A brand new crypto-currency launched to fund impact investment projects in developing countries logged and processed on the blockchain? “BOOM!”
Well, at least that’s how Good With Money’s collective brain reacted to news of the IMPAXTXO Coin, issued by Impact Earth, a Dutch start up with a revolutionary new idea to build low carbon, affordable homes for disadvantaged communities in Africa.
Resisting the urge to skip to something a little more comprehensible, though, we decided to pick up the phone for a leisurely chat with founder and CEO of Impact Earth Erik van Eeten who – with infinite patience – left us contemplating the equally infinite possibilities of this project. Could this be the future of impact investing? …. Read on to find out.
So, Erik, what on (impact) earth is this all about?
The whole idea is to help meet the United Nation’s sustainable development goals (SDGs). When you look at the SDGs, as well as the 2015 Paris climate agreement, its clear we need to mitigate climate change by reducing the global carbon footprint while creating more sustainable communities and improving peoples’ lives. We found that a good way – if not one of the best ways – to do that is to provide affordable houses to people in developing countries – which is what Impact Earth is all about.
We’re working with renowned architect DoepelStrijkers, who are experts in sustainable building. They came up with a sustainable building concept for affordable houses that means the production process has a lower carbon footprint in comparison to normal building methods. Also, by providing the houses in shells, they already introduce Co2 reduction and because the houses are insulated and include sustainable energy sources, they need less heating.
Ok, but why use crypto currency to fund this?
If you look at doing projects in developing countries the biggest problem you have is transparency; normally there is a very low trust level. International investors do not like to invest in these kinds of projects – even if the project is sound. With blockchain, you have an incorruptible central ledger that stores all transactions, making it an ideal tool to create more transparency to prevent fraud – this was why it was invented. If something happens on the blockchain it will stay there forever and everyone can see it.
We will use something called ‘smart contracts’. With these you can implement any kind of process that you can think of – you can buy or sell a house and the original owner can see the whole transaction. It will also help us to prove that these projects improve Co2 reduction. We are actually looking into the United Nations certification process that you can go through to get Co2 reduction certificates.
But what about the coins – how do they work?
The cryptocurrency component is in for two reasons. The first is, of course, to fund the projects with the money that we hope to raise with the issue – or initial coin offering (ICO) – of the IMPACTXO coin. The second is the tradable properties of cryptocurrency: once we have raised enough money we will lift the coin onto a cryptochain and then people can buy and sell the coins on the open market.
We will have two coins – the first is like a share certificate – it proves ownership of an investment into the company, is linked to the success of Impact Earth and can be traded publicly. The second – which the first gives access to – will be more like what would be called a dividend in the real world. With this currency, investors can either cash it in for hard currency (like US dollars, euros or pounds) with us, or spend it on other philanthropic projects on the website. We are also considering making it tradable, but we are not sure yet.
Why couldn’t you ask investors to give you money without creating a cyptocurrency? Crowdfunding, for example?
A number of reasons. The first is that we are in a new world and, as we are doing something on the blockchain, cryptocurrency fits with our vision. The second reason is that an ICO in an ideal way, and has been used by many other parties lately, to get attention and to do capital raising – it gives you access to a different market of people who are looking to invest professionally.
The third reason is, if you do this with an ICO, with cyptocurrency it is much easier to let people participate in smaller amounts because the administration costs are much lower. Therefore people can participate for as little as $10, for example, – if you do that in a normal way $10 would not be enough to cover administrative costs.
Finally, if you participate in crowdfunding there is no secondary market, so when you invest £100 into a crowdfunding company you are stuck to the £100 until the project ends. When you invest into a cryptocurrency, you are doing the same, but when the coin is listed on a cryptochain you can start selling your participation tomorrow and exchange it for something else, such as Bitcoin, if you want to.
What’s the return like?
We estimate that the return we can achieve is going to be around 10 to 15 per cent on loan-based investments, and for equity investments maybe even higher. We think an annual return of around 12 per cent is achievable. When we make these profits we will share them with the IMPACTXO coin holders. The plan is do to that bi-yearly.
Who do you expect to invest?
We have a strong affiliation with Africa as a developing continent, especially supporting philanthropic projects like orphanages and hospitals. Of course, these are not investments like our low carbon houses, but we think that anyone with an interest in developing Africa will be attracted to this project and should be encouraged by our track record. At the moment the social housing provided by the government is little more than sheds – we think we can do better – and turn a good profit.
We expect investors to come from Europe – of course Holland – but we are also hoping a lot of investors from the UK will be interested as the UK is much more progressive in terms of impact investment – it is the leader.
We also hope a lot of cryptocurrency enthusiasts will participate since this is a different kind of ICO, and we do have underlying assets. As we also have block chain underling the process – which gives complete transparency – we also hope to gain interest from more traditional investors who are looking to become more sustainable in their investment choices.
Impact Earth has now launched its Initial Crypto Coin Offering (ICO) on www.impact.earth. The ICO ends on the 31 January. Find the whitepaper at https://www.impact.earth/files/IMPACTXO_whitepaper.pdf.