Soybean tokens per agricultural machine

There are at least four definitions for "token". In agriculture, the term gained prominence with the announcement of an operation in which “a producer used ‘digital grains’ to acquire a tractor”. The explanation provided by the companies involved barely went beyond advertising. The idea of ​​this type of commercial operation can be excellent for producers. Or not.

The aforementioned operation occurred through the "transformation" of soybeans into (digital) tokens. These tokens are "backed by real assets" and "have identical value throughout the national territory, regardless of where and by whom they were issued, according to the price indexed in indices", informed the companies involved in the operation. They added that there is "parity", which makes it a "stable coin, that is, a low volatility currency".

One of the stablecoin is a type of cryptocurrency designed to maintain a stable value relative to a currency or asset, such as the US dollar, gold -- or soybeans.

Some stablecoins they are backed by fiat currency reserves or tangible assets, such as gold or real estate, which provide assurance of stable value. Others are created through smart contracts on blockchains that use price stabilization mechanisms, such as automatic adjustments to the currency supply or interest rate.

Its main advantage is that it allows users to carry out transactions with cryptocurrencies with less volatility. This is because its value would be related to the supply and demand of tangible assets -- unlike "traditional" cryptocurrencies.

In the case under analysis, apparently, the currency is backed by soybeans. One of the companies involved reported transforming "grains into a digital good to store or exchange for inputs, services and other possibilities". Its spokesperson added that the "digital asset is a fungible token that represents the value of soybeans and has soybean pricing."

He also said that the producer receives credits (tokens) when delivering the grain to the locations indicated by the company. From there, you become the owner of the digital assets. In turn, the company that issues the tokens becomes the owner of the beans.

Up to this point, except for the technological issue involved, the business consists of mere exchange. One part delivers soybeans; the other a “digital asset”. This concept is very old (thing for thing). Just as an example, in classic Roman Law, the institute was called "permutation". It was translated as barter; or exchange.

Doubts arise from there.

If the satablecoin is backed by soybeans or another grain, it is assumed that there will always be parity between the quantity of digital assets and that of physical grains. This raises several questions. For example, given that grain deteriorates, will the token issuer always be buying and selling grain without increasing the number of tokens to maintain parity? Who will bear the costs of these operations? Who guarantees parity? Is there an audit?

The passage of time makes managing this mechanism quite complex. Just remember that for many years country currencies were backed by quantities of gold. This mechanism collapsed due to the inability to maintain physical parity.

In any case, if the producer carries out a quick operation, acquiring and passing on the tokens, the risk seems small. Here comes another point of attention: tokens are only useful if someone accepts them in exchange for a product or service.

Real, in Brazil, has liberating power and forced course. The first means its possibility of being used to fulfill obligations. By delivering the adjusted amount, at the agreed time, place and deadline, the debtor is released from his obligation. The forced tender means the guarantee that the creditor will receive the real as a means of paying the debt. This is in the law.

These characteristics seem banal because of habit. But they are not. The creditor is not obliged to accept anything different in payment, even if more valuable. For example, in an absurd hypothesis, one cannot force the creditor of R$100 to accept a US$100 bill in payment. Likewise, one cannot force him to accept a "token", even if its suggested quote appear favorable.

Therefore, although a producer can oblige a legal entity to receive a certain number of reais as payment for a tractor, it cannot do so in relation to a quantity of "tokens". However, nothing prevents the concessionaire from accepting "tokens" as a means of payment. But this decision is liberal.

This leads to another question: will legal entities, especially those required to report to minority shareholders, usually accept this type of operation? Or only on occasions that generate free exposure for your brands in the press?

Reserve power is another important point in issues involving the maintenance of financial assets. It is about the ability to maintain its value, its purchasing power over time. The currency's reserve power is influenced by several factors, such as inflation, interest rates, political and economic stability of the issuing country.

Most assets tend to suffer large fluctuations in their reserve power, which can quickly reach zero under certain conditions. At this point, just remember what happened with Americanas shares (AMER3) in recent weeks. In mid-2020, the asset was traded at R$120,00; on January 11, 2023, at R$12,00; and on January 17th at R$1,17. There is no guarantee. The fluctuations are much more abrupt than what is usually seen with currencies issued by States.

Assets largely reflect supply and demand -- and confidence. Until a certain point in 2008, few imagined the possibility of the "housing bubble" in the United States bursting, which formed during the 2000s. At that time, many American banks began offering mortgages with low interest rates and easy terms for people who would not have access to these loans otherwise. These mortgages, known as "subprime", were granted even to people with a bad credit history or no proof of income.

These subprime mortgages were often negotiated with investors through financial instruments called "securitization." They were grouped and sold as debt securities on the financial market (derivatives).

However, many mortgage debtors were unable to pay the installments. This led to a large number of mortgage foreclosures and the devaluation of the properties that secured these loans due to oversupply. The fall in collateral, the value of properties, caused a crisis in the US real estate and financial market, which spread to the rest of the world.

Finally, the most important question that was not answered by the companies involved: when and how can the owner of a token convert it into reais?

The general conditions on the website of one of the companies involved include the warning: "[...] The User acknowledges and accepts that he uses the Website under his sole and exclusive responsibility. Each User knows and agrees to be solely responsible for their actions within the Site. The User knows and accepts that when carrying out operations through the Website he does so at his own risk. In no case will [company] be responsible for lost profits, or for any other damage and/or harm that the User may have suffered, due to operations that are carried out through the Website or using the technologies provided by [company], especially acceptance, negotiations, transfer and custody of virtual assets. [Company] will not be responsible for user interaction based on the trust placed in the system or the Site [...] ".

And he adds: "[...] Likewise, [company] will not be responsible for or guarantee compliance with obligations that users have assumed with third parties in relation to payments to be made or received through the Website. [...] In no case will [company] be responsible for direct damages, lost profits, or for any other damage and/or harm that the User may have suffered, due to transactions made or not carried out through the Site [...] ".

Finally: "[...] [company] does not guarantee the availability or continued operation of the Website and Services. Not all services and content in general are available in all geographic areas. [...] ".

Token definitions

What is a token? There are several explanations.

In information security, a token is a physical or virtual device that is used to authenticate a user. It is a mechanism that generates a unique, temporary password that is used to verify a user's identity.

In cryptography, a token is a sequence of characters that represents a value or an object. This value or object can be text, a number, a file, a cryptographic key, among others. The token is generally used to protect the privacy or integrity of the value or object by allowing it to be transmitted or stored without revealing its actual contents.

In blockchain technology, a token is a unit of value that is issued by an organization to represent a specific asset or utility. These tokens are typically based on standards like ERC-20 on Ethereum and can be traded on cryptocurrency exchanges.

In programming languages, a token is a sequence of characters that represents an element of the language's syntax, such as a keyword, an identifier, an operator, among others. Tokens are generally generated by the language compiler as part of the process of translating source code into executable code.

Clarifications from those involved

The companies involved in the operation were contacted for clarification. The website owner answered some questions. Asked about other aspects, she reported that the person responsible went on vacation. The bank of the tractor and harvester manufacturer did not comment.