Token Paper

Link to original document below https://drive.google.com/file/d/1zsetLT6mOGk_kWavq3m2oBY1xYCGq7IW/view

The Impact Token

Connecting DEFI to the productive and impact economy

A tool to decentralise governance and distribute the value of the ecosystem among all participants

A.- Introduction

EthicHub is a platform that connects small farmers’ communities with investors willing to lend them money and with buyers for their crops. Given the nature of the borrowers and that loans were denominated in the farmer's currency, the perceived risk was higher than the actual one: just a 3% default on group solidarity loans to small farmers, worldwide.

To attract more investors willing to lend money to farmers, the challenge lies into providing the system with a stable profitability, and such is the main objective of Ethix, the EthicHub token.

Blockchain, among other things, gave birth to Decentralised Finance (DeFi), which are impressive tools to a new financial system way more transparent and efficient, but until now its benefits were restricted to a very small universe of crypto investors . The Ethix is meant to act as a bridge between DeFi and the real economy represented by more than one billion small farmers in the world.

Even when operated without collateral for over two years, loans on EthicHub platform maintained a 0% default. By capitalising a Compensation Reserve with most of the Ethix, we will collateralise these farmers' loans, making their financing easier by reducing perceived risk while creating an incentive loop: more investors participating will make the Ethix capture more value, thus more value there will be in the Compensation Reserve, generating more security and therefore, attracting more investors, completing the incentive loop.

Based on the experience of these two years and the studies carried out in other countries, we can estimate a sustainable annual profitability in dollars of 8-10% for the lender. Depending on the country, the parameters of what farmers are charged will have to be adjusted.

Default and currency devaluation are not linear so it is difficult to get a stable profitability. EthicHub’s solution consists on offering two options: a low-risk investment product with an attractive stable return for such risk, aimed for a conservative profile lending the farmers (senior debt), and another product -the Ethix- that absorbs the variation in profitability for people who bet on the success of EthicHub.

Providing uncollateralized loans to hundreds of millions of small farmers is a huge opportunity and the main challenge was to have a reliable and competitive origination system like the one we have achieved: a sustainable and profitable solution to incorporate these small farmers into the global economy.

Ethix main objectives:

● Risk mitigation of default and profitability’s volatility. Except in case of Large Unexpected Events (Black Swans), the Ethix will be able to absorb the profitability deficit.

● Implementation of a decentralized governance system to facilitate value distribution among stakeholders and to allow interaction with DeFi systems.

● Expanding growth capacity of the platform by creating incentives for users who add value to the ecosystem.

Key Incentive Loop for Ethix

B.- Loan’s Smart Contracts

EthicHub has been providing access to affordable loans to over 250 small coffee producers in Chiapas, Mexico, for more than two years, with a 0% default. All loans are coordinated with the support of Nodos Locales México SAPI de CV and its spanish parent Lendingdev SL, which therefore acts as the first originator of loans in the EthicHub ecosystem.

These loans operate through Smart Contracts using xDAI, a stablecoin worth 1 dollar that operates its own blockchain on a second layer of the Ethereum blockchain. Once the Ethix is ​implemented, the conditions stipulated in the Smart Contracts will be: 8% annual interest for the lender, 4% for Lendingdev SL, and 4% for the Compensation Reserve (the parameters will be constantly adjusted in search of sustainability. In exchange for this contribution to the compensation fund, all the capital of the Compensation Reserve is made available to the Loan’s Smart Contract in the event of the originator not returning the money in the amount and term agreed.

The contributions of 4% of each loan is grouped in a Smart Contract that will

regularly convert the XDAI into Ethix, creating demand for Ethix (which is an ERC20 token on the first layer of Ethereum) in an Ethix / DAI pool in Balancer, destined for the Reserve of Compensation:

Once the funds required to guarantee the existing loans have been covered, the excess Ethix will be distributed among the Ethix holders who staked them. Ethixholders staking Ethix help secure the system by buying Ethix, taking them out of circulation and placing them as last-level collateral in case of default. In return, they will get discounts in the online store, better interests in the credit platform, they will be able to participate in governance and distribution of surplus Ethix not required by the Compensation Reserve. Furthermore, in the initial stages of the project, this action will be encouraged with Ethix reserved to stimulate the behaviors that add the most value to the system.

In the extraordinary event that the loans do not produce the minimum expected profitability, the Loan’s Smart Contract will liquidate automatically the Ethix needed from the Compensation System, allocating them to investors affected by said abnormality. The Compensation System design has 4 levels to be activated sequentially until covering the total amount of the loss plus interest for the lender, in exchange for the debt.

C.- First compensation level: Ethix from Originator Hubs

To be an Originator Hub for EthicHub, it is required to stake Ethix in the defined volumes, in addition to a due diligence carried by a specialized committee to validate the Originator’s capacity to attend new demand for loans, the risk of such loans and the positive impact for small farmers. EthicHub aims to bring money from the DEFI ecosystem to the real economy, which objectively produces an impact aligned with the Sustainable Development Goals promoted by the UN.

Originator Hubs’ Ethix are kept in guarantee as in case of default they will be the first to be liquidated tocompensate its affected lenders.

Lendingdev’s Ethix are available for loans originated by its business group. Other Loan Originator Hubs will need to buy Ethix on the secondary market in order to access the ecosystem.

D.- Second compensation level: the Compensation Reserve

When the Ethix staked by the Originator Hub are not enough, a Smart Contract will prompt the global Compensation Reserve to sell Ethix in exchange for DAI until the expected profitability is covered.

The Compensation Reserve is created with 50% of the original Ethix supply and it has the exponential capacity to satisfy the objective profitability of loans to farmers (increasingly resistant to large unexpected events -Black Swan Events-). The greater the volume of loans in the ecosystem, the greater the demand for Ethix, the greater its value and therefore the greater the capital of the Compensation Reserve.

We believe that in the future we will be able to obtain concessional capital interested in the impact of the project (Development Cooperation Agencies, foundations, large donors, etc.) which will buy Ethix to deposit them in this second level of assurance to increase the system’s confidence (with a double capitalization effect by increasing the number of Ethix in the Compensation Reserve and pushing the price up). This system would be a form of Blended Funding that grows exponentially in order to meet the SDGs.

E.- Third compensation level: Ethix staked by EthixHolders

EthixHolders can also contribute to mitigate the ecosystem’s risks by staking their Ethix. Their Ethix will integrate a third level of guarantee in the event that neither the Ethix of the Originator Hub, nor the Ethix of the Compensation Reserve were sufficient to cover default. In return they will get discounts, better interest rates when lending to farmers, and other benefits. They will be able to participate in the ecosystem’s governance. In the early stages of the project, part of these incentive tokens will be used to encourage this behavior.

F.- Fourth compensation level: Liquidity providers of Ethix / Dai pool in decentralized Exchange Houses.

Liquidity providers within the pool of decentralized Exchange Houses (with EthicHub / stable Cryptocurrency pairs), may choose to be part of the Compensation system as a fourth level, if they stake their positions within the pool (in Ethix and Dai) and receive in exchange same benefits than those participating in the third compensation level in addition to benefits received for being liquidity providers per se.

G.- Governance and the relationship with Lendingdev SL

Lendingdev is the group of companies that created EthicHub and the Ethix through the English company Connecting Defi Limited. It is a for-profit social enterprise whose business model generates a sustainable positive impact and whose mission is to help small farmers to get out of the Poverty Cycle, helping them to get cheaper and more accessible financing, and the possibility of selling their crops in international markets.

Due diligence of last mile small farmers is very expensive because of the small amounts they require and difficult access to the communities they live in. To achieve a sustainable business model, it must be based mainly on their crop commercialization, where the profit margin from exports compensates for the lack of margin on loans. Online loans are instrumental in creating a sustainable supply chain build thanks to this lending.

For loans, we propose a 100% decentralized ecosystem governed by the Ethix token. Lendingdev will be the first Loan Originator Hub, having demonstrated its capacity after two years with 0% default, but the decentralized governance, through a delegated Committee, will approve the entry of new players that need financing to grow their business model of positive impact for small farmers, buying Ethix to deposit as collateral.

The initial relationship between Lendingdev and the loan ecosystem supported by Ethix represents a challenge and a competitive advantage at the same time. We have been able to witness with Sushiswap's attack on Uniswap that 100% decentralized projects have very few competitive advantages to defend their position, however if someone forks from Ethix, they will find the challenge of developing an origination network of reliable loans, which, given the profile of the farmers served, needs to be built offline.

To align the interests between Lendingdev, its shareholders and token holders, 10% of the Ethix will be reserved by Lendingdev SL to be deposited as collateral to operate its loans or those of its investees.

In the initial stages, Lendingdev bears the costs of development, maintenance and promotion of the ecosystem supported by Ethix, for which it will charge a commission on each loan. Not depending on a token sale for financing the project is ​an advantage for Ethix since there are less tokens in circulation and the selling pressure is reduced. Over time we will work on a DAO to lead and take care of development costs and promoting the ecosystem so that Lendingdev can eliminate commissions and focus its business and effort on the supply chain orchestration.

Additionally, besides governing the parameters of the entire loan ecosystem, within Lendingdev's vision of a governance representing all the agents in the system (multistakeholder), token holders will have the ability to vote a representative on Lendingdev’s Board.

Main parameters for staked Ethix holders to decide will be:

-Profitability rates of the Smart Loan Contracts (initial target interest 8%). -Use of Liquidity Fund surplus (when it exists).

-Contribution rates of each Smart Contract Loan to the decentralized ecosystem (In principle 4%).

-Use of each loan’s contribution (in principle they will capitalize the Compensation Reserve).

-Use of gradually released incentive tokens.

-Election of a representative to look after the interests of the token holders on the Lendingdev SL Board of Directors.

-Over time, building a governance able to cover more and more aspects of the ecosystem.

H.- Ethix / DAI Pool

In order to give Ethix liquidity, LendingDev will contribute Ethix to an Ethix / DAI pool in Balancer with a composition of 80% Ethix and 20% DAI. The starting price will be 0.64 DAI / Ethix, a price that will begin to fluctuate based on supply and demand. Here is where the loans’ contributions are exchanged for Ethix to become DAI in case of default. This pool will be open to the public to buy, sell and provide liquidity. The price of the Ethix in this pool will be the price oracle for compensation in case of default.

I.- Ethix Distribution

100,000,000 (one hundred million) Ethix have been created in the form of ERC20 tokens.

Its main destination will be the Compensation Reserve (50%). This amount won’t be vested but will only leave the Compensation Reserve in case of deafult.

The rest will be distributed among the areas we consider to add more value to the Ethix development:

As said before, a 10% will be reserved for Lendingdev to align interests. What is not contributed to the Ethix / DAI pool will be staked to be used as collateral in case of default from projects originated by Lendingdev or its investees.

5% are already committed to members of our community who participated in the 2018 presale, and another 10% for the team and advisors who have worked on the project for years. Pre-sale tokens will be delivered with a 90-day linear vesting and tokens for the team will be delivered with a 4-year linear vesting starting after the first 90 days.

The rest of the Ethix are reserved as incentives to develop the ecosystem (25%). Only a small part will be used before decentralized governance is implemented. These incentives will be to encourage EthixHolders to participate in the governance of said DAO; for farmers; Local Nodes (field agents selecting and supervising projects); ambassadors; liquidity providers to loans and the Ethix / DAI pool; to finance new developments; to achieve partnerships that add value to the project and in general, for any destination that the community considers to add value to the ecosystem. These tokens will be gradually

released. 1% will be free to be used from day one in programs to give liquidity to Ethix, 5% will be vested for one year, 10% for the next 5 years and another 10% for the next 10 years.

The circulating supply will be 40% of the Ethix originally destined to freely circulate and gradually reaching the market along 16 years.

J.- Token utility

The main utility of the token will be to participate in governance.

Furthermore, the Ethix promotes behaviors that add value to the ecosystem by redistributing the network effect value creation among the agents who contribute the most to it:

-Users who lend to farmers (by staking Ethix they will achieve a higher profitability to be paid with Ethix as an incentive).

-By staking Ethix, users who buy in the online store will be rewarded with a special discount on their purchases in the form of incentive Ethix.

-All users who immobilize Ethix will be rewarded with incentive Ethix. -Users who provide liquidity to the Ethix-DAI pool in Balancer will also be awarded with incentive Ethix.

K.-Implementation

● H2 2020: Ethix distribution begins. Compensation reserve with 50% of the Ethix (with manual operation). Ethix / DAI Pool in Balancer. Incentive programs with Ethix. ● H1 2021: Automation of the bridge between xDai and Ethereum. Originator Hubs token staking system. Committee to select new originators. ● H2 2021: DAO is implemented to govern Ethix. Liquidity Pool

L.- Arquitectura

M.- Disclaimer

THIS TECHNICAL DOCUMENT HAS NOT BEEN REVIEWED OR REGISTERED BY ANY FINANCIAL SUPERVISORY AUTHORITY, NOR BEFORE THE FCA (FINANCIAL CONDUCT AUTHORITY), NOR THE COMMISSION NATIONAL SECURITIES MARKET OR ANY OTHER COMPETENT AUTHORITY.

The ETHIX Token (as defined below) is classified as a utility cryptographic asset or “utility token” (as defined below) in accordance with the administrative doctrine prevailing as of the date of this White Paper and, therefore, it is not classified as a “Security Token” under current Spanish and European regulations regarding the Stock Market or financial instruments. The Offer and the White Paper or White Book have not been reviewed or registered with any competent authority.

ETHIX tokens are assets based on Distributed Ledger Technology and are used as a means of digital exchange, unit of account and storage of value.

ETHIX tokens have been designed and structured as digital service access utility tokens and therefore do not serve an investment purpose. The ETHIX tokens do not entitle token

Holders to participate, directly or indirectly, in the capital of the Company, to vote or to receive dividends or interest payments. Consequently, an ETHIX token shall not be deemed to be the holder of any share, capital, convertible capital, shares, debt or hybrid instrument in the Company, or a right of option or guarantee on such corporate instruments. In addition, an ETHIX Token Holder will not have any preemptive rights, rights of opposition, drag, accompaniment, joint sale, or any other right of preferential treatment on any share, capital, convertible capital, share, debt or financing instrument in the Society. The only rights of the ETHIX Token Holder are the Utility Rights, the Platform Participation Rights and the Payment Rights contained in this White Paper, and the Terms and Conditions of any Token Contracting Agreement (as defined by below) that may be in effect. Consequently, ETHIX tokens are considered as "utility tokens", that is, Crypto-assets that provide a utility function of access to services, and therefore are not considered as a means of payment or exchange of goods and services , within the ecosystem in which they operate.

Neither the FCA nor the CNMV nor any other financial supervisory authority in any jurisdiction has reviewed, approved or registered this White Paper. Neither the FCA nor the CNMV nor any other financial supervisory authority in any jurisdiction assume responsibility for the content of this White Paper and do not make any representations regarding its accuracy or completeness, and express disclaimer for any loss arising from or based on all or part of the content of this White Paper or Whitepaper, including any loss produced by the investment in the ETHIX Token.

The offer to purchase the ETHIX Tokens under this White Paper has not been, and will not be, registered under the United States Securities Act, 1933, or under any federal or state law. of securities, and may not be offered or sold, directly or indirectly, in the United States of America, its territories or possessions, or any area subject to its jurisdiction (hereinafter the"USA". ) or for the benefit of, directly or indirectly, any US person (as defined in regulation "S" of the aforementioned Act). Furthermore, the Issuer will not be registered under the United States Investment Companies Act, 1940 and subscribers will not be entitled to the benefits set forth therein.

This White Paper does not constitute and cannot be used for the purpose of creating an offer or invitation to subscribe, purchase or acquire the ETHIX Tokens by any natural or legal person in any jurisdiction: (i) in which said offer or invitation is not authorized; or (ii) where the person making such an offer or invitation is not qualified to do so; or (iii) to any person to whom it is illegal to make such an offer or invitation. Accordingly, ETHIX Tokens may not be offered or sold, directly or indirectly, and neither this White Paper or Whitepaper, nor any advertisement or other offering material, may be distributed or published in any jurisdiction, except in circumstances that result in compliance. of applicable laws and regulations.

Persons in possession of this White Paper or the ETHIX Tokens must inform themselves and observe such restrictions on the distribution of this White Paper and the offering of ETHIX Tokens under it.

Since the ETHIX Token is not considered as a “Security Token”, the offer of ETHIX Tokens contemplated in this White Paper does not constitute an offer or request for transferable securities and, therefore, does not enter the sense of an offer of securities to the public within the meaning of the “Prospectus” Regulation (EU Regulation 2017/1129). Furthermore, the admission to trading of the ETHIX Tokens included in this

White Paper on a Distributed Registry Market or DLT does not constitute an admission to trading on a Regulated Market within the meaning of the “Prospectus” Regulation. Consequently, the Issuer is not obliged to prepare and register a prospectus for such purposes.

The offer of ETHIX Tokens to the public is subject to the terms and conditions contained in this White Paper. The Issuer reserves the right to modify the terms and conditions of this White Paper. Furthermore, in the case of pre-sale subscribers, the offering of ETHIX Tokens is made in accordance with the terms and conditions of this White Paper.

An ETHIX Token Holder will only transfer, exchange, redeem or otherwise dispose of the ETHIX Tokens, or grant interests or other rights in accordance with the terms and conditions contained in this White Paper and the terms and conditions of contracting tokens that may be in force.

The subscribers, as well as any person who has an interest in the ETHIX Tokens, will be deemed to have made the decision to acquire the ETHIX Tokens only after having read, received, and understood the content of this White Paper, and therefore only after having full knowledge of the information contained in this White Paper and, consequently, it will be considered that they have accepted all the and conditions established in this White Paper.

The content of this White Paper should not constitute or be construed as legal, commercial, financial or tax advice. Each subscriber must consult his own legal adviser, commercial, financial and tax advisers regarding the legal, commercial, financial, fiscal and related matters with this White Paper and the offer of ETHIX Tokens that are made in accordance with this White Paper.

It is the responsibility of anyone in possession of this White Paper to inform themselves of and observe and comply with all applicable laws and regulations. This White Paper is not intended to be, and should not be construed or construed as a document containing all the information that a potential subscriber may wish to know in the investigation of the Issuer and / or ETHIX tokens.

The statements made in this White Paper are subject to change and the Board of Directors expressly waives any obligation to update the White Paper.

The White Paper and the offer, sale or delivery of any ETHIX Token in accordance with this White Paper cannot have the consideration or implication of: (i) that the information contained in the Whitepaper is accurate and complete after its issue date ; or (ii) that there has been no material adverse change in the Issuer's financial situation since such date; or (iii) that any other information provided in relation to the White Paper is accurate at any time after the date it is provided or, if different, the date indicated in the document containing it.

The content of the Issuer's website or any website linked directly or indirectly to the Issuer's website is not part of this White Paper unless otherwise stated by reference in this White Paper. Also, app.ethichub.com and shop.ethichub.com are not part of this White Paper. Consequently, no subscriber should rely on any information or other data contained in such websites, or in such applications, as the basis for the decision to purchase the ETHIX Tokens.

The Directors confirm that when the information included in this White Paper has originated from a third party, such information has been accurately reproduced, and to their knowledge the Directors are aware of and are able to determine the information published by that third party, has not omitted facts that make the information reproduced inaccurate or misleading.

All of the Issuer's Advisors have acted and are acting exclusively for the Issuer in connection with the offering of ETHIX Tokens that are made in accordance with this White Paper and have no contractual, fiduciary or other obligations to the subscribers of the Token Holders or with any other person and, of all, they will not be responsible for any subscriber or holder of Tokens or any other person, anyone who is in relation to the matters described in this matter.

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