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Abstract

Swarm’s governance-first model has been designed to bring $1  trillion in real assets into the blockchain world by creating a  platform for regulatory engagement and a fully compliant legal  container for highly profitable and scalable investments.

As with other highly successful network models like Visa, our  infrastructure is fully accessible and entirely governed by its  community members. We use a token-based, stake-weighted,  liquid democracy system to provide both an early adopter incentive  and input into long-term decision making. This is augmented by a  reputational system, which helps streamline capital deployment  and allow a fusion of human and artificial intelligence.

We launch with multiple partner funds (distressed real estate, art,  renewables, hedge funds) who have already deployed $100mm+  with 30+% IRR and team members who have built platforms  that handle over $20B in transactions per month. Our market  infrastructure allows funds to automate creation, fundraising,  deployment, distribution, and reporting via a process language  that is an enhancement of currently available smart contract  technology.

Disclaimer

The attached white paper is meant to describe Swarm’s currently  anticipated plans for developing its business and its SWM Tokens.  Nothing in this document should be treated or read as a guarantee  or promise of how Swarm’s business will develop or of the utility  or value of SWM; the document outlines our current plans, which  could change at our discretion, and the success of which will  depend on many factors outside our control, including market-  based factors and factors within the cryptocurrency industries,  among others.

Any statements about future events are based solely on our  analysis of the issues described in this document, and our analysis  may prove to be incorrect.

Purchasing SWM is subject to many potential risks, some of which  are described in this paper, and some of which are provided in  the FAQ on SWM Tokens and the Token Offering and in the risk  disclosures for the Token Offering. These documents, along with  additional information about our business and the SWM, are  available on our website. Purchasers of SWM could lose all or  some of the value of the funds used to purchase SWM.

1. Introduction

1.1 OVERVIEW

The Swarm Fund team plans to help the  crypto world grow to $1 trillion by bringing  tokenized real-world assets through partner  funds. The Swarm Fund team has managed $10B in  portfolios and built platforms which handle $25B of monthly deal flow and already has  several pre-selected funds which generate  30+% IRR through scalable models powered  by artificial intelligence.

Swarm token holders will govern the platform  in which all of this will happen and receive  additional tokens on the private blockchain. This will allow them to participate in all of the subfunds.

This system is designed to be adaptable  for full regulatory compliance in multiple jurisdictions. The corridor between the public  and private blockchain tokens is additionally  designed to be fully AML/KYC compliant and to  follow the model of existing exchanges.

Swarm is building technology bottom-up, with  a fully operational liquid democracy platform  for making key decisions related to investment  opportunities on Swarm.

Our technology and blockchain co-op model  will likely also be useful for other industry  verticals besides finance.

People should participate if they believe in the  value proposition of democratizing finance, collaborative ownership, high returns, and the soundness of both the team and technology.

＜表＞

1.2 THE ULTIMATE VALUE  PROPOSITION

From the standpoint of organizational  design, Wall St. is a collection of archaic incentive models waiting for a fully peer-

to-peer organization to disintermediate and  redistribute the wealth that is monopolized by  a small group of insiders. Wall St. insiders are  able to manipulate market prices by creating  artificial scarcity and promoting fear and  ignorance of other models.

Peer-to-peer models consistently beat  protectionist monopoly-based models  because they directly incentivize top  performers rather than creating multiple levels  of opaque hierarchy, and because they layer  dynamically-generated reputation on top of  these models.

Additionally, peer-to-peer models are a  perfect substrate for the utilization of artificial intelligence and a much higher degree of  automation in general. Peer-to-peer models combined with models of cooperative  ownership also allow a high degree of resistance to abuse of big data, as well as  integration with other governance systems to  offset any potential abuses.

Systems are a product of their incentives. If  the existing Wall St. model has incentives for  protectionism and hierarchy, Swarm Fund  has incentives for early identification of talent  and rewards that proportionally follow high  performance.

1.3 CURRENT INVESTMENT  DRAWBACKS

Crypto Asset Holders

The investment landscape for crypto asset  holders is largely limited in choice to either  a selection of established crypto currencies,  (e.g. Bitcoin, Ether, Ripple etc.) or a selection  of more recently issued tokens (i.e. altcoins).

While overall crypto asset developments are  extremely positive, both asset categories have  significant challenges associated with them  from an investment perspective.

• For Bitcoin and Ether, volatility is a major  factor. Holding a significant portfolio of Bitcoin and Ether implies that the net asset  value fluctuates by a significant percentage  on a monthly basis. As an investment, this  could be desired, but for the purpose of  predictable preservation of value, it is highly  undesirable.
• For investment in altcoins, the challenges  are primarily related to the evaluation of  assets prior to investment, and lack of  liquidity post investment. It is also difficult  for many investors to clearly understand the  market dynamics of the coins.
• Although the two million crypto asset  transactions every week between people, businesses, and charities suggest a  significant value exchange, the grand question of the intrinsic value of Bitcoin and  its peers remains.1

Meanwhile, tokens that store digital value are  breaking into the mainstream investment  landscape as a new asset class in which to allocate investment capital. This is  largely driven by an increasing awareness  of the extreme returns generated by the  early investors in this category. But for the  mainstream investor, this new asset class  presents challenges; namely, the workflow basics of navigating trading, and maintaining  asset security.

Market Problems in Traditional Investing 

Over the last 15 years, a simple S&P 500 index  fund outperformed 92% of large-cap funds.

Meanwhile, the percentages of mid-cap and  small-cap funds lagging their benchmarks  were 95% and 93%, respectively. The odds of  an actively-managed domestic equity mutual  fund performing better than an index fund are  nearly as bad as 1 out of 20.2

Finding products with high investment return  is a challenge, which increases as the target  return increases. The marquee products  offering more than 10% returns are invariably  hard to access (Bridgewater generally requires  that its clients have a minimum of $5 billion of  investable assets3).

Take real estate as an example. Investors

mostly face three major challenges:

• The most exciting deals are for insiders only;  accessing them requires working through  middlemen that are costly, sometimes  untrustworthy, and who often only operate  locally.
• Large amounts of money are required to  participate in the best opportunities.
• Worst of all, investment is often tied down  for an indefinite amount of time.

Combinations of these challenges are part of  any traditional investment product category, e.g. private equity and hedge funds.

1.4 MISSION STATEMENT:

WHY WE CREATED SWARM FUND

Swarm is a fully decentralized capital Swarm  is a fully decentralized capital marketplace  platform built on blockchain technology that is  entirely owned by the community.

Our vision is to allow anyone, anywhere in the  world, to participate in value creation within  the crypto asset category and to capture  opportunity in new types of asset-backed  tokens, including in real estate, hedge funds,  solar installations, and many more.

Swarm transforms financial opportunities from  exclusive to inclusive. We provide access and  tradability so that anyone can take part and  have their crypto funds work for them.

With Swarm, we will:

• Make it extremely simple for hands-off or  novice crypto investors to participate in a  composite of wealth creation resulting from  utilizing the crypto space.
• Create a viable framework and hub for  crypto investors to invest into alternative,  asset-backed token opportunities, in order  to escape market volatility.
• Introduce a new alternative liquidity hub for  project owners with attractive underlying  economics to find capital and engage with  the investor community.

Core Objective: Follow The Experts

Swarm allows experts to run their own  syndicates and have other crypto investors join  them in projects and deal opportunities, with  no middlemen involved.

We are building an ecosystem of experts with  any kind of edge (track record, trading ability,  unique data, unique deal access, etc.) in order  to allow crypto investors to follow and co-  invest with them.

This changes the mechanics of the traditional  fund/GP model, as investments can be as  large or small as the investor wants them to  be, and they can operate the fund structures  very flexibly. Also, it breaks up the syndicates  of gatekeepers and rigid structures of  institutional capital as it is deployed today.

Core Objective: Combine Token Flexibility  With Real Opportunities

Crypto investors have appreciated the  flexibility and immediate market-making  function that tokenization has introduced.  Tokens and their underlying smart contracts  represent the ultimate opportunity for two  parties to come together and interact without  middlemen. One benefit is the freedom to  trade or co-own tokens. That is the freedom  we want to bring to any kind of asset.

When a participant likes an opportunity  running on Swarm, they will be able to pool  funds together with others and invest as little  or as much as they want in order to realize the  project and see the opportunity grow.

At the same time, all projects become  tradable, asset-backed tokens. Participants  can buy or sell these tokens whenever they  want; they decide how long to engage. All trades are made using blockchain technology,  making them fast, transparent, and secure.

Core Objective: Collective Intelligence

We believe in the swarm intelligence hypothesis that decentralized networks  can out-compete traditional centralized entities, and that the trust and  transparency embedded in blockchains greatly facilitates this.

The foundational element of the blockchain is data transparency, which  provides a basis for an unprecedented degree of machine-driven methods to  generate insights and take actions.

Ultimately, with Swarm we envision a degree of investment automation that  helps participants make informed and data-driven investment decisions,  while using reputational scores to maintain the health of the market. Our  automation can go even further, to where every step of the investment  process, from workflows to establishment of legal structures, will eventually  be automated, creating an efficient system without single points of failure or control.

With Swarm we envision an unseen  degree of investment automation.

2. Swarm Innovations

2.1 LIQUID DEMOCRACY

Network Democracy as Liquid Democracy  Network democracy is a stake-weighted  delegated voting system (liquid democracy)  that also provides options for enhanced stake  and programmable liquidity.

Stake-weighted means that voting power is  directly proportional to the amount of stake  you have in a project. In the blockchain world,  this is typically called your ”tokens” or ”coins.”  In the world of stock, this would be called your  ”stock” or ”shares.”

Liquid democracy involves ”delegated voting”  and implies that a user can delegate their  vote to another party at any point, for as long  a duration as they desire. This allows users to  maintain a degree of control without having  to participate in minute decision making.

This is in some ways similar to the decision  an investor makes when they give someone  capital for a project; the key distinction is that  in a liquid democracy, the investor retains  control of the capital.

Stake-weighted liquid democracy is a highly  flexible governance model that accommodates  any structure, from one-member-one-vote, to  traditional corporate arrangements, to novel  forms of collectives. It also appropriately  incentivizes the many different types of  possible contributions to a network (code,  community contributions, funding) and allows for both decision-making capability  and rewards. It also integrates with other  automated decision-making structures, such  as futarchy.

Swarm employs an enhanced voting stake  process. The enhanced voting stake makes use  of a locking period and is a proposed addition  to the stake-weighted liquid democracy

(which does not allow tokens to be traded for  a certain period). This can also allow a person  to have a proportionally higher voting weight  if they have a provable long-term stake in the  network.

Traditional model:

A funding pool is an organization governed by  network democracy that distributes funds. It  can be structured similarly to an investment  fund, in which case it seeks opportunities

or some other purpose (e.g., advocacy,  education). Funds that go into any funding pool  can be allocated by a higher-level network  democracy or received independently.

A key element of the Swarm Platform is the  use of tokenized assets. Swarm may be used  to govern other real-world assets, such as real  estate and other tokenized elements derived  from classic investment vehicles. Specific  details of these deal opportunities are made  available to members of the network.

Trust Network

The trust network is made up of many  independent trust endorsements (i.e. vectors), which create accountability and allow  automation.

Trust Equation

The trust is the sum of all trusted parties and  their recommendations from the standpoint  of an individual (here represented as vectors, which can be positive or negative). In this case,  we record all of these endorsements and allow  multiple levels of ascription and derivation.

Trust currency is made up by individual  immutable trust vectors. Each trust vector i t is an endorsement. A endorses B

for X. This has a timestamp and an optional  weight represented as a number from [-1 .. 0 ..  1]. The ability to provide a negative filter as well as a positive one is important for separating  signal from noise (an example of a similar  problem being Facebook fake news). As with  other open networks, it has an open-access  policy and the nature of the endorsements is  pseudonymous.

Trust Graph

These vectors are optimally represented  as a graph. This graph illustrates that trust (including what we believe to be true) can be  derived from the various trust vectors on the  network.

The implications of a trust model are  numerous. An open reputation ledger built of individual trust vectors is a critical element in  the Swarm Platform.

3. Swarm Token

• The token distributed during the token launch is known as the Swarm  Token, or SWM. The SWM token is a standard ERC20 token (on the  Ethereum platform) that allows one to use the Swarm software platform.
  The utility unlocked by the SWM token is the ability to create sub-  funds, participate in token offerings of Swarm projects, get access  to information that is exclusive to our network, and execute network  governance functions. Member participation is key to the Swarm  platform. Over time, more functionality will be released that helps generate swarm intelligence for the benefit of the network. This follows  the model pioneered by Visa, SWIFT, and other consortia where common  infrastructure is maintained by member organizations.

3.1 TWO-TIERED TOKEN MODEL 

The Swarm ecosystem has two types of  tokens. The Swarm token (SWM) is a utility  token, and the essential element that powers  the Swarm ecosystem. It is used as Gas to  implement the token economics on Swarm.  Proofs create a self-enforcing mechanism,  encouraging a thriving decentralized network  of participants. Participating providers and  consumers on the network use the SWM  token to settle transactions on the platform  and provide other services to operate the  network. The SWM token also grants access to  Swarm’s governance technology, which is used  to govern any significant decision made on the  platform.

SRC20 token standard. The SRC20 standard implements fundamental characteristics to  support regulatory compliant issuance of  security tokens, such as transfer restrictions.

3.2 TOKEN UTILITY AND VALUE

In general, incentives and counter-incentives - elements of Game  Theory - are not new in blockchain projects, and act as core functions  that encourage desired behaviour in a decentralized system.

Bitcoin’s Proof-of-Work (PoW) incentivizes miners to process  transactions on the network, thereby securing it in return for  a monetary reward to the first miner that solves an arbitrary  mathematical problem and creates a new block.

The 2nd generation model with Proof-of-Stake (PoS) is a more efficient  protocol for validating transactions. New block creators are chosen  deterministically, there is no block reward, and instead, the chosen  block creator is rewarded proportionally to their wealth, or stake in the  network. In other words, with PoS, incentives are constructed to buy  and hold some of the coins being minted, with miners incentivized by  transaction fees.

Now we’re seeing the rise of projects inspired  by “The Third Wave of Crypto” - decentralized  projects that provide incentives and rewards  that promote deeper collaboration and real-world interaction, incorporate machine  learning and artificial intelligence, and bring  real assets to the blockchain. We’re now moving on from incentives that encourage  support of the network and proving blocks, to  rewarding important value-adding services to  the community of token holders (in addition  to the core value proposition central to the  system).

NEO’s users are rewarded GAS to create  a network that deploys and runs smart contracts. SIA tokens incentivize data hosts to  stay online, building a network of decentralized  storage with sufficient redundancy.

Simply put, we’re seeing the first signs of  blockchain-based self-sustaining ecosystems  that disentangle massive inefficiencies in the  current economy.

In this spirit, we have been designing a crypto-economic token model that we believe achieves far more than its core vision of democratizing finance. We’re going further than opening up alternative high-performing  investment opportunities to all people rich and poor.

Swarm Token Utility Model

The token model has two core elements:

• The SWM tokens are created for the network  to govern a market infrastructure for a large  pool of assets running on the Swarm Network.  The Swarm (SWM) utility token has a limited  supply of 100M tokens.
• The SRC20 tokens are security tokens,  minted by the syndicate manager of each  investment opportunity, that represent  ownership of that investment.

In that context, the SWM token has three  essential functions on the Swarm platform, each of which add to its value in a unique way,  and each incentivized by the network.

SWM as Gas

SWM functions as the core element that  powers investments to operate.

On the investment side, fund managers are  required to pay SWM when they launch new  investment opportunities and to keep them  operational for their duration. We call this Gas  for Fund Operations (GFO), and it has the  following characteristics:

• GFO is calculated as a percentage of Net  Assets Under Value (in $USD) and is payable in  SWM
• GFO is withdrawn on an ongoing basis, as  needed, in order to fund operations
• Subject to iteration by early adopters, initial  GFO will be in the range of 0.6 - 1.0%

Fund managers are required to continuously  maintain a positive balance of SWM to  cover their expected GFO needs. Managers  are able to plan their purchase of SWM at  times optimal to them, taking into account market forces, their own expert analysis, and  future investment requirements. In future  iterations, this will be fully powered by artificial  intelligence. For example, a real estate fund  that expects to make a large investment

in a year’s time may opt to front-load their  purchase of SWM now, taking advantage of  current prices and known market conditions.

SWM raised from GFO is automatically sent  to a smart contract that acts as a Proof-of-  Service pool. This pool is then used to reward  third-party actors that provide additional  value-adding operational services such as  audit, accounting, or marketing services,  further adding value to the platform as a  whole and promoting its growth.

On the other side of the equation, investors  are required to pay SWM when they allocate  capital to an investment. We call this Gas  for Capital Deployment (GCD) and it can  be thought of as a traditional placement fee that, in contrast to other private equity capital placements, allows for tradeability and  liquidity. However, rather than directly paying  GCD to the fund, Swarm offers investors a  strategic choice.

Investors choose between:

• Liquidity: Investors can opt to keep their  investment liquid and tradeable, in which case  the corresponding GCD is forfeited, but they  receive regular returns on their investment, or
• Commitment: Investors can opt to lock  their investment for a fixed period of time,

correspondingly locking their GCD for the same  amount of time. Capital, returns, and the full  amount of locked GCD is fully refunded at the  end of the locking period. Note that investors  could choose liquidity at first and once they  gain comfort with the investment, later move  into a commitment on a lower basis (as some  of the GCD will already have been released on  a prorated basis). Subject to iteration by early adopters, initial GCD will be in the range of 1.0

Strategically opting to lock one’s GCD acts as a  Proof-of-Commitment, and brings enormous  benefits for both investors and fund managers:

• Fund managers can act on investments with  far greater certainty knowing investor funds  are committed, and can recycle and reinvest  capital rather than paying returns out regularly,  giving them a greater ability to negotiate using  their assets.
• Investors who lock their GCD can also  benefit from potential appreciation in the value  of SWM once their chosen locking period has  ended.

Swarm’s Proof-of-Commitment is so powerful  that we’ve introduced a further incentive  mechanism to encourage it, especially for  those funds to whom capital commitment is  strategically important. Fund managers are  given the option to match an investor’s GCD  commitment with their own, in any ratio they  like. This greatly amplifies investors’ potential

returns at the expiration of the lock. As an example, a solar installation  in California, for whom capital commitment is important, may offer

2-for-1 GCD matching as incentive for a 3-year lock, meaning that  investors who choose to commit their investment receive a bonus of  double their locked SWM tokens at the end of the locking period.

GCD Proof-of-Commitment allows investors to effectively neutralize  their placement gas and therefore boost their returns, while giving  plannability and certainty to managers. Both win.

SWM as Voice

Perhaps the most revolutionary feature of the Swarm platform - and  the one we are very passionate about - is its Liquid Democracy voting  module. Swarm is built with governance designed into the core, and  at every level. Blockchain is maturing beyond payment systems,  stores of value, and distributed applications (Dapps). We are entering  the age of real assets on the blockchain. Art installations, marijuana plantations, and community-funded infrastructure are all going to be conceptualized, debated, crowd-funded, realized, and managed on the  blockchain. None of these functions can be performed without a layer  of governance, arguably the most fundamental and important utility of  SWM.

Direct governance of investments is necessary and important, as we  are not building Swarm to be another middleman. The ultimate goal is  to found an ecosystem of independently governed engagements; an  upgraded iteration of the DAO.

Incentivized Governance

• Governance is inherently key  to Swarm
• The foundation allocates budgets  to incentivize governance
• Only token holders have voting  rights in platform & investment-level decisions
• Voters are rewarded with SWM for  participating & taking actions to  improve the system

Proof-of-Participation

• Participants get rewarded for making proposals & voting on the

Self-governance ensures the  evolution of the platform

• Swarm‘s governance model enables  direct representation for minorities
• Through Liquid Democracy, votes can  be delegated to those with domain-specific knowledge
• Delegation grants better-informed  individuals greater voting power
• Through incentivized governance, the  Swarm Foundation is building a fully  decentralized, self-governing

SWM as Value

SWM’s value derives directly from its powers  as incentive and reward; powers that  combine asset management with resource  efficiency, powers that strengthen community engagement, and powers that derive and keep  value within the platform.

Optimal behavior is clear within the system -  for all actors - and is summarized in the table  below:

• Investors choose between two powerful  strategies when allocating their resources.
• Fund managers plan and optimize their  operational requirements according to their

specialized knowledge, and further compete  by matching incentives.

Infrastructure and service providers are  incentivized to continuously innovate and  advance the virtuous competitive cycle of  delivering more at lower cost.

While initial monetary policies for gas  prices will be set by the foundation, future  policy will be voted on and iterated by early

participants. Successful interaction amongst  all stakeholders will, over time, permit the  Swarm Foundation to act as mentor and  guide, moving on from its role as architect and  administrator.

4. Solution : Swarm Platform Model

Layer 1: Swarm Core

The Core layer provides the foundational system components  and smart contracts for Swarm use: network governance token management with consensus via liquid democracy, and a  management interface. This also includes system replications of the  preferred legal frameworks, reputational engine, and decentralized  collaboration, as well as foundational processes around security and  data transparency.

The Core layer framework allows for the creation and management of  new projects. It is and always will be free and open to use.

Layer 2: Swarm Services

The Swarm Services layer will offer additional  services on top of Swarm Core. These services  are meant to make it extremely easy for any  participants to build investment applications  on top of Swarm and serve the marketplace in  the most creative way.

These services will include full-stack  setup of vertical Swarm funds (via Special

Purpose Vehicles, or SPVs), operating Swarm  syndicates, asset custodian services, and any  automation of ongoing investment operations.  More features will be introduced to best meet  the requirements of the evolving marketplace.  Application templates, customization tools,  and advanced data processing capabilities  will allow our users to execute their visions  faster while lowering the barrier to entry for  new investment applications to come to  market. While applications and participants  are welcome to interact with Swarm on the  Core level, we will be offering Swarm Services  to accelerate the go-to-market process and  reduce operational costs. Swarm Services will  be offered using a license-fee model.

Layer 3: Swarm Applications

On the highest layer, on top of the Swarm  Services layer or directly operating on the Swarm Core, is the Swarm Applications layer.  These applications are both front-end as well  as in some cases application back-ends that  are specific to target investment use cases  and/or target segments.

• Our vision for Swarm is  to have a wide variety of  investment applications  built on the same  platform technology and  liquidity pool.

Some of these applications may be built by  Swarm, while others will be built by third  parties. Our vision for Swarm is to have a wide  variety of investment applications built on the  same platform technology and liquidity pool.  These applications will likely charge additional  fees or use alternative business models such  as market making, information selling, or  revenue/profit sharing. As further describe in the following section, many of such Swarm  applications may include the release of their  own utility tokens as a core component of  their business model.

4.2 PLATFORM COMPONENTS

Liquid Democracy Voting Module

Governance is core to Swarm’s mission. And core to that mission is  to create infrastructure that allows participants to vote on issues in a trustless, transparent, and auditable way, which can persist outside of  Swarm as an organization.

Therefore Swarm is creating a “Liquid Democracy Voting Module”  (“LDVM”), which has been the basis of all voting that the Swarm  organization has performed internally and externally, and first versions  are already available.

The LDVM is intended to be configurable by any developer, integrated  with other platforms, and executed outside of the Swarm platform.  The LDVM will be able to be customized to specific voting populations,  issue discoveries, and consensus methods, as well as voting  processes.

Further, a major objective of new voting systems is to relieve  participants of ongoing voting obligations or complexities around  voting. With the LDVM, users are able to delegate their votes to others  in a persistent fashion, and differentiated by issue category and  duration. With these abilities, the governance of the foundation, as well  as each of the underlying SRC20 tokens and related legal entities, can  be performed in completely new ways; for example, there is no longer  a necessity for board structures.

The LDVM is intended to become a universally applicable voting engine  for any part of the Swarm platform, and to be usable beyond Swarm  in other related or even unrelated projects. In particular, the open  architecture of this module will lead to exciting new applications and  use cases well beyond Swarm.

Purpose-Driven Funding Wallets (“Blackbird”)

One of the use cases powered by the LDVM will be the Blackbird  wallet. A Blackbird wallet is a smart, multi-user wallet that collects  funds and deploys them to a target address that is approved using a  stake-weighted majority. Each Blackbird Wallet can potentially have  connections to realize its purpose on the Swarm network, but not necessarily.

Blackbird will allow the pooling of capital, such as for a purpose that  has yet to be specified, and all participants together make decisions  along the way about the deployment of capital. As the purpose gets  further specified, more participants gain confidence and invest more  capital, and so on. While a setup like this can have many different

use cases, the first iteration of the wallet will be used (1) as a one-  time fund collection and deployment instrument and (2) an evergreen  (ongoing) fund collection and deployment instrument.

There are a number of powerful use cases that can be powered by  Blackbird wallets. Think of Uber drivers pooling their capital to buy a  corner position in Uber. Or the creation of a foundation to offset the  carbon footprint of the blockchain.

Artificial Intelligence Infrastructure for the AI-driven Investment  Economy

The name ”Swarm” is a reference to “Swarm Intelligence,” a form of  decentralized intelligence. In the natural world, it manifests in self-  organizing communities like ant colonies, flocking birds, and schooling  fish. Swarm intelligence is also employed at the vanguard of artificial  intelligence technology. Swarm (the company) is taking a practical,  multi-phasic approach to solving real-world problems, while building  the infrastructure and ecosystem that will allow for decentralized  intelligence to occur.

The first phase of AI at Swarm is a simple approach: providing  users and industry professionals with tools to make more informed  investment decisions via products of machine learning. Within the  Swarm ecosystem, we are rolling out a practical reinforcement  learning algorithm that uses a multi-armed bandit approach (i.e., an algorithm that acquires knowledge by performing multiple  experiments simultaneously, assessing results, and quickly learning  to optimize outcomes). This will be combined with some traditional  financial analytics models (EMA, MACD, Ichimoku Cloud), along with  more sophisticated ML models (LSTM, Phased-LSTM and others).

We anticipate this taking a few months to roll out, as the algorithms  require sufficient data and voting within the ecosystem in order to  provide a robust model. A deep roster of funds are in the pipeline to  get listed on the Swarm platform, and our astute AI will analyze them  all. Not only will we deploy our bots for the direct benefit of Swarm  platform participants; we will also offer these tools and infrastructure  to Swarm syndicates to create crypto hedge funds that trade using  machine learning algorithms (ML) in addition to traditional trading  strategies.

The second phase will advance the platform in a few very important  ways: First, it will allow for active trading based on individual  configuration and preferences within the Swarm platform. Some may  individually use the tools, and others may create funds and offer them  as syndicates on top of the platform. Swarm members will be able

to participate in those strategies via the Swarm platform. There are a few key advancements in this phase: The goal will be to employ a large  ensemble of models whose number will be determined by market  factors. Using many reinforcement learning agents, or ”bots,” we can  program them to compete with each other, honing their “intelligence,”  and maximizing potential rewards. A master algo will choose how to  execute trades based on observed potential rewards and observed  market behavior. The goal is to decentralize the AI, eventually achieving  proper Swarm Intelligence (Today we are getting closer, but still not  entirely decentralized from a model perspective.). A key component of  this phase is the ability of models to give information to other models.  This mutual informing can be both adversarial and constructive in  nature. Models that can win the vote of the trade get more reward.

By doing so, models learn to capture and maximize reward across  many different market conditions while tailored to different trading  preferences by investors.

The third phase is a big and extremely exciting one. In Phase 3, we  will fully decentralize the ability to trade within the Swarm network,  and link with other technologies. While Phase 2 allowed the Swarm  professionals to build out fund organizations upon which Swarm  members can vote and invest, Phase 3 will allow any individual quant  and model builder to tokenize their own models and strategies, and  to effectively create their own funds. These models can be trading  algorithms, or models that serve other monetary purposes. For  example, a model builder can provide a language model with the  ability to parse and make sense of Twitter or Telegram feeds. Then,  other models can tap that model for information. The goal is to create  the core market infrastructure and a network of incentives to allow  for both model competition and genetic evolution of performance  and fitness, thus allowing for model primitives to evolve, which then generalize to different domains. We will release more technical  information on this in the near future.

5. Swarm Applications -  Swarm-Supported Asset Types

With the Swarm investment platform serving as a technology reference  framework as well as a global liquidity hub, decentralized application  developers will be able to create new classes of investment assets that  can be used in any number of simple or complex applications.

The following section lays out defining characteristics of asset classes in  which to pilot the Swarm Platform, followed by subsequent sections that  highlight a number of use cases that Swarm has identified as interesting  target markets and which are readily deployable using the Swarm  Platform.

5.1 CHARACTERISTICS OF PILOT  ASSET CLASSES

When launching a marketplace technology it  is critically important to (a) build trust with  the participants and (b) provide curated pilot  use cases that allow the marketplace to take  off in the right direction and with the right momentum. In identifying the first target asset  use cases, we have tried to balance both.

Particularly in light of issues that led to the rise  and fall of the DAO, we approached this project  with significant diligence and preparation,  before being able to bring a market-ready  proposal to the community.

We strongly felt it was important in the early  stages to (1) demonstrate tangible platform  viability, (2) be able to show viability and  material attractivity, and (3) be able to quickly  scale within the use cases if they prove their  efficacy by meeting or exceeding expectations.

Therefore, we invested significant efforts  into identifying asset classes that have the following key characteristics, among others:

• Have the ability to start with small amount  of investment.
• Show continuous tangible returns.
• Represent a range of risk-reward profiles  that are relevant to the crypto investor  community and provide relevant alternative  asset profiles (e.g. 20%+ ROI annually,  focused on global impact, etc.).
• Are well-established and understood from  an assessment/ratings perspective.
• Scale to significant size quickly

5.2 CRYPTO HEDGE FUND

Investing in crypto assets presents unique  challenges, revolving around trading workflows  and asset security. It requires expert  knowledge to properly navigate the market  and be aware of the latest market dynamics  in specialized market verticals, starting with  liquidity movements, arbitrage opportunities,  or proper assessment of the latest market-  influencing industry news.

The syndicate with which we are collaborating  forms a crypto hedge fund that strives to be “ahead of the curve” with the goal to  simplify value creation for crypto investors by offering the best experience to engage with a network of investors, collaborators, and opinion makers. The objective is to present an incentivized platform for vertical experts  to trade on their unique market knowledge or data and to provide uncorrelated, risk-adjusted  alpha relative to industry benchmarks. The  composite investment strategy includes right-  frequency trading into 1) a highly curated  portfolio of crypto assets, 2) derivatives  market-making, and 3) mining proof-of-stake tokens. The goal is to create a blend  of selected best trades based on proprietary  algorithms, market-neutral quantitative models, and fully automated execution.

5.3 DISTRESSED REAL ESTATE 

Real estate investments present a unique  opportunity for private equity real asset engagements. Especially interesting are sub-  market segments like distressed real estate primarily focused on judicial foreclosure states.

The syndicate leader we have partnered  with has created a machine-driven platform to identify negative equity real estate in  foreclosure auctions, and acquire these “Subject To” existing liens from an impartial  federal bankruptcy trustee. During the very  long judicial foreclosure timelines, this  provides 2-3+ years of rental income, and in some cases the fund is even able to clear liens  at a steep discount and immediately sell the  property at profit. This produces exceptionally  high cash returns and is an excellent  opportunity, even in an economic downturn.

5.4 SOLAR INSTALLATIONS

There is no doubt that renewable energy,  and particularly solar, is on the rise and an interesting asset category. The unit economics  of producing, installing and maintaining solar  panels have improved significantly and made  the investment case an interesting opportunity  with 20%+ annual returns. Additionally, there  are significant tax breaks in various regions  globally, especially in California, which presents  additional major economic benefits. The  syndicate operators we have been evaluating  have been successfully building an investment  platform specifically for this application.

5.5 PURPOSE-DRIVEN FUNDING POOLS

Swarm is also aiming to help generate impact investments for  nonprofits and social enterprises that help meet significant  community needs and address humanity’s grand challenges. We are  working to ensure basic needs are met for all people, while sustaining  and improving quality of life and mitigating future risks. We hope to involve individuals and institutions who are using their resources  for social good, and are looking beyond simply making traditional philanthropic gifts. We seek to help them leverage their capital directly,  with a purpose they deeply care about, and perhaps even earn a small  gain over time.

We believe the crypto community has successfully proven that it can  build incentives for the community itself to create desired outcomes.  We envision purpose-driven funding pools, that incentivize the  entrepreneurial community to create solutions to meet the challenges  and compete for the “bounty” by delivering a “social Proof-of-Stake”,  similar to the way the X-Prizes have fueled innovation.

6. Token Offering

1.TOKEN OFFERING IN BRIEF

The Swarm organization created 100M tokens, and budgeted 33M  tokens to be sold to purchasers. Of these, 8.2M were sold in Q4 2017.

In the current token offering, we are projecting to sell 20M tokens,  targeting a raise of $23.75M USD denominated in ETH. Should the  demand be higher, the Swarm Foundation can decide to re-allocate  token budgets to expand the sale.

With the above, the cap share distribution changes in favor of the  community. As such, a higher market demand within the sale simply  allows for more exchange listings on the SUN network and augments  the value of the platform.

Our method of drip liquidity ensures that earlier token holders cannot  immediately “dump” all of their tokens after the purchase. After the  token generation, the members voted to introduce a liquidity option  that releases the token liquidity in 4 equal releases every 84 days. The  first liquidity release started on Nov 6, 2017, and full liquidity will be  reached on Jul 16, 2018.

2.TOKEN ALLOCATION

Of the total 100M tokens created, 33M tokens will go to contributors  (past Swarm members, advisors, a pool for future contributors), while  33M tokens are assigned to the core team.

7. Roadmap

7.1 KEY ACTIVITIES

For the past 6 months we have been executing  on key activities, including the launch of the  live Swarm platform:

• Our team developed concrete, trusted  investment opportunities, with a goal  of showing successes and pushing the  marketplace in the right direction.
• The initial deployment of the Swarm  platform went live on Jan 29th 2018.
• Substantial work has been performed  toward viable legal frameworks for Swarm initiatives.
• Implementation of a regulatory framework  across different jurisdictions for security  tokens has started, including integration  with service providers for e-infrastructure  and AML/KYC.
• Ramping up community engagement efforts,  Swarm has 14,000+ investors registered on  the live platform, with ongoing significant  growth.
• We have developed a pipeline of 35+ funds  that want to list on the platform; we are  developing onboarding processes and  launching them soon.
• We have created partnerships with  exchanges to support SRC20 security tokens.

7.2 FINANCES

In our token sale, we are projecting a raise of $23.75M USD denominated in ETH. For capital  allocation, the main principle is that funds will  go towards operational expenses and platform  development.

Product / Development Costs: Platform  development will include building upon and  securing core smart contracts, additional  frameworks such as a decentralized  reputational engine, trading and management  interfaces, service-level app templates

and customization tools, and integrations  with future Ethereum or other blockchain  infrastructure such as exchanges, custodian  service providers, and stablecoins. We will  develop certain custodian components for  Swarm wallet holders and work with experts  for custodian services (e.g., Ledger).

Legal & Regulatory Costs: Legal requirements  include corporate setups in different locations  for crowdsale, operations, and other licenses.  Post-launch, we will work with legal advisors  and regulators in different jurisdictions to  develop legal opinions of the interpretation  with local laws, and become compatible

with e-infrastructure and AML/KYC and  accreditation infrastructures in various  markets. Ongoing resources are required for  investment and possible other use cases of  legal work. A legal contingency fund will be  reserved in case of future need.

Marketing & Sales: Sales and business  development efforts will be focused on  identifying and forming relationships with new  projects and existing partnerships that can be  built on Swarm. Marketing will be focused on  promoting Swarm applications to potential  customer segments and markets. Additional  efforts will be spent on increasing awareness  and knowledge of the Swarm Platform and  what can be built with it (applications, etc.).

7.3 DEVELOPMENT ROADMAP

Current State

Swarm has been under development for  over 18 months. Since then there have been multiple iterations of the core elements of  Swarm. These include the smart contract powering the framework as well as the general  web interface.

The Swarm platform has a fully operational  live implementation since January 2018.

The current operational platform supports  key use cases, such as voting within network  democracy (including delegation), wallet  transfers (ETH/BTC/SWM), and allocation of  capital towards investment opportunities.

Future Development

Phase 1 (Quarter 2 2018):

• Legal automation: Underlying the Swarm  platform, our goal is to automate most  of the administrative processes related  to foundation of SPVs (special purposevehicles) and fund deployment. We seek to  work with e-governance providers to make  this as seamless and scalable as possible.
• SRC20 token standard protocol, with  integration to exchanges supporting security tokens.

おわりに

• 注意：本ページに掲載しているホワイトペーパーは、スマホ／モバイルでの読解の補助を目的に、原文を成形しストックしたものです。また、この引用文は投資を促すものではなくあくまで調査のための手軽な確認のために掲載しています。詳細な内容またはDisclaimer本文など、正しい情報は左記の原文等をご覧ください。https://docs.swarm.fund/Swarm-Whitepaper-eng.pdf