If there is one thing we could point out from the experience in the creation, growth and subsequent fall of Tree Farm Token, it is that when it comes to creating a digital asset linked to a real-world asset, all expectations can be buried when, within an alliance between companies, haste or lack of patience in unclear matters such as regulation before the regulatory body makes its presence felt.
The great environmental contribution of mahogany, together with its high financial value, positioned TREE FARM TOKEN as an investment opportunity with high profitability and important ecological and social impact. The viability for the development, exploitation and commercialization of a mahogany plantation, in twenty farms in the Dominican Republic, in the course of seventeen years was assured, then, what failed?
Let’s recap, and make an analysis of everything.
To understand what went wrong with the Company’s first intention, we must recapitulate, the value proposition of Tree Farm Token. The objective of TREE FARM TOKEN was to offer investors from all over the world the possibility to participate in an eco-sustainable project with high profitability and low investment risk. Tree Farm Token developed, managed and marketed a plantation of 2,600,000 mahogany trees on a 2,000 hectare site, divided into self-sufficient farms.
The project could be started because the company that owns the asset already had a 96-hectare farm and 100,000 mahoganies planted in the Dominican Republic, which we could consider as experimental. In this operation, the Company acquired valuable experience in land, crops and farm management in the country.
From this base we started to work on the configuration of the product. But to work on a digital representation of the product we had to check that the macro and micro data of the agroforestry operation was correct. To do this, there is nothing better than consulting with experts in this type of plantation before an audit. That’s what we did and we found the first problems among this triple alliance between companies. The numbers of the planting frame of the trees per square meter in the hectares of the farm did not fit, neither did the WTP of the tree, which is the diameter of growth per year. This meant that we were losing our high profitability.
This was adjusted through external audits and a lot of work by the whole team.
While we were adjusting the financial macro data, we were working on the product configuration, the TFT Token. To create the TFT token we had to conceptualize several prototypes until I realized, that if we wanted to have a product to sell legally to investors around the world, we would have to clone a legalized financial product into a smart contract. That is, implement these features of the traditional legal document into the smart contract.
De hecho, solo cuadraba uno conocido, el bono de deuda. Ya que la intención de Tree Farm Token era financiarse con el rendimiento de árboles futuros para el desarrollo de las fincas. Entonces había que crear un contrato inteligente híbrido en el que se contemplara la entrada de liquidez basada en deuda para después devolver el capital con intereses.
La idea era que a medida que se fueran cortando árboles y vendiendo al mercado, se irían repartiendo los dividendos entre los propietarios del TFT token.
While working on all this, we are working in parallel in the negotiations with the investment funds. While it is true that a security token in Europe or Spain, for example, is perhaps too advanced a product for investors, in the United States it is the investment funds themselves that come to you very interested in listing products of this type in their investor bases. So it was not difficult to close with an investment fund, quite well known but still confidential, the entry of Tree Farm Token in its portfolio of more than 20,000 investors, which claimed to raise about 30 million.
The gear had definitely worked, and everything seemed to be working.
Not only did we design one of the first intelligent hybrid contracts in the world, but we also created one of the first business models applied to asset tokenization: the intelligent contract and vault business model. If you need the smart contract code you can contact Alexis Texeiro through his Linkedin profile.
Until the due diligence started and everything blew up. The bureaucratic problems in regulating an underlying product in the Dominican legislation seemed incompatible with current U.S. regulations, and this affected the agreement between companies, as well as the route of the project.
Currently the Dominican company is working on restarting the conceptualization of the project under another name.
Here’s a video, so you can see how big the project was, and how sad it was to have achieved everything until we had to deal with the regulation.