Attracting Financing for the Supply of Future Agricultural Products Using the Agrobon Platform
The existing practice of attracting financing for the supply of future agricultural products can be improved and scaled up using the proposed model based on the Agrobon platform by means of:
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concluding digital agreements and their tokenization;
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managing rights and obligations under an agreement on the supply of future agricultural products while recording all events in the Bitbon System distributed ledger;
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fast and reliable assignment of legal rights under an agreement (in one click);
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using an escrow account;
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expanding the capabilities of an escrow account due to the use of specialized services of the Bitbon System;
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concluding an insurance agreement;
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minimizing the efforts of Agricultural Producers to find and attract financing for the agricultural production.
The general model for attracting financing for the supply of future agricultural products using the Agrobon platform is shown in the diagram:
The model for attracting financing for the supply of future agricultural products using the Agrobon platform includes the following steps:
1. Public offer creation
The Agricultural Producer creates a public offer for the sale of future agricultural products on the Agrobon platform. This offer specifies all the necessary details, including price, volume, expected delivery date, obligations of the parties and consequences of non-compliance.
2. Public offer tokenization
Using the interface solutions and functionalities of the Agrobon platform, the Agricultural Producer tokenizes the public offer and creates a metacontract allowing buyers to accept this offer as well as manage their rights and obligations under it by means of accounting units while recording all events in the Bitbon System distributed ledger.
3. Buyer’s pre-order
Using the ad service, buyers accept the offer and place a pre-order for future agricultural products. This can be done by exchanging the tokenized right accounting units derived from the agreement on the escrow account containing funds for deferred payment under the pre-order for future agricultural products (hereinafter referred to as the payment accounting units) for the seller’s public offer metacontract accounting units (hereinafter referred to as the offer accounting units). The amount required for the Agricultural Producer is controlled and evaluated by means of payment accounting units received from buyers. In case of the lack of the required amount, the offer is considered not concluded, and a reverse exchange is made automatically: the buyers get back their payment accounting units, and the Agricultural Producer gets back the offer accounting units. If the required amount is available, an insurance agreement should be concluded for the offer to enter into force. It is important to note that all events related to such transactions are recorded in the Bitbon System distributed ledger, which significantly enhances the reliability of these transactions and minimizes the human factor and risk of fraud.
4. Concluding an insurance agreement
Before the public offer enters into force, the Agricultural Producer concludes an insurance agreement for the future crop for an amount equal to the amount of buyers’ pre-orders. This insurance policy protects both the Agricultural Producer and the buyers in case of unforeseen circumstances that may affect the harvest. Moreover, the existing practice of concluding agreements on the supply of future agricultural products in terms of insuring the buyers’ interests indicates the widespread use of the collateral model. This model is implemented by including the obligation to conclude a collateral property agreement (usually, with regard to the future crop) in the essential terms of the agreement on the supply of future agricultural products. In this respect, the Agrobon platform provides insurance coverage for the transaction, which consists in temporary technical blocking of the seller’s access to a certain amount of specialized software product, Bitbon software unit, owned by the seller (offeror) as collateral property.
5. Entry of the public offer into force.
After the required amount is reserved and the transaction is insured, the offer enters into force.
6. Transfer of the acceptor’s rights.
One of the public offer essential terms on the pre-order for future agricultural products is the offeror’s obligation to redeem the acceptor’s right to agricultural products within the specified period, and the acceptor should sell this right. In addition, if it is provided by the offer, the acceptor can exercise their right to receive agricultural products in kind. Furthermore, before the onset of the redemption period, the acceptor is entitled to dispose of their right at their own discretion through its assignment (i.e. to exchange, give as a present or sell it), but with the onset of the redemption period, this right is limited to the sale to the acceptor or the receipt of agricultural products by self-delivery. If the offeror fails to fulfill their obligations to redeem the acceptors’ rights, the buyers under the transaction insurance agreement will get their funds back.