4.5 TOKENIZATION PROCESS

Onboarding: Compliance with KYC and Investor Qualifications

The onboarding process for the Proton Token ensures that all participants meet strict regulatory requirements, fostering a secure and compliant investment environment. The steps involved are:

• KYC (Know Your Customer): Each potential investor must complete a KYC process, which involves verifying their identity through government-issued identification and other relevant documents.
• AML (Anti-Money Laundering) Compliance: Investors are screened against global watchlists and monitored for any suspicious activity to prevent money laundering and other illegal activities.
• Accreditation Verification: Depending on jurisdictional requirements, investors may need to prove their accreditation status to qualify for certain investment opportunities.
• Digital Identity Creation: Investors are provided with a digital identity (ONCHAINID) that ensures their credentials are securely stored on the blockchain, facilitating seamless participation in the token ecosystem.

Issuance: Deployment of ERC3643 Compliant Smart Contracts

The issuance phase involves the creation and deployment of smart contracts compliant with the ERC3643 standard, ensuring the security and regulatory adherence of the tokens. Key steps include:

• Smart Contract Development: Custom smart contracts are developed to manage the issuance, distribution, and compliance aspects of the Proton Tokens.
• Compliance Rules Integration: The ERC3643 standard allows for the embedding of compliance rules directly into the smart contract, ensuring that only eligible investors can hold or transfer tokens.
• Token Creation: Tokens are created and distributed according to the predefined allocation strategy, representing fractional ownership of the underlying real estate assets.
• Auditing and Verification: Independent third-party auditors verify the smart contract and token issuance process to ensure transparency and trustworthiness.

Servicing: Blockchain Management of Investor Information and Asset Tracking

Once the tokens are issued, ongoing management and servicing are conducted via the blockchain to ensure accurate and real-time tracking of all activities:

• Real-Time Cap Table Management: The blockchain maintains a real-time record of token ownership, providing an up-to-date cap table accessible to both issuers and investors.
• Automated Corporate Actions: Dividend distributions and other corporate actions are automated through smart contracts, reducing administrative overhead and ensuring timely execution.
• Transparency and Reporting: Investors have access to detailed reports on property performance, income distributions, and token movements, ensuring complete transparency.
• Compliance Monitoring: Continuous monitoring ensures that all transactions comply with regulatory requirements, with automated alerts for any discrepancies or violations.

Secondary Trading: Facilitation of Token Trading on Compliant Platforms

The ERC3643 standard facilitates secondary trading of the Proton Tokens, enhancing liquidity and providing investors with flexible exit options:

• Listing on Digital Securities Exchanges: Realproton Tokens will be listed on compliant digital securities Exchanges, enabling secondary market trading while ensuring regulatory compliance. Registered in USA and Europe, Asia and MiddleEast - In process.
• Peer-to-Peer Transfers: Investors can engage in peer-to-peer transfers of tokens, provided the receiving party meets the necessary compliance criteria.
• Market-Making and Liquidity Provision: Market makers are encouraged to provide liquidity for the tokens, ensuring stable pricing and reducing the bid-ask spread.
• Compliant Trading Ecosystem: The trading ecosystem is designed to comply with all relevant regulations, ensuring that only eligible and verified investors can participate in secondary market activities.

Lifecycle of a Tokenized Security The lifecycle of a tokenized security can broadly be divided into five stages:

• Deal Structuring: In the initial phase, the crucial factors include shareholder and asset categories, relevant jurisdiction, and applicable legislation. Before securing capital for a new venture, issuers often opt to tokenize previous transactions to enhance liquidity for existing investors.
• Digitization: Information traditionally in paper form is uploaded to the block-chain and encoded into smart contracts to issue security tokens.
• Investor Management: In the primary distribution phase, tokens are allocat-ed to investors in Exchange for capital, and investor details are recorded digi-tally.
• Corporate Action Management: Post-tokenization involves managing corpo-rate actions like dividends and shareholder voting, which can often be auto-mated using token-based smart contracts. This management persists until the token matures or is redeemed.
• Secondary Market Trading: The final stage, enhancing liquidity through to-kenization, occurs in secondary trading, where token holders trade on Exchanges or over the counter with other investors.