Contents
The economic and legal nature of the Bitbon System[i] is set forth in the constitutive document, the Bitbon System Public Contract[i], and the Appendices that are an integral part thereof as well as in the entire set of digital assets[i] of all Users whose information resources[i] form its information and applied aspect.
Simcord, the developer of the Bitbon System infrastructure[i], takes a deeper view of the distributed ledger technology[i] than is generally accepted in the sector and even in the world.
This technology is a perfect basis for tokenization of not only objects but even social relations, in particular legal relations, which is quite different from the world’s common understanding of blockchain[i] (one type of the distributed ledger technology) merely as a kind of “payment system” or new “means of payment” such as cryptocurrencies.
The capabilities of the distributed ledger technology are much broader and deeper than even the most common cryptocurrencies can offer, since they always have a speculative nature that poses a real threat to legal and even financial systems of countries.
The Bitbon System allows its Users[i] to tokenize not only physical objects, but also legal relations surrounding them. This distinguishes it from any other known FinTech solutions based on the distributed ledger technology and allows instant recording of all events upon their occurrence on an information platform based on the distributed ledger technology — the decentralized information platform[i] (DIP).
1. Tokenized legal relations
Tokenized legal relations are legal relations between users of a DIP as subjects of law regarding the object of law, which is also the object of accounting performed via a distributed ledger token[i]. At the same time, some rights and obligations of parties arising in such legal relations as well as their sequence provided that they have a precise algorithm of events, can be programmed in the DIP and executed automatically. All events of tokenized legal relations are taken into account as they are recorded in real time in the distributed ledger token accounting system[i].
The main advantages of tokenized legal relations compared to standard ones are the following:
- verification of parties to legal relations;
- transparency;
- instant transactions;
- 24/7 access;
- technologically guaranteed level of security and social trust between the participants when making deals using a distributed ledger token;
- the indisputability of the events held by participants in legal relations and their consistency;
- automation of elements of legal relations with a precise algorithm of events, programmable actions and their sequence;
- other aspects.
2. Market of tokenized assets
Tokenization of legal relations allows modernization of existing legal relations, which greatly simplifies their adaptation to laws of different countries. Tokenization of legal relations sets conditions for formation and development of a new market — the market of tokenized assets, the functionality of which depends on the attributes and properties of tokenized assets and their circulation environment.
Tokenized asset is a type of virtual asset[i] that exists in the distributed ledger token accounting system in the form of a record with an identifier of information derived from the original asset[i].
The Financial Action Task Force (FATF) defines a virtual asset as “a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes”. Since the FATF Recommendations are a recognized international standard for combating money laundering and terrorist financing, financiers and regulators around the world have further focused on the term “virtual asset”, which became the basis for research by scientists from different countries.
*Source: a research article Comprehensive Classification of Virtual Assets
Simcord considers the market of tokenized assets as a market of rights derived from the property disposition agreement, including the rights to close certain deals, and is convinced that it should have a single decentralized space. A prerequisite for this market operation is the existence of uniform interaction rules for all its participants, the violation of which entails liability imposed automatically due to the technological nature of the market.
Simcord has created and successfully develops the market of tokenized assets through such a space — the Bitbon System Social Network[i], which is the digital asset circulation[i] environment (one type of tokenized assets).
3. Basic concepts of the economic and legal nature of the Bitbon System
The economic and legal nature of the Bitbon System should be viewed through the following concepts:
Bitbon System Social Network
Bitbon System Social Network is a form of organization of the Bitbon System Community as a decentralized social network of economic relations that allows its users to realize social relations, including legal ones, using digital assetsand the Bitbon System infrastructurein accordance with the Bitbon System Public Contract the provisions of which are binding for all Bitbon System Users.
The main differences between the Bitbon System Social Network and other social networks:
- the Bitbon System Social Network is decentralized, that is, there is no single place of data storage as well as no single manager, but there are many managers. There is no single beneficiary, but there are many beneficiaries. At the same time, both managers and beneficiaries are Users with the status of a Bitbon System Participant[i].
- the Bitbon System as a social network has all main features, among which common values[i] of the entire Community and the existence of a universal online platform for implementing similar interests, establishing business contacts and engagement in business activities can be highlighted. At the same time, the communication tools of Bitbon System Users are not public messages, but digital assets, which can also be considered as a kind of closed chats under a modern interpretation.
- the Bitbon System Social Network has an economic orientation, where the main tool for building social relations in the economic aspect are digital assets and deals[i] made with them, which implies regulation of mutual rights and obligations as well as the responsibility not only for the parties to certain legal relations, but also users in general.
Bitbon System Infrastructure
The Bitbon System infrastructure is a single software complex created by Simcord according to ISO:9001:2015 international quality management system certificate in research in the field of development and production of highload software solutions based on the distributed ledger technology confirmed by the intellectual property of Simcord registered in the international registers.
This single software complex (software) consists of software[i], a set of components[i] and base services of the Bitbon System[i], which are on the balance sheet of Simcord as an object of intellectual property rights and are defined as intangible assets (IA) for the purposes of accounting in accordance with International Financial Reporting Standards (IAS 38).
Qualitative and quantitative changes in the elements of the single software complex (software) are aimed at improving and expanding the Bitbon System infrastructure including its functionality and are recorded in the accounting records of Simcord.
The Bitbon System infrastructure is the initial asset[i] for the Bitbon digital asset. All Users of the Bitbon System Social Network have the right to use the Bitbon System infrastructure in accordance with the Bitbon System Public Contract.
Digital asset as a method of disposal of property
Disposal of property in civil law is one of the powers of the owner allowing him/her, at his/her discretion, to perform with respect to the property belonging to him/her any actions that are not contrary to the law and other legal acts and do not violate the rights and legally protected interests of other persons. These actions include alienation of the owner’s property into the ownership of other persons (sale, exchange, donation, etc.), transfer to these persons the right to possess and use the property while remaining the owner, transfer to these persons the right to dispose of the property, pledge the property, dispose of it in any other way.
A digital asset in the Bitbon System is a form of fixation of the method of disposal of property in the Bitbon System Social Network, which envisions the synthesis of correlated data of the initial asset[i] (property), the original asset[i] (the property disposal agreement) and the distributed ledger token[i].
A digital asset is a type of tokenized assets based on the Bitbon System[i] derivativeness[i] as a generating factor.
The instrument for implementing the method of disposal of property chosen by the owner is a digital asset unit[i]. Each digital asset unit has a technological as well as an information and applied component. The technological component is represented in the form of a distributed ledger token accounting unit[i] and its data, and the information and applied component is represented in the form of correlated data of an original and initial assets. When events occur with the property (the initial asset) its data are simultaneously changed, which entails changes in data of the original asset. These changes are recorded as a transaction with the distributed ledger token accounting unit. Thus, all events with the property, which are reflected in the agreement on its disposal, are recorded as a record in the distributed ledger.
The technological component determines the form of each digital asset unit of the User, which is uniform for all units and is represented in the form of a distributed ledger token accounting unit, while the information and applied component is unique for each unit of such digital asset of the User and determines its content. Due to special information and applied component, the digital asset of the User is unique in its content, but uniform in form due to its technological component. Derivativeness inherent in each digital asset of the User gives it dynamism as a method of disposal of property, which is a characteristic of the main criterion for the digital asset of the User, its practical significance.
Digital asset derivativeness
Digital asset derivativeness is a legal relationship between the initial asset and the original asset for a digital asset, which is established automatically when creating a digital asset and is dynamically tracked through circulation of units of this digital asset in the Bitbon System.
Legal relationship means a complex dynamic agreement comprising a number of contracts, deals, terms and conditions laid down in the information resource as the original asset for a digital asset as well as actions with property as the initial asset for a digital asset. Actions with property are carried out upon the occurrence of conditions envisaged by contracts and deals as components of the complex agreement. Such actions are recorded in the distributed ledger and are a prerequisite (cause) for carrying out certain actions until this agreement is terminated due to the fulfillment of its terms and conditions.
Moreover, some deals and contracts are executed automatically according to the established terms and conditions. All events related to deals and contracts are recorded through transactions with distributed ledger token accounting units as a technological component of the digital asset, which correlates with an information and applied component.
Some digital assets of Bitbon System Users may be based on a simple agreement rather than a complex one, for example, in the form of a deal with the purchase and sale of products or services.
Bitbon digital asset
Bitbon is a key element of the Bitbon System infrastructure, which is software in the form of code for activating base services of the Bitbon System using Bitbon units[i] as an integral part of that software.
Bitbon is a strictly limited resource of the Bitbon System with a number of 100,000,000.00 Bitbon units.
Bitbon is a system-forming digital asset created by Simcord as a result of tokenization of the initial asset for Bitbon.
Bitbon is a method for Simcord to dispose of its property,namely the nonmonetary asset “Components and Services of the Bitbon System Infrastructure” as the Bitbon System infrastructure under the terms and conditions of the Bitbon System Public Contract.
Thus, Bitbon is a digital representation of the right to use the nonmonetary asset “Components and Services of the Bitbon System Infrastructure” as an initial asset for Bitbon in accordance with the “Bitbon System Infrastructure Access Set” information resource[i] as an original asset for Bitbon recording all events in the distributed ledger token accounting system.
Hence, Bitbon is a method of accounting of the right to use the nonmonetary asset “Components and Services of the Bitbon System Infrastructure” using Bitbon units, which are access to the Bitbon System Social Network as well.
Digital assets of Bitbon System Users
Each User[i] has the ability to create his/her digital assets[i] to manage his/her property and/or personal non-property rights in order to register and dispose of them, in particular to perform equivalent exchange of such rights using digital asset units in the Bitbon System Social Network. The circulation of property and/or personal non-property rights of Users is performed using digital asset units of these Users.
The Bitbon System User determines the method of disposal of his/her property (initial asset) in the original asset for his/her digital asset, as well as establishes attributes and properties of this digital asset, which determine the terms and conditions of legal relations with such property, as well as with units of such a digital asset being the tools for implementing the method of disposal of property.
The functionality of the Bitbon System infrastructure allows its Users, in compliance with the terms and conditions of the Bitbon System Public Contract, to conduct legal relations by concluding deals related both to the implementation of methods of disposal of property defined by digital assets of Users and the circulation of such digital asset units, which promotes development of tokenized legal relations using digital assets in the Bitbon System Social Network.
The ability of Users to create different types of digital assets is related to the Simcord’s development of forms for such digital asset units as elements of the Bitbon System infrastructure.
Deal in the Bitbon System
The nature of the Bitbon System is based on the doctrine of natural law, which means that when realizing property and personal non-property relations, Users are free to choose the method by which the will of the parties is recorded, namely, the choice of the deal form.
All deals can be divided into two groups in the Bitbon System Social Network:
- Deal in legal relations where the object of the right is property and the digital asset unit is a tool for implementing the method of disposal of property.
- Deal in legal relations where the object of the right is a digital asset unit, which is a tool for implementing a particular method of disposal of certain property.
What they have in common is the form of a deal, which is standardized in the Bitbon System Social Network.
Deal in the Bitbon System is relations between Users of the Bitbon System Social Network aimed at establishing and/or changing and/or terminating rights and obligations in legal relations between these Users.
Deals in the Bitbon System are realized by means of distributed ledger token transactions[i].
The form of a deal in the Bitbon System is a distributed ledger token transaction (hereinafter — transaction), which is accepted by the Bitbon System Community and is ensured by the functionality of the Bitbon System infrastructure in accordance with the algorithm of actions of the digital asset module[i].
Thus, any deals in the Bitbon System Social Network have a single form being a distributed ledger token transaction as a technological component of the User’s digital asset, which having a special information and applied component, makes such a deal unique in its content.
In the Bitbon System, the moment of concluding a deal is the registration of a distributed ledger token transaction in the distributed ledger token accounting system as a structural element of the Bitbon System by implementing digital asset module operations.
In the Bitbon System, the parties to a deal are solely Users.
In the Bitbon System, transparency of deals is ensured by the Bitbon System infrastructure.
Parties to a deal in the Bitbon System
A deal in the Bitbon System must be concluded in the appropriate form and by the relevant parties.
A deal is concluded as a distributed ledger token transaction in the Bitbon System.
The parties to a deal are Users of the Bitbon System Social Network, each having his/her own personal account[i]. The account data of the participants in the deal allow approving them as parties to the deal.
Status[i] and role[i] allow a User to make a deal through his/her account, and the Bitbon System infrastructure allows such a deal based on the principle of digital asset segregation[i].
Transfer of digital asset units[i] from one User account and acceptance of these digital asset units by another User account confirms that their owners agree to conclude such a deal.
In a deal where the object of a right is a digital asset unit as an instrument for implementing a method of disposal of property, accounts of Users serve as confirmation of their owners as parties to the deal. The deal is carried out by virtue of conclusive actions of the parties to the deal and does not imply any additional formalities.
In the offer agreement as a deal where the object of the right is property and a digital asset unit is a tool for implementing a method of disposal of property, the account of the User being an Offeror serves as an electronic digital signature, which confirms data on its owner as a party to the deal and his/her authorship of the offer agreement. Herewith, the account of the User being an Acceptor also serves as an electronic digital signature, which confirms data on the owner of digital asset units as a party to the deal (Acceptor) when digital asset units are presented to the digital asset owner to fulfill obligations under the offer agreement as well as confirms a claim from him/her to the other party to the offer agreement (Offeror) to fulfill obligations under the offer agreement and/or close the deal.
Activity in the Bitbon System
Activity in the Bitbon System Social Network are based on special statuses which are described and regulated by the Bitbon System Public Contract, which makes it clear and accessible to each User.
The distinctive feature of the activity is that the benefit from it may be received solely in digital asset units. At the same time, the category of “digital asset units” includes all types of digital assets as methods of disposal of property including financial resources, in particular via bank agreements.
In the Bitbon System, a particular type of activity corresponds to a special status and role, which determine the level of User’s access to the functionality of the Bitbon System infrastructure.
4. Conducting economic activity using the Bitbon System
The types of activity for the production of economic products and services that can be conducted using the Bitbon System Social Network[i] correspond to the types of activity that currently exist. The Bitbon System Public Contract does not contain any restrictions. However, restrictions on economic activity that exist in various countries apply to Users who are citizens of such countries and/or whose economic activity are regulated by the laws of such countries.
All legal relations carried out by Users in the Bitbon System Social Network where the object of the right is property and a digital asset unit[i] is a tool for implementing the method of disposal of property, should be considered as legal relations where the offer agreement on the disposal of property has deferred execution (the right to close a deal), including as a deferred payment. Such legal relations can be divided into two categories:
- legal relations where the result of the offer agreement on the disposal of property (exercise of the right to close a deal) is subject to mandatory state registration due to the status of the property and/or the type of activity (e.g., the agreement on the sale of a house);
- legal relations where such a result is not subject to state registration (e.g., lease of real estate).
Legal relations from the first category should be considered as an offer agreement of intent to conclude the main agreement on the disposal of property, which will be concluded in accordance with the requirements of regional laws. At the same time, the offer agreement must contain guarantees of liability for evading the conclusion of such a main agreement (for example, the agreement on responsible storage of property with its retention in case of violation of the terms and conditions of the offer agreement, insurance agreement, escrow agreement, etc.). Moreover, such guarantees can be provided by the functionality of the Bitbon System infrastructure[i] (e.g., collateral in the form of digital asset units).
Legal relations of the second category do not stipulate such guarantees since they do not imply conclusion of the main agreement on the disposal of property. Such legal relations can be carried out provided that they are “insured” by a certain number of digital asset units using the Bitbon System infrastructure.
When it comes to financial reporting in the Bitbon System Social Network, each User conducts business activity that do not depend on the activity of other Users.
5. Integration of the Bitbon System and the local economy
One of the objectives of the Bitbon System Social Network is the modernization of e-commerce, in particular accounting of products and services as well as all events regarding deals between Users using the functionality of the Bitbon System infrastructure, as well as accounting of Users’ digital assets.
The architecture of the Bitbon System Social Network envisages the role of a regional operator, which will perform the main functions in organizing e-commerce through the Bitbon System[i] in its assigned territory in accordance with the franchise agreement. The main functions of the regional operator include:
- assistance and protection of Community interests in a particular territory;
- verification of parties to legal relations carried out throughout a certain territory using the functionality of the Bitbon System infrastructure;
- carrying out activities aimed at implementing new methods of managing property and non-property rights using digital assets;
- interaction with local authorities;
- compliance with local laws when using the Bitbon System functionality;
- facilitating involvement of the Bitbon System services in existing mechanisms for the provision of public services in a particular territory;
- modernization of e-commerce in compliance with local laws;
- many other features that ensure full integration of the Bitbon System in a particular territory.
The main task of the regional operator is to create conditions for the development of the Bitbon System Social Network in the assigned territory in accordance with the franchise agreement.