Redcurry may seem similar to classical RE funds, as Redcurry is investing in the same type of property: commercial real estate. However, the investment strategy of Redcurry has a different aim: we are not trying to maximize the return in a certain period (RE funds usually have a 5 to 10-year investment period) but to optimize the portfolio and management with the conditions to minimize the volatility of the net asset value growth and outperform the long-term Euro inflation. Redcurry is not an investment, like a RE fund, but a store of value and means of payment, like fiat money, should be.
RE funds are (almost) non-fungible, not divisible and typically have a fixed investment period. Meanwhile, Redcurry is fully fungible, fully divisible and can be held effectively endlessly. REITs are essentially stock-listed RE funds and are thus affected by the volatility of stock markets, on top of any real estate market volatility. Redcurry, in contracts, is designed to minimize volatility and serve as a store of value.
The fundamental concept of Redcurry is to create an alternative means of payment that appreciates in value without making it a security. To disqualify as a security, the Redcurry token must be completely independent of the assets backing its value. Therefore, the holder of the Redcurry token has no rights to the real estate tied to the token.
According to the EU Financial Instruments Directive (MIFID2), Redcurry does not fall under the definition of a security. This has also been confirmed through an extensive independent legal review. As Redcurry is not a security, it could be considered entirely unregulated, like a utility token. That said, we do not intend to keep Redcurry outside any regulated markets.
Redcurry is meant to be an alternative to legal tender and therefore is an instrument of payment. Instruments of payment are regulated as well, not by securities acts like MIFID2 but by banking sector acts. Redcurry is designed to fully comply with such banking sector regulations and is therefore distributed only through financial institutions licensed under the applicable banking sector acts.
Redcurry does not have a say in what any property in its portfolio is worth. Instead, the whole system is based on objective facts. Each property acquired by Redcurry is recorded at the actual cost level of the acquisition, data which is audited and made public by Redcurry, so that anyone can verify the correctness of the data. This purchase price or Original Acquisition Value (OAV) is thus not an opinion but a fact.
Subsequently the OAV is tested every year against external independent professional market valuations of each property (RICS standard). If the market valuation shows a higher value than OAV, nothing happens, as the intention is to not reflect short term market volatility in the net asset value (NAV) of Redecurry. Only if the market valuation shows a lover value than OAV, then an OAV Impairment (OAVI) is applied for as long as the market price is below OAV.
By this method, the NAV becomes a completely objective fact, as none of the components of the NAV of Redcurry can be influenced at will by Redcurry, and all components of the NAV are being audited by external auditors.
Beyond the external audits, anyone interested in the NAV of Redcurry will be able to track the components of the NAV on-chain and through the Redcurry website. OAV and any subsequent increase through investments are facts recorded in the accounting and made public by Redcurry. Buying a property in a calendar year will be reported in that year’s annual report as an asset, with the original acquisition value. As Redcurry’s annual report is made public, anyone can cross-check this information. There is no room for manipulation.
Minimizing volatility of the Redcurry token is a key performance indicator for the management of Redcurry. Therefore, there is no motivation to e.g. overpay the market when acquiring a property, as with the first external valuation immediately an OAV impairment would become necessary and the NAV would go back to the actual market values. The management of Redcurry is thus incentivised to rather buy undervalued assets than overvalued assets.
Common fallacies in understanding real estate:
- Commercial real estate performance fundamentally comes from the rent income, not the price change (residential real estate behaves differently). Redcurry is taking that principle to its core and tunes out short-term fluctuations of market prices and focuses on generating cash-flow, which increases the NAV.
- To maintain the value of a building, one must also invest into it. Such investments will be recorded in the OAV, and therefore OAV will not remain the same forever. Over a period of 10-20 years, such investments can amount to up to 20% of the OAV. Thus, the actual OAV will always be higher over the years, however the increase will come from cash-flow generated and invested, and not from market fluctuations. Still, the market valuation will be tested against an increasing OAV and thus any higher OAV will always be objectively tested against the market.
Redcurry is designed to be non-inflationary, stable and resistant to fiat currency inflation, which requires it to be appreciative compared to its reference currency (Euro). For stability alone, linking to a physical long-term fixed asset that does not perish would already suffice. But commercial real estate provides several more benefits.
First of all, commercial real estate generates income from renting, and this income is not depleting the original value of the real estate. Compare that to precious metals that generate no income but cost of storage. As the income generated from renting stays in the Redcurry system and is used for acquiring more real estate, the value of Redcurry is continuously increasing, even when the value of the underlying assets remains unchanged.
In addition, the rent income generated by commercial real estate is typically indexed to an index reflecting inflation (in Europe typically the HCPI – Harmonized Consumer Price Index – as published by Eurostat). Therefore, in times of inflation the income from commercial real estate is increasing correspondingly, which in the case of Redcurry means that the NAV is growing.
More than that, as the market value of commercial properties mostly is driven by the rental income generated by that property, an increase in rent income also leads to a higher market value of the property. This means that in times of inflation also the value of the properties start to rise, and that’s why commercial real estate is a shield against loss of value caused by inflation.
Redcurry’s mission is to enable global access to stable hard money – a true store of value.
Currynomic’s vision is to become a key provider of truly stable digital currencies and a store of wealth for open finance.
The fundamental concept behind Redcurry is to create a currency – a means of payment that appreciates in value – without making it a security. Therefore, to disqualify it as a security, the Redcurry token cannot give token holders any rights to the assets backing its value.
Redcurry holders do not own any real estate. The RE portfolio backing Redcurry acts mainly as a safety mechanism. If, for any reason, Redcurry fails or ceases to exist, all the real estate in the portfolio will be liquidated, and all tokens in circulation will be repurchased at the net asset value!
The legal requirements for pegging Redcurry tokens to the real estate portfolio’s net asset value (NAV) are enforced technologically by our open-source asset tracking smart contracts (ERC721) deployed on the public blockchain. This is done using institutional digital asset operations software, MPC wallet management, access control and identity access management, and smart contract management.
Redcurry is also planning to integrate with oracles for AML and KYB checks as well as for price, supply and NAV feeds.
In addition, Redcurry’s publicly available asset explorer dApp, a Web3 window into our on-chain assets, and the open-source nature of every smart contract bring public transparency to our token pegging and treasury asset management activities.
Redcurry asset reporting infrastructure is built on an EVM-compatible public blockchain.
Decentralization is a spectrum and a process. All projects and companies in the DeFi space are somewhere on this spectrum. When it comes to Redcurry, we have many elements, some more, some less decentralized.
Redcurry has a specific underlying legal structure, and its asset reporting is done on a public blockchain. That alone is, of course, not enough. We need to look at the source of data and decision-making.
Elements creating levels of decentralization to Redcurry are the following:
- Asset management: treasury assets are reported on blockchain by asset managers belonging to separate organizations across geography and countries with independent interests, goals, and liabilities – decentralized actors. Currynomics develops the technology and interfaces for this to happen.
- Redcurry’s commercial real estate investments will be diversified and divided between geographic and political areas. All in Eurozone for now.
- Decisions are governed by the Foundation (ownership renounced), third-party auditors, Currynomics DAO, and Oracles with their auditors. Redcurry is governed by the Currynomics Foundation. Decision-making must ultimately be consistent with the foundation deed. In addition to those mentioned above, all information related to Redcurry decisions, and its assets, is publicly auditable.
Redcurry also has levels of centralization. Namely, the current setup of the legal structure and architecture is based on the decisions that the founding team and our stakeholders are making. Having said that, our goal is to lay the legal and technological foundation that allows us to move towards higher levels of decentralization – i.e., strong DAO governance.