An interview with Sven Köksal, Founder of Blockchain Metal Company, about his project of utilizing blockchain technology in commodity trading by tokenizing industrial metals.
Blockchain Metal Company plans to tokenize Copper with their first product Cu Coin MBX; a negotiable electronic warehouse-receipt exchangeable for 1 Kg of Grade A Copper Cathodes stored in warehouses operated by Blockchain Metal Company.
Q1: What is your background and how was Blockchain Metal Company founded?
— I am a Law student in Germany and have been acting as a broker for transactions between buyers and sellers of industrial metals since 2017. Cu Coin MBX is the result of a combination of two thought experiments. On one hand my fascination with blockchain technology, in particular, self-executing contracts, eventually lead me to experiment with some concepts on how to tokenize physical assets in a legally secure way. On the other hand, I was looking for the best possible way for buyers of smaller quantities to be able to profitably invest in this asset class.
The combination of this eventually gave way to the idea and legal framework behind Cu Coin MBX, the most cost-effective and genuine way to invest into Copper, combining all market actors under one platform and asset.
I then began to build a team of technical and legal professionals, some student friends, and partners from past business ventures and together we started with Blockchain Metal Company and the following operational fine-tuning, marketing, and fund-seeking process.
Q2: What is tokenization of physical assets and how does it work?
— Tokenizing assets essentially means attaching ownership of any kind of physical or paper asset to a digital asset referred to as Token, through a legal concept.
Before doing this and marketing these assets to the public certain legalities have to be considered, especially when dealing with financial instruments classified as securities. Irregularities in the legal framework or ownership transfer procedure could lead to the tokenization losing its “effect”.
Q3: How does Blockchain Metal Company tokenize copper?
— For our token, we chose the legal framework of a negotiable warehouse receipt defined in the German Commercial Code. The Commercial Code explicitly states the possibility of electronic warehouse receipts with the condition that the system is secure. The required information for the warehouse receipt is embedded in the code of the token. Ownership is assigned to the holder of the receipt, so the owner of the wallet that the token is stored in. Physical copper is stored in our warehouses and handed out to the holder of the token in exchange for the token.
Q4: What benefits come with tokenizing assets?
— Tokenizing assets without giving the legal owner control of the actual digital asset disables peer-to-peer functionality and ultimately creates just another derivative.
If used correctly, and when I say correctly I mean decentralized; so not under custodial management and free to trade on decentralized exchanges and off-market, the token becomes a powerful tool especially in connection with smart contracts.
Self-executing contracts are programmed as “if, then” applications. For example: If copper is delivered then release the payment. Every smart contract on the ethereum blockchain requires a node to verify the physical world function, this link to the physical world is usually called “oracle”.
With Cu Coin MBX, a self-executing contract can be programmed in a way that both copper delivery and payment obligations of the contract can be executed and verified completely on the blockchain whilst the ownership for both assets successfully and formally change ownership.
And beyond that, of course, the more talked about benefits of decentralization such as cost and time efficiency, security, and transparency.
Q5: The technical superiority of your product is on hand. Are there any benefits in the operational structure of Cu Coin MBX in comparison to other financial instruments relating to Copper?
— Firstly our instrument is one of the most direct ways to invest in ready available copper. That’s what I meant with “genuine” in my answer to Question 1. A holder of Cu Coin MBX can at all times pick up her or his copper and make use of the physical properties that make it valuable.
The profit from the initial purchase and a 0.5% market value fee due on receipt of the physical copper covers all storage costs. So it comes with no ongoing storage fees for holders, which is very unusual for the kind of product we offer, like all other instruments, including crypto-assets backed by gold and silver, do come with some kind of monthly fee.
Furthermore, direct ownership of Copper creates reduced risks in comparison to derivative trading; no counterparty default risk imposed stop loss or take profit. If the counterparty to a contract fails to meet their financial obligations, the instrument may have little or no value regardless of the underlying asset. This means that a CFD trader could potentially incur severe losses, even if the price of the underlying asset moves in the desired direction.
Q6: Why do you suggest buying Copper out of all other precious and industrial metals out there?
— Rare resources, including industrial and precious metals, have always been an interesting asset class to invest in. Their scarcity together with growing demand as economies develop makes a logical reason to assume that their market value will increase with time.
Readers should always do their own research and keep in consideration that we are not in the business of advising on investments. However, the reason why we chose Copper is that we believe it is the metal with higher upside potential in comparison to other metals, such as Gold and Silver.
It has far wider industry application and is indispensable in construction, electronic products, and power grids. A metal that constitutes a viable alternative does not seem to exist and although it is a perfectly recyclable material and scrap copper is being used, the supply of new copper is predicted to decrease in the coming years.
Copper is an interesting investment for speculators who are optimistic about global economic growth. The USA with approximately 10 Kg per capita still consumes twice as much copper as China, the world’s second-largest economy. Both China and India will continue to upgrade their infrastructure and will consume more copper in the process.
Adding into the equation all the additional demand that electric vehicles and renewable energies will create in the next 15 years, Initial Token Offering investors are likely to sell their Cu Coin MBX for a significant profit in the not so far future.
Q7: Could you tell us more about your planned online exchange?
— With our Online Exchange, we are making sure that Cu Coin MBX users will be able to liquidate and trade their assets against USD, EUR, Bitcoin and Ethereum. It is set to launch either during or straight after the ITO depending on the performance. It will be a state of the art exchange with all that is required for smooth trading experience. Readers can find more information on the features in the Whitepaper and Website.
It is important to note that Cu Coin MBX will be open to trade on decentralized exchanges, and manually peer to peer. Furthermore, we will permit listing on other chosen centralized exchanges.
Q8: Will there be new products in the future?
As part of our expansion, new Cu Coin MBX will be sold at market price. We also plan to tokenize all other industrial metals as well as create products relating to recycled metal.
Readers with further questions are invited to get in touch with the team directly over Telegram ( t.me/blockchainmetal ) or over LinkedIn.
The Initial Token Offering of Cu Coin MBX will begin in 2020 however future clients may already register on metalbx.com and earn a 5 FMX reward worth 5 USD.