Tokenizing and Timelocking Collateral Shares for Loans on Ethereum
Looking ahead 🔭 CodeX FutureLaw Conference 2019 // https://conferences.law.stanford.edu/futurelaw2019/ ⚖️
To close out March 📕, we saw how Ethereum token smart contracts embedded into bankruptcy filings might help track and facilitate assignments of these claims in secondary markets with tools available on legal engineering platforms like OpenLaw.io.
For another legalhacking demo to kick off April 🌱, let’s use similar programs to quickly (i) tokenize uncertificated shares for a Delaware Corporation, and (ii) deploy a custom “timelocked” escrow program for these shares to secure a loan agreement (🏵️/⏲️/ 🏦).
Step #1: Execute Delaware Inc. Package (+) Generate Tokenized Shares on Ethereum
Pop into “Flow” Questionnaire 🌊 that automates drafting for standard Delaware corporation formation documents derived from * market * Orrick’s Startup Library:
(Tokenized) Authorized Shares Details:
Board Organizational Resolutions (Delaware):
. . . finishing up with details on Founders’ vesting schedule . . . .
Initial Stock Purchase:
We can then execute this Delaware incorporation package and scope our new tokenized shares in the mobile address I provided earlier:
👀: 📲
- Not too bad, right?
Step #2: Generate TimeLocked Wallet to Escrow Tokenized Shares as Loan Collateral
Next, turn to this template Promissory Note and Loan Agreement that has an embedded call to the TimeLocked Wallet Factory generously deployed on Ethereum (Rinkeby testnet) by Radek Ostrowski.
Among other things, this program will allow us to execute a loan agreement for our newly drafted/tokenized Inc. and simultaneously deploy a custom wallet for the Lender to hold our tokenized shares as collateral — only claimable once the agreed “timelock” runs out.
Modeling off a public deal filed with the SEC, we set December 2, 2019 12:00 p.m. as our sunset: if Borrower satisfies their payment obligations, Lender will return these shares . . . otherwise, Lender will be able to claim these ERC20s (without interruption!) per underlying loan agreement:
Loan Agreement and Promissory Note (Token TimeLock):
Execution . . . 🗡️
Reading details from new timelocked wallet via Remix: https://rinkeby.etherscan.io/address/0x1cc66f1de5c350056975d574a40fd266dd27a250
Our [unlockDate] programmed via OpenLaw form also looks good!
Roleplaying as BORROWER here, I can then lock the “Collateral Shares” specified in the loan agreement into this new TimeLockedWallet from my phone:
Now . . . the ‘Collateral Shares’ we generated earlier should be locked up until December 2, 2019 (I guess we shall see!):
Wallet address on Rinkeby: https://rinkeby.etherscan.io/address/0x1cc66f1de5c350056975d574a40fd266dd27a250
Onward! 🎩
For more details on drafting: see following links to templates executed in this demo:
- Incorporation ⛓️ 📜
- Loan ⛓️ 📜
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Update 4/3: Using TimeLockedWallet for Founder (Tokenized) Share Vesting //
Using the same smart contract factory from above, we can also quickly extend the use of TimeLockedWallet to help program and secure the initial vesting of Founders’ shares represented as ERC20s . . .
Take a look at this tweaked Delaware Incorporation (master) form that now includes a call to generate a TimeLockedWallet for 25% of a Founder’s portion of their Company’s tokenized shares, set to unlock and be claimable by that Founder’s Ethereum network address on April 3, 2020:
See VesTests Inc. tokenized shares here: https://rinkeby.etherscan.io/token/0x0271c8492c6df52fdeeab0ecab33509103c6bd70 (and track all movements, locations!)
TimeLockedWallet reads 👌 from details provided from OpenLaw form . . .
Can then send tokenized shares from phone to this vesting TimeLockedWallet 📲 ⛓️:
Scope out the vesting wallet here (now we wait a year . . . ) 🔭 ⏳ ⏳ ⏳
https://rinkeby.etherscan.io/address/0x4265fafa8417777bbb3741402e2cab337e5533c6 / . . . . . /
Hope this was a helpful elaboration! Look forward to exploring more to do with tokenizing and programming corporate assets ~~~
