FEET Tokenomics

Blockchain technology allows the ownership of Real World Assets (RWA) to be tokenized. By recording ownership rights on the blockchain, tokenization makes ownership independently verifiable and indisputable, while still allowing it to be transferred simply and reliably. This will reduce transaction costs and ownership disputes.
To achieve these advantages, we must build a bridge between RWA ownership rights and the blockchain tokens. Evidence of ownership of RWA may take the form of title deeds, in the case of real estate, or stock certificates and the shareholder register, in the case of companies. These instruments must themselves be tokenized, so their ownership follows the ownership of the tokens.
There are 2 ways to transfer a company’s ownership to the blockchain:

• • The company can be incorporated in a jurisdiction that recognizes companies represented by Tokens as an alternative to companies represented by Shares. Few jurisdictions offer this option, and those that do may have high setup costs and suboptimal tax treatment.
  • The company can have a single overseas Shareholder, which issues Tokens representing its rights as a Shareholder. Holders of these Token have only the unsecured contractual obligation of the Shareholder. Other claims against the Shareholder, especially secured claims, may interfere with the Shareholder’s ability to honor the rights granted to Token Holders. This issue can be addressed by making the Shareholder a trust whose trustee is licensed and has limited authority.

Instead, ICE is using a solution that can be implemented without changing the existing ownership structure: The Project itself will issue both Shares and Tokens,10 and Token Holders are granted a Distribution Right stating that dividends may not be distributed to Shareholders unless a matching amount has already been distributed to Token Holders. Specifically, the Distribution Right of Forest Edge EcoToken (FEET) Holders is that they must receive distributions equal to 3× as much as any proposed dividend payment to Shareholders, before the dividend payment can proceed. This effectively confers on FEET Holders the right to 75% of all dividends.

One of the greatest concerns of equity investors is dilution. No matter how confident an investor may be of a company’s ability to generate profits, the amount of profits attributable to the investor’s equity position can always be reduced, or even destroyed, by the issue of additional Shares with the right to share in those profits.

We have addressed dilution risk in the design of the FEET. Additional Share issues cannot dilute FEET Holders because the amount of distributions to FEET Holders is at least 3× as much as dividends to Shareholders, regardless of how many Shares have been issued. And, additional Token issues cannot dilute FEET Holders, because no more FEET can be minted.

Since FEET Holders have a Distribution Right, any purchase of the entire Project company would require the purchase of the outstanding FEET. Therefore, a party wishing to purchase all of the outstanding FEET may contact ICE and will be allowed to make an offer to all FEET Holders through the EcoWallet. If the Holders of a majority of FEET agree to this offer, the remaining Holders are obligated to sell at that same price, and the sale will be executed automatically in the EcoWallet.

Besides these rights, additional governance and decision making rights may be granted by management and exercised by FEET Holders in one of the following manners:

• • Management may send a question or other message to each Holder’s EcoWallet and tabulate responses.
  • Management may distribute limited purpose Tokens pro rata to all FEET Holders, which may be exercised, spent or otherwise used in order to express the Member’s preference on a decision making issue.
  • Management may form a DAO (Decentralized Autonomous Organization) and distribute Tokens issued by the DAO pro rata to FEET Holders together with instructions on how to use the Tokens.

The supply of FEET, particularly the addition of new supply, must be limited in an effective manner in order for FEET to appreciate in value. Cryptocurrency developers, in their Whitepapers, often allocate the total Token supply among various purposes, without mentioning the timing of new Token issues. This disclosure is typically accompanied by a pie chart.

In management’s view, this is not an effective way to manage market expectations of new supply. In the public equity markets, for example, it is the timing and amount of near-term new supply, or “overhang,” that concerns investors – not the issuer’s authorized but unissued Shares and how they might be used over an extended period.

Therefore, our approach is to limit the rate at which FEET can be Issued and added to the available supply, rather than limiting the purposes for which FEET will ever be issued. Forest Edge’s Liquidity Policy is set out on the following page.

Secondary market liquidity is a universal problem in any kind of funding drawn from a community. In a small market, it will eventually come to pass that there are no buyers. The offered price may then drop precipitously, and this discourages potential bidders from entering the market, resulting in a self-reinforcing downward spiral.

Forest Edge’s Liquidity Policy creates a secondary market repurchase fund to provide a regular and reliable source of demand for FEET. Whenever FEET are added to the supply, funding for repurchases is added, so as to mediate the effect of new FEET Issues. This policy will be implemented transparently, and the market will know that funds are available to Members who need to exit their positions.

We were concerned that when market conditions are good, simply adding demand to the secondary market may exacerbate the excesses of market enthusiasm. Therefore, the Liquidity Policy also provides that the buyback obligation will be temporarily suspended during any time that the secondary market price is above a predetermined Floor Price for the year. The intention of this suspension is to hold market support in reserve for use during downturns.

The Floor Price, above which the buyback obligation is suspended, is US$10 for 2024, US$11 for 2025, and increases by 25% each year thereafter. When funds are added to the buyback pool, ICE will post an offer on the ICE Bulletin Board to purchase FEET. When eventually there is an offer at or above the Floor Price that no one has accepted, the buyback exercise is suspended, and any remaining funds in the pool are held in reserve until the next market downturn. The following diagram illustrates a case in which FEET grow in value by 35%/year from mid-2024, thereby maintaining a secondary market value above the Floor Price, which grows by 25%/year.

• • Initial Offering Tokens – FEET offered in the initial fundraising Issue will be sold only for cash or stablecoins. 10% of the gross proceeds raised will be used or set aside to buy back FEET through the ICE Bulletin Board.
  • Founder Tokens – FEET Issued to each Founder Member is a one-time grant of Restricted Tokens and no further FEET may be Issued to Founder Members pursuant to this provision.
  • Supplier Tokens – FEET Issued to suppliers or service providers to the Project in lieu of cash payment shall be Restricted Tokens and are limited to 20,000 FEET per calendar year. 10% of the amount of the Issue will be used or set aside to buy back FEET through the ICE Bulletin Board.
  • CSR Tokens – FEET Issued to members of the community as part of the Project’s community outreach and corporate social responsibility initiatives shall be Restricted Tokens and are limited to 10,000 FEET per calendar year. 10% of the amount of the Issue will be used or set aside to buy back FEET through the ICE Bulletin Board.
  • Performance Incentive Tokens – FEET Issued to Management and Project staff as performance bonuses shall be Restricted Tokens and are limited to 30,000 FEET per calendar year. 10% of the amount of the Issue will be used or set aside to buy back FEET through the ICE Bulletin Board.
  • Strategic Investor Tokens – FEET sold at a discount to an investor or group of investors in a block of 100,000 or more are considered not to have been Issued. Thereafter the investor or group is considered part of ICE and any transfer of FEET by the investor or group must comply with this Liquidity Policy.
  • Market Operations – ICE cannot sell FEET on the ICE Bulletin Board or the Starworks Bulletin Board unless all FEET purchased and sold by ICE on such Bulletin Boards since inception, excluding mandatory buybacks, have not created any net addition to supply.

Rules About the Application of the Above Rules

• • ICE consists of Numada, YTHL, Waldstar and the Project company, plus any investor or group of investors considered as part of ICE under the Strategic Investor Tokens Rule.
  • An Issue of FEET is a sale, grant or transfer of FEET from within ICE to outside of ICE. The minting of EcoTokens by StarLabs and their transfer to ICE is not an Issue of FEET.
  • Restricted Tokens are FEET that cannot be offered or sold through the ICE Bulletin Board or the Starworks Bulletin Board at less than their market value on the date of Issue, or US$10/FEET, whichever is more, during the first 6 months after their date of Issue.
  • The obligation to buy back FEET is suspended when the value of FEET is at or above the Floor Price, as conclusively evidenced by an unaccepted offer posted by ICE on the ICE Bulletin Board which is at or above the Floor Price. The suspended obligation is carried forward and returns into force if the price subsequently drops below the Floor Price.
  • The Floor Price per FEET is US$10 in 2024, US$11 in 2025, and in each subsequent year is 25% higher than the year before.
  • FEET bought back pursuant to this Liquidity Policy may be re-Issued. FEET bought back pursuant to Forest Edge’s Buyback & Burn Policy may not be re-Issued.
  • The terms of Forest Edge’s Liquidity Policy can be adjusted upon one year’s advance notice disseminated to Members.

Besides the Liquidity Policy, ICE has adopted a Buyback & Burn Policy for FEET. In the monetary context, currency appreciation is deflation. Deflation is generally avoided by central banks, for the principal reason that deflation makes the principal amount of debt more valuable when it is repaid than it was when it was borrowed. However, when people invest in Tokens, deflation is exactly what they want. The opposite of deflation is inflation, which can be caused by adding to the number of Tokens in circulation, which results in a reduction in the value of each Token.

In modern corporate finance theory, stock buybacks are considered similar to dividends in that both deliver a portion of the company’s cash to its owners. Buybacks leave the underlying enterprise value unaffected (except for the reduction of cash on its balance sheet), while reducing the number of units into which it is divided, thereby increasing the value of one share.

In principle, buybacks deliver value to holders collectively, not only to those who sell, but to all holders through their effect on the secondary market. The stockholders who sell are those who place the lowest subjective value on owning the Shares, so that those who remain have a higher average commitment to buy and hold the stock.

Blockchain Tokens have a fixed supply imposed by the original coding of the blockchain which cannot be changed. This eliminates the possibility of inflating the supply by issuing newly created Tokens. However, as discussed above, the market will still be concerned about additions to the liquid supply because of distributions by the original developer from its Treasury account.

In response to this issue, it has become common for blockchain Token sponsors to manage supply by periodically reducing the total number of Tokens in circulation. Besides reducing the number of units into which the value of a business or project is divided, thereby increasing the value of one unit, Buyback & Burn may also have a positive effect on market sentiment.

Therefore, in order to precipitate deflation, the Project will spend 10% of its prior year’s Net Cash Flow on Buyback & Burn, in which it will purchase FEET through the ICE Bulletin Board and take them out of circulation permanently. Thanks to blockchain technology, Buyback & Burn transactions will be independently verifiable, and will be made irreversible by transferring the FEET purchased to a Burn Address, which is a crypto wallet from which withdrawals are impossible.

The size of the Buyback & Burn to be undertaken will be measured in the currency of the Project’s financial statements, and not as a number of Tokens. Therefore, the buyback will involve the repurchase of a certain monetary value of FEET, not the repurchase of a certain number of FEET. The Buyback & Burn Policy will proceed, assuming the Project is profitable, until 500,000 FEET, or 50% of all FEET minted, have been retired. ICE may extend or modify the Policy if and when this occurs.

Since burning FEET will have a greater effect on the market if it is announced and can be anticipated by Members, FEET will not be burned except pursuant to the Buyback & Burn Policy.

The size of the Buyback & Burn Policy, like other terms of the Policy, can be adjusted by ICE upon one year’s advance notice disseminated to Members.
The amount of the Buyback & Burn in each year will be announced no later than April 30 of that year, together with the release of financial statements. ICE has opted to base the size of the Buyback & Burn on its own net Cash Flow instead of its accounting net income for two reasons.

First, it is crucial that Project operations must generate actual cash flow, and not just unrealized net income, to fund the Buyback & Burn Policy.

Second, a change in accounting standards might cause variations or a dramatic change in the scope of the Buyback & Burn. If accounting standards require Treasury Tokens to be marked to market, for example, Project net income could vary widely in a way not directly related to the performance of the business, or in a way that does not generate cash flow.

Some Buyback & Burn Policies are fully automated using Smart Contracts. This may be practical when the business entity buying the Tokens is itself an exchange on which the Tokens are listed. While Buyback & Burn Policies may be automated to enhance their credibility, automation does not necessarily increase their impact. To maximize the positive effect of the Buyback & Burn Policy, ICE will allow the exercise of human judgment in the execution of the market purchases. In the opinion of ICE, human input in market execution is not a weakness in the Policy and does not need to be avoided.