This assignment is to be prepared by each student individually and accounts for 40% of each student’s overall mark for this course. The assignment consists of four questions. Students are required to answer all four questions. All questions carry equal marks. The assignment assesses students’ achievement of the ILOs of the whole course and particularly of Topics 10-15, which focus on entrepreneurial finance. The purpose of this assignment is to test students’ understanding of entrepreneurial finance including innovative financing methods such as initial coin offerings (ICOs).
V1.0 October 2018 LakeDiamond ICO – White Paper 2 | | LakeDiamond Table of contents 1. Introduction P.3 1.1 Problem overview P.4 1.2 The solution P.4 2. Growing diamonds P.4 2.1 LakeDiamond’s technology P.4 2.2 Diamond seed P.5 2.3 Time P.5 2.4 Quality assessment P.5 3. Initial coin offering P.6 3.1 Why the blockchain? Why an ICO? P.6 3.2 Collaborative production P.6 3.3 ICO P.6 3.4 Token metrics P.7 4. LKD Token P.8 4.1 Description P.8 4.2 Conversion P.8 4.3 Transparency P.9 5. Full project description P.9 5.1 The e-commerce website P.10 5.2 LKD platform P.11 5.2.1 How does the platform work? P.11 5.2.2 Smart contract order life cycle P.11 5.2.3 Order book dashboard P.14 5.2.4 Order filling mechanism P.15 5.2.5 Payment to token owner P.17 5.3 Proof of production P.18 5.3.1 “Trust” model of the reactors P.18 5.3.2 Verifiable logging of reactors’ activity P.18 5.3.3 Key ceremony and revocation processes P.19 5.4 Audit P.19 6. Roadmap P.19 7. Tokenomics P.20 8. Disclaimer P.22 3 | | LakeDiamond 1. Introduction LakeDiamond is a Swiss Company that grows diamonds and transforms them for high-value industrial applications. These diamonds, manufactured at its local laboratory, are ultra-pure – at least 50 times more pure than mined diamonds. Purity is essential because the purer the diamond is, the greater its versatility and performance for industrial applications. The exceptional qualities of diamonds – their hardness, transparen- cy and supreme thermal properties – make them an advanta- geous alternative to the materials currently used in many industrial applications. Diamonds have the power to revolutionize energy management, telecommunications, medical and computer science – driving considerable improvements in efficiency, productivity and value. LakeDiamond has the proprietary growth and transformation technology to fully capture the potential of ultra-pure diamonds. Today, the Company transforms diamonds into micromechanical parts for the Swiss watch industry. LakeDiamond is also develop- ing diamond-based lasers and has embarked on research into diamond transistors. Its long-term vision extends to R&D of diamond-based semiconductors and biotech applications. Below is a list of important definitions to better understand the rest of the document: Growing diamond: the action of producing physical diamonds in the reactor. This controlled process is realised in laboratories and described below and in the business presentation. Industrial client: it is LakeDiamond’s final client or end customer that makes a purchase with the company via its online shop or directly from LakeDiamond. At first, this will be limited to diamond plates for high tech implementations, as described in the business presentation. LKD token owner: it is an Ethereum address which can send and receive time-based tokens (LKD). For the purpos- es of this paper we use the term LKD owner to describe addresses instead of physical owners (i.e. the person that holds the private keys). All authorized Ethereum addresses will be identified via KYC procedures. In this context, we use the term owner to describe the physical owner of LKD and the Ethereum address. LakeDiamond offers a collaborative diamond growth experience – a cooperative in which token owners can exchange LKD tokens (time-based machine tokens) for actual machine time (1 LKD = 1 minute of production time) in LakeDiamond’s diamond-growing reactors. 4 | | LakeDiamond 1.2 The solution The LakeDiamond team has over 15 years of extensive knowl- edge in growing diamonds and has developed unique proprie- tary reactors for this exact purpose. An estimated CHF 10 millions was invested in the development of these reactors to reach an industrial version and are now ready to be duplicated in order to reach scale for mass production. LakeDiamond now opens the possibility to collaboratively produce diamonds to expand its production capacities and access new market opportunities. This innovative mining technology, which LakeDiamond is pioneering, also remotely connects ‘token owners’ to our lab-based ‘diamond growth reactors’ 24/7, from the convenience of their computers. For full details on what the reactors do or what these diamonds are used for, please refer to the Business Presentation – this white paper will list token specifics and explain the purpose of the project’s blockchain implementation. 1.1 Problem overview Building diamond growth reactors is extremely costly and requires heavy investments. In order to seize the most promis- ing markets, LakeDiamond needs to reach a critical production capacity. Raising capital through equity sale would imply giving away control of the company, and could have deep implica- tions on the targeted markets. The team in place wishes to address civilian applications only, while high-purity diamond is mainly used for military applications. 2. Growing diamonds 2.1 LakeDiamond’s technology LakeDiamond’s proprietary technology derives from MicroWave Chemical Vapor Deposition (MWCVD), consisting in the growth of diamonds by building a carbon atom lattice, layer by layer, using only a gas mixture and electromagnetic radiation. The initial development of MWCVD diamond processes goes back to the late 80s. The growth takes place on a starting material; a high-purity diamond seed (thin diamond plate). Before the gas mixture is admitted into the reaction chamber, all the potential contami- nants are removed by performing a high vacuum. The growth process is carried out in a perfectly controlled atmosphere, with pure gases. As a result, LakeDiamond can produce a consist- ently engineered, ultra-pure and optimum quality diamond as required by high-tech applications. Indicatively, LakeDiamond’s reactors can grow 20 rough dia- monds of 6mm x 6mm base size simultaneously. It takes about a month to grow a 4mm thick layer, leading to diamonds of roughly 3 carats each, in the same batch. Multiple reactors can be operated in parallel in one single factory. One LKD token represents one minute of growth of one diamond in one reactor, not the entire batch. In this paper we describe the process of growing one single diamond. 5 | | LakeDiamond 2.2 Diamond seed Diamond products’ size is driven by the size of the seed and the growth time. The following scheme and its metrics represent the area occupied by each diamond in the growth chamber. The larger the seeds, the fewer the number that can be arranged on the substrate holder in the reactor’s growth chamber. An LKD token integrates area unit/seed in its price calculation. Influence of seed surface on number of diamonds per batch 0 12.5 25 37.5 50 Nb of seed(s) per batch Seed surface (in mm2) 0 75 150 225 300 Diamond reactor Chamber Substrate holder Seeds 2.3 Time During a growth, the thickness of diamond increases with time. Growth rate, meaning the speed at which diamond thickness increases, mainly depends on reactor performance and diamond purity. As a consequence, the number of LKD tokens used to grow a diamond of specific thickness may vary. Indicatively, a diamond dedicated to micromechanical applications will grow at a rate of 10µm/h, while the purest diamonds, with specific properties, will grow at a rate slower than 1µm/h. It should also be noted that the time needed to grow a diamond may evolve with productivity improvements. The faster LakeDia- mond is able to grow a diamond, the less LKD tokens that will be required for the same output. 2.4 Quality assessment After the growth, all diamonds are thoroughly checked with state-of-the-art characterization tools in order to match industrial clients’ expectations. Only the diamonds that pass these tests are accounted for and displayed on the LKD platform. Dr. Ioulia Tsvetkova performing X-ray diffraction on LakeDiamond samplesNI C O LA S RI G H ET TI Growing diamonds 6 | | LakeDiamond 3. Initial coin offering 3.1 Why the Blockchain? Why an ICO? Blockchain can bring huge benefits to industrial companies such as LakeDiamond: collaborative production, traceability and frictionless payments. From October 2018, the Company launches an initial coin offering (ICO). The goal of this operation is to allow for a collaborative production of diamonds in LakeDiamond’s factory. The ICO gives the possibility to acquire minutes of diamond production in the form of tokens. By doing this, token owners can take an active part in the story of LakeDiamond. Token owners can therefore directly capture a part of LakeDiamond’s turnover. Shares, in contrast, provide dividends, that depend on company policy. 3.2 Collaborative production An estimated CHF 10 million has already been invested in setting up a first diamond growth reactor and R&D on novel diamond-based devices. The ICO constitutes an opportunity to avoid further dilution, as LakeDiamond’s founders wish to remain in control of their company to preserve their core values. Today indeed, diamond is mostly used in military applications, while LakeDiamond only addresses civilian markets. During the ICO, whitelisted contributors will be allowed to purchase LKD tokens which represent one minute of reactor use. After the ICO, approximatively two weeks of checking will take place, to ensure no foul play or irregularities occurred during the crowdsale. Tokens will be released to all token owners that will then be responsible for manually withdrawing them. All token owners will be notified by email. Withdrawal requests will only be issuable from the Ethereum addresses registered during the contribution stage. 3.3 ICO Duration: October 22, 2018 – February 15, 2019 Token Name: LKD Total token supply: 141,120,000 tokens Minimum purchase per address: 60 LKD (1 hour of production) Accepted currency: Ether, Fiat (CHF/EUR) via Swissquote Bank Token emission price: CHF 0.55 Distribution: Will take place 2 weeks after the ICO. Once the period elapses, investors will be able to manually withdraw their tokens as per instructions on