Friday, December 2, 2022

Bankex – Buying a Piece of Skyscraper With Ethereum

Bankex – Buying a Piece of Skyscraper With Ethereum

Bankex is making bold claim that they plan to change the way we think of contracts and ownership. Through a process they call “fractional ownership and tokenization”, the company says their service will allow people to buy and sell what are essentially shares in various forms of physical capital.

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This could be, for example, part ownership in an office skyscraper, a gold watch, a rental property, or a car among other options. We interviewed CEO and founder Igor Khmel to learn more about how this platform might work, and also what kinds of risks a token holder may face.

Putting Real Assets on the Blockchain

So how does Bankex intend to tokenize physical capital? For some things, it’s easy to imagine this is a fairly simple process. For other, more complex assets like an office building, the process to accurately describe both the object and the value of said object must be incredibly complex.

Bankex screenKhmel said that while Bankex is responsible for the tokenization, they do incorporate what he referred to as reputable independent third-party auditors to make sure that the asset in question “… meets the physical or economic specifications built into the smart contracts/token structures.”

In essence, this means that capital is tokenized through making use of third-party auditors who will assess the value of the item being tokenized. Igor stated that this can potentially be done almost anywhere in the world, and that Bankex already has a physical presence in New York City, Chicago, Moscow and Hong Kong.

How Would Bankex Deal With Fraud?

How would the group would deal with fraud? And specifically, what’s stopping someone from claiming that they own a 100-story skyscraper, tokenizing it, selling the tokens and then disappearing with the cash? As anyone who has spent time in the crypto world will tell you, cryptocurrency does have a tendency to attract fraud in various forms.

Igor seemed confident in both his organization and the technology behind it, saying:

“… the office building “owner” would have to provide the legal ownership documentation just like in any other real estate transaction, and a field exam to verify the condition of the building, number of units, etc would be conducted. Again these are all standard practices in real-property finance. ”

Igor’s claim is that fraud is prevented by first requiring boots on the ground due diligence by a trusted auditor before any assets can be put onto the blockchain. Continuing on the subject of an office building, Khmel went on to describe some of the benefits of tokenizing a building:

“The tokenization benefit will really kick in once the ownership of the building is legally transitioned onto the blockchain. An easy example would be 10 different start-ups sharing a co-working space with 10 offices and a large conference room; the parties can shift ownership of the conference room hourly at some low rent rate via the API. Next, let’s say one startup defaults on the lease and another is flourishing and needs more space they can buy the tokens for that additional office space in real-time on blockchain with a full audit trail; the purchase represents one additional office unit for one month. A new highly flexible smart-office building.”

The Bankex Token (BKX)

The Bankex group will be launching its own token, BKX. We wanted to know what this token would be used for, and how it differed from a token that represents a share of an office building, or if they were somehow one in the same. Do BKX tokens work like SALT or Degree tokens — membership tokens that allow you to buy access to a platform or website? This is his answer:

“BKX is the standard token for utilizing the various platforms and protocols. One example would be a project we are working on for private placements/shares in privately held companies. The BKX (just one example) exchange would operate like a public stock exchange but for privately held companies where an investor could buy BKX using Bitcoin, Ether, or fiat and then use BKX to invest in the private placements via smart contracts. The smart contracts would distribute tokens representing shares in the end company, mezzanine debt, profit sharing, or any other specifications the company is interested in offering for financing.”

In short, an investor buys BKX with crypto or fiat, then uses BKX to buy shares of tokenized assets.

Who Owns the Real World Asset?

Many of us following cryptocurrency are not from a real estate background. So, of course, we had a few questions for Igor about the actual concept of ownership once something like a building is tokenized.

What if, for example, someone were to own a single token of a building. Would that give them the right to just walk in the front door and set up camp on the floor with a sleeping bag and stay there whenever they wanted? His answer was not too surprising:

“Nothing changes with regard to the terms of leases or fractional ownership. So for example, if I own 15 percent of a retail strip center that is leased to business I can’t just show up and try to take over a unit. If the tokens are the leaseholder obligations then yes they could use whatever unit they bought. If the token represents a share in a REIT they only have rights to profits and loss on rental income and property disposition.”

Buying a share of a building may get me a portion of the profits, or entitle the owner to sell their share for money, but it doesn’t just let them walk in the door whenever they please.

The Blockchain Behind Bankex

Bankex logoWhat about Bankex’s blockchain network? Seeing as putting something on the network requires real-life auditors, it’s a safe bet that the network wasn’t designed to be wide open like Bitcoin or other crypto asset networks.

Khmel stated that Bankex is based on Ethereum, and so in that sense, it is fully decentralized. However, as the platform will need a fair amount of private information from asset owners in order to operate within the legal frameworks of its host countries, there will be a large amount of data that is not on the public blockchain.

Bankex is currently holding a pre-sale for large contributions (roughly 100 ETH or more) and will be shortly announcing its open public token sale which will have no minimum requirements to participate.

What’s your take on this project? Feel free to share your thoughts in the comments below.

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