.

The Road Map

  • According to the road map, this ICO should have a working beta of the platform by the 7th of September. What I have found is that they are a little bit behind as you will see when I talk about the network. In terms of schedule, however, they are ambitious. They plan to have a fully-working platforrm launch by March of 2018 and a P2P Rental platform live by April of 2018. So not a lot time to wait to see if they can pull this off. They get points for having a schedule and a road map, and they seem to have a team that can execute.

The Network

The Network – Ethereum, plus ATLANT (secure communication between) – According to the whitepaper, they will be using the Ethereum virtual Machine and Ethereum network, plus they will launch an ATLANT network as well. There will be secure communicate between those two systems. Smart Contacts will handle rental contracts, but the management of those contracts will be on the ATLANT network. They will make use of the Platform DAO and each property will have its own DAO and Property Token Offering. All certificates and contracts, as well as transactions are digitally signed, of course.

Pre-Sale

  • Soft Cap of $1.5M, which is the amount reached at the Pre-Sale, which started on August 1, 2017 and ended 19 days later when the $1.5M cap was reached.

Offering Details

  • Platform – Ethereum Platform and a standalone P2P ATLANT Platform. The software stack is multi-tiered, with data, logic, presentation and high-level logic tiers. The Ethereum Virtual Machine runs the high-level logic, and an External Ethereum node helps power the presentation node, with the Atlantic Desktop, which speaks to Ethereum through the API.

  • Token/Coin – the main platform token is the ATL, which will be eventually traded on exchanges. When you log into the trading platform, which is alpha at the moment, you see ATL, ATLE, ATLF, ATLG and a few others that you can trade, all of which have different valuations. ATL is .0017 BTC now (About $6), and the highest is trading against BTC at .004, which is about $37.  I am still in the process of verification and so I can’t fund the account or trade, and anyway the FAQ indicates that trading ATL will occur after the ICO is complete.

  • Structure of the Offering

    • Begins September 7th and runs until October 31, 2017
    • Soft Cap of $1.5M, which is the amount reached at the Pre-Sale, which started on August 1, 2017 and ended 19 days later when the $1.5M cap was reached.
    • Hard Cap of 225,000 ETH which is roughly $76M (the original cap was higher but they announced a reduction because of the rise of ETH in recent weeks)
    • Total Supply of ATL tokens will be limited to 150,000,000.
    • Unsold Tokens will be burned.
  • Exchanges Supporting the token/coin
  • ICO Price ($.67 – $.80) If you buy before 10% of the tokens are sold, then you will get 505 tokens for 1 Ether, which is about $340 at the moment. If you wait until the last 90%, you will get about 425. So the range you may pay for these tokens during the sale is between $.67 and $80 per token.

SEC Compliance and the Howey Test

  • The Most important question here is with respect to SEC Compliance. It should be understood that the first mission listed on the Security and Exchange Commission’s website is to protect the investor. However, with respect to ICO’s the most important question to ask is whether the SEC would consider the ICO a “Security Offering” in the legal sense. Because if it is, and it’s not filed as such with the SEC, then regardless of whether the ICO actually is a Security or not, targeting by the SEC could at the very least severely impede the progress of the project you are investing in.  So as investor’s, it’s in our best interest to discern whether the ICO would be considered a Security by the SEC.
  • The best way to do this is the so-called “Howey Test,” named after a landmark Supreme Court ruling decades ago. There’s not enough time to explain the details of the Howey test in this podcast, but from my reading of it, the ATL token would most likely not be determined to be a Security for the following reasons:
    • Speculation is discouraged. In more than one place in the whitepaper it is pointed out that there is “No Passive Expectation of income solely for holding ATL tokens” – while the grammar may be slightly off, the meaning is clear.
    • Voting rights for token holders to make operational decisions for the platform, as well as the token providing an operational use – both implying that the token holders have an active stake in the operations of the network. This is expressed in several places in the whitepaper, from powerful and wide-ranging voting rights to workers using the network and running nodes.
  • Howey Test (Token Holders can change elements of the network) result is a score of “30” which is deemed “unlikely” to be treated as a security.

Technology

  • Technology – Github has 14 repositories of code, with token contracts, pre-sale contracts, an altant and adex (that’s the exchange) clients. Code seems standard and compliant to the Ethereum platform, using web3.js, solidity and go.
  • Community Response and Anticipation
    • Significant – the response on BitCoinTalk was generally favorable, and the team seemed to stand up to probing questions pretty well. The best thread was the pre-sale thread, not the bounty thread, which was mainly lists of bounty proof.
    • Slack channel has a lot of activity – a good deal of it positive.
    • On Bitcontalk, the ATLANT got into a minor fight with a competing ICO named Relest, and after reading both whitepapers I can say that there is very little comparison, and they handled themselves well.
    • On Reddit, there was a complaint that the GitHub “leaves a lot to be desired” and the response was that the team only deployes to GitHub when the code is fully tested and ready-to-deploy. And then on September 3rd there was an announcement that the Exchange was live, as well as wallet and smart contracts.
    • ICO Bench rates the ICO at 4.8 stars of 5.
  • Business Viability – With a $1.4 trillion market, and a 7% fee for listing real estate assets, plus a worker incentive to keep the network running and do the arbitration work for rentals, the business model seems lucrative. However, the gotcha below deflates those number just a bit.
  • Open to US Investment – the Pre-sale terms indicated that US citizens would not be able to participate. This may be the same for the ICO, but please understand that as a US citizen you will have access to exchanges where you can purchase the tokens, so it’s not like you won’t be able to participate in the network.

Potential Issues

  • The whitepaper, as well as discussions posted on YouTube mention the $1.4 Trillion transactional volume of real estate on an annual basis, and the implication is that a very small slice of that market share would be needed to capture significant revenue. With a 7% listing fee for an asset, lets run the number where ATLANT manages to capture just 1% of this massive market. That would amount to $980,000,000 in fees alone. That’s quite a goal to aspire to, but there’s a slight flaw in that math in that the whitepaper mentions that the minimum value for the listing of a real estate asset would be $20,000,000 dollars. So the real market that ATLANT would be disrupting would be closer to 1% of the $1.4 Trillion. This is a much more modest number – closer to about $10,000,000 in fees. Now granted, that’s only half the business – the other half is the Peer-to-Peer rental market, and that market could yield some large numbers, particularly if ATLANT makes deep inroads to the market share that AirBnB  has already captured. One might wonder why they shut out all real estate less than $20M – but it kind of makes sense.  We don’t, after all, want every three bedroom, 2-bath family of four to suddenly start tokenizing their homes. That might be disruptive in a bad way.  So it makes sense – but it does take a little air out of the $1.4 Trillion dollar volume that sounds so very large when first mentioned.
  • Another point that a person knowledgeable in real estate made BitCoinTalk is that operationally, it’s difficult enough to collectively manage a piece of real estate – like a building where capital decisions must be made from time to time. This person’s point was that with a decentralized group of investors, it will be even more difficult. The counter point from ATLANT was that this is done by co-ops already and not very well – and the counter to that was that at least the co-op owners live in the building. So – certainly an interesting conversation with respect to the business model. One slight disappointment that I saw was that as soon as ATLANT got wind that this person was a US resident, they asked him to stop “participating” since ATLANT ICO is not accepting US persons at this time. To which the person responded by the fact that he could purchase tokens anytime after the ICO, and that he was, in fact, entitled to make comments on the thread.

 

Final Takeaway

This ICO has all the hallmarks of a professionally planned and responsibly-delivered project. I have looked at competing real estate ICO’s and I don’t see anything with this level of depth in the whitepaper and response form the community.  I think as ICO’s, it should be seriously considered and worth the effort to perform the due diligence to make your own decision to participate.

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