Launching Instant Access for Easy, Secure and Compliant Peer-to-Peer Transactions of SPiCE Tokens

WHAT IS INSTANT ACCESS AND WHY ARE WE LAUNCHING IT?

When we launched SPiCE VC, one of our goals was to provide our investors ways that will allow them to execute secure and compliant transactions with their digital securities.

This is why a year ago we became the first Digital Security to be traded on a regulated marketplace. We all hoped that the market will evolve faster than it actually did liquidity-wise, that existing marketplaces will outgrow the early product feature issues and lack of liquidity, and that more regulated digital security marketplaces will go live already in 2019. All this is, unfortunately, still yet to come. We believe that market liquidity will improve as well as that more live digital security marketplaces will go live within the next year or so.

In the meantime, we enabled a new feature on our site called Instant Access to provide more liquidity options. The new Instant Access feature, implemented by Securitize as part of their platform, allows our investors the opportunity to compliantly sell their Digital Securities directly to other investors with no counter-party risk and without paying any fees for the transaction.

In other words, the sale and payment for the digital security will be executed as an atomic trade, that adheres to all regulations, ensuring that no side of the trade comes out short-handed.

THE EXPERIENCE

By accessing a specific tab on the SPiCE dashboard, investors will see all available options for transferring (or selling) SPiCE tokens to others.

In addition to other secondary marketplaces options, Investors can now find also the Instant access option.

Instant Access solves the counter-party risk on personal peer-to-peer trades by ensuring that when a trade is arranged between a seller and a buyer, the buyer cannot receive the securities without paying the corresponding amount to the seller, and vice versa.

This is known as an atomic swap in blockchain terminology and it ensures that both tokens — the one representing the underlying securities and the one representing the corresponding payment (e.g., a stable coin like USDC) — complete the transaction or that the transaction does not happen at all.

This new tool solves this issue by allowing an investor to create an order to sell their Digital Securities in the form of a web link. This web link can be shared with the person they want to do the trade with by any means available, like sending an email or using a text message or publish it on a forum or bulletin board.

The Instant Access feature ensures that the trade complies with all relevant laws, and that the exchange is executed as one unit. Thanks to this, It is not possible for the buyer to not receive the SPiCE tokens nor is it possible for the seller to not receive the payment for the transfer.

EXAMPLE

Let’s illustrate the process with an example. Imagine that Anne, a SPiCE investor, wants to sell one SPICE token for $2 to Bob. She could do it this way:

Creating the SPICE Token Sale Order

• From her SPiCE investor dashboard, Anne can access the “Instant Access” tool and create an order for a specific trade. She selects the number of SPICE tokens she wants to sell and what she wants in exchange. In this example, she will send 1 SPICE tokens and then receive 2 USDC (a token that directly represents US dollars). The order can be restricted such that it is only able to be accepted by a specific counter-party (defined by their wallet address), but Anne isn’t sure of Bob’s wallet address so she leaves the order open (public order). The order can also have an expiration time, which Anne sets to 1 hour to ensure that it is not cleared at a point in the future in which the $2 price may no longer be appealing (if the SPICE value goes up to $5 in the next month, this order would not be active anymore even if Bob does not take it in the end).

The tool allows creating an order to sell securities for a defined price and restrict the counter-party or expiry time for it

• Anne must sign the order to confirm it, basically giving authorization for the order to be taken within the expiry time provided. She does this by hitting the “Create” button, which will guide her to connect her wallet. To use the Instant Access tool, the traded securities must be held in a compatible wallet, such as Coinbase Wallet, MetaMask or a Ledger hardware wallet. Anne is holding her SPICE tokens on a Metamask Wallet app, so she connects that one.

The Instant Access tool supports multiple wallet options

Once Anne chooses the Metamask Wallet, she will have to authorize its use.

• If this is the first time that Anne is using the Instant Access tool, she will also get a prompt to approve a transaction for the AirSwap Trader smart contract to take tokens from her wallet. This is only required once, and the authorization is managed so that it will only be effective when specific orders have also been signed by the investor.
• In both cases Anne is guided by the tool to sign the appropriate transaction and order using her Metamask Wallet.

The tool informs that a signature is requested and sent to the investor wallet

• Once Anne has signed the order, it is ready to be shared, using the generated web link, so she copies it and sends it to Bob via WhatsApp for him to complete the process.

The order is now ready and the link in the bottom ready to be shared

Taking the SPICE Token Sale Order

Bob receives the link via WhatsApp, and can access it to review the trade details and choose whether to take it.

This is the trade presented to Bob when following the link Anne sent him

But in order to accept it some conditions must apply:

• Bob needs to use a wallet that is registered with SPiCE VC (and if Anne had set a counter-party wallet when creating the wallet, that must be the specific address to use). Digital Securities require certain controls that involve proper KYC (“know-your-client”) process for holders. If Bob’s wallet has not been approved yet, the Instant Access tool will guide him through the process so he can be KYC’d. In our example, Bob passes SPiCE VC’s KYC and accreditation checks, and SPiCE VC authorizes his wallet.

A wallet not recognized will present this error, but clicking the button will send Bob to a website to authorize his wallet

• That same wallet must have enough funds to cover the trade. In this example, Bob should have at least the 2 USDC in his wallet to be able to pay for the SPICE token. Otherwise, the trade cannot be settled, and no asset will be changing hands. In that scenario Anne will not get the 2 USDC she asked for, but neither will Bob get the SPICE tokens. Also, if from the moment the trade was created by the Anne the SPICE tokens have been moved and are no longer available (which is possible as the order may have been open for days), Instant Access will also invalidate the trade. So it is not possible that the securities or the payment exchange hands without the other side of the trade exchanging hands as well. This makes this tool a secure way to transfer securities with no counter-party risk.

If Bob’s wallet does not have enough USDC to pay for the trade, he will be prevented from completing it

But in our example, all these conditions are met, and Bob can also sign his side of the order (in the same way Anne did it before, with any of the approved wallets) which will execute the trade. This will be processed by the Ethereum blockchain, and it can be checked in a block explorer that will reflect how both assets have been exchanged in a single transaction.

We can see how 2 USDC tokens and 1 SPICE token moved in opposite directions in an atomic way.

CONCLUSION

The security and ease of use of this new mechanism to trade SPICE tokens brings new opportunities for liquidity, while keeping the process safe and compliant.

Instant Access does not solve the “how do I find a buyer” issue, however, once a seller finds a buyer, this feature makes the actual peer to peer trade safe, secure, and regulatory compliant.

With further developments in the Digital Securities space, and with more Digital Securities exchanges/market places and OTC providers joining the ecosystem, more liquidity options will be added to the toolset available for SPiCE investors.