Secret Trees Convertible Token (STCT)

What is Secret Trees Convertible Token

Abstract

Secret Trees is an industrial hemp producer that reduces supply chains and transportation costs for the hemp community. We create refined products by producing demand set through STU token, in our Latvian based factory, that can be distributed as per the token holders wishes. Business activities encourage the use of renewable and environmentally friendly materials to both individuals and existing hemp producers, who will now be able to rent land plots and or reproduce their hemp interest through the Secret Trees factory.

Current Hemp market problems

As with any supply chain, length is always a problem. A producer of hemp is only the first block in the supply chain, hence a producer needs a manufacturer to turn hemp into a hemp product, who in turn need retailers to distribute. This has led to an insufficient share of revenue for the total cost of product being paid to producers.

With the majority of the world's hemp produced in China, there is an uneven amount of supply across the globe. The poor quality of finished products from this region means that most of the output is used for hemp paper and textiles, hence, the quality of the current supply is limiting the use of hemp in other industries.

Legislation has been restrictive in this area. Due to the proximity of characteristics of hemp and marijuana, regulators have previously classed the two synonymously and restricted its production. Developing research in the area has prompted adapted legalisation of both plants across the world, with hemp production now legal in Canada the US and EU.

Entry costs to the market are high, in that land, machinery and workforce are to individual’s expensive assets. The requirement of upfront costs to partake in business activities is quite onerous for hemp producers too and with no futures contracts available for hemp, there is no protection.

Futures

What is a Futures Contract?

An agreement to buy a specific amount of an asset at a future time for a certain price. These contracts are generally set on standardised terms meaning they are fungible – contracts have common underlying assets and common delivery dates.

The Secret Trees Futures Contracts model (STF)

Hemp producers will be able to agree to buy hemp or hempcrete at a future date (once the factory is operational) for a certain price at the point of the Secret Trees ICO. This contract will be issued via the Secret Trees Exchange. Secret Trees Futures will be encoded in a smart contract, where the party to the smart contract is the token holder, allowing the Futures contract to be tradable.

Producers will be proposed with two option when purchasing Futures Contracts: Exchange Traded: Fungible futures contracts. Here contracts will have standarised terms issued by Secret Trees. Over the Counter: Non-Fungible futures contract. Here contract terms can be set by the producers as per their requirements.

The smart contract these futures shall be encoded into will lock in 3% of the agreed purchased, meaning at the time the contract is redeemable, the current STF holder will autonomously pay 3% of the contracts total value. All STF holders will be credit-rated so that the lock-in price will reflect the risk of the agreement with the individual purchasing STF. From this a prospective purchaser having defaulted on a previous agreement would have to purchase STF with a higher lock-in period (4%). The lock-in period will therefore increase by 1% on every default by a purchaser.

What is a Call Option?

The right to buy a specific amount of an asset at a future time for a certain price. This is a right, not an obligation, call option holders have the choice whether to exercise the right or not. The right afforded by call options is available via premium and may be tradable.

The Secret Trees Futures Contracts model (STF)

Hemp producers will be able to purchase a right to buy hemp or hempcrete at a future data (once the factory is operational) for a certain price at the point of the Secret Trees ICO. This right will be available via purchase of STCO Token through the Secret Trees Exchange. The STCO Token will represent a specific weight of hemp or number of hempcrete blocks depending on the purchasers requirements.

Producers will be proposed with two option when purchasing Futures Contracts: Exchange Traded: Fungible Call Option Tokens. Here tokens will have standarised terms issued by Secret Trees. Over the Counter: Non-Fungible Call Option Tokens. Here contract terms can be set by the producers as per their requirements.

The Call Option Token (STCO), will have a premium of 5% of the value of the overall contract. As STCO is a token, redemption is not obligatory and be redeemed on the redemption date through the Secret Trees Exchange. There is no credit-rating mechanism for this token, as credit defualt risk is covered by the premium.