Tokenising Exotics: Disrupting The Global Hypercar, Supercar, And Rare Classic Car Ownership Market

Mar 15, 2018

In a disruptive world first, BitCar aims to create a platform to allow for fractional ownership in one of the best performing asset classes of the last 10 years.

Exotics on the BitCar Platform

“Exotics” is a classification that can be applied to a wide variety of cars amongst different categories, era’s, makes, qualities and provenances. However, in the case of BitCar and as defined in the BitCar Whitepaper, “Exotics” refers to rare classic, hyper and supercars. While the Platform targets a trinity that encapsulates a very large number of cars, our target is to only include cars that are low in build number, of the highest quality (including those that are concours-quality), and have the best provenance. These are only some of the many factors that go into consideration when a valuation is conducted on a car, and affect the way in which the cars price will change over time.

BitCar will have multiple independent, third-party Agents who will be in charge of sourcing, acquiring and tokenising Exotics that will then be included on the BitCar portfolio. These Agents will also be in charge of organising the maintenance, storage and insurance components of a cars acquisition. When acquiring an Exotic, Agents will also have to put forward a Performance Escrow to ensure that their interests are aligned with that of the Platform and users.

Historically, classic cars as an alternative asset class have performed extremely well over the last decade. The Hagerty Classic Car Index shows a strong performance for the class over 10 years until early 2016 (Figure 1).

Figure 1 — Hagerty Classic Car Index from BitCar Whitepaper

Tracking the performance of individual exotics also shows the potential strong performance of this asset class. For example, the Ferrari La Ferrari hypercar had a valuation of £1 million when it was released in 2014, but now has a valuation of around £2.8 million.

The Porsche 911 R had an original listing price of £170,000 in 2016 when it was released, and is currently on the market for approximately £400,000.

More recently, the Bugatti Chiron, valued at £2.5 million five months ago is now selling at £3.6 million.

Photo Credit: By Matthew Lamb — FoS20162016_0624_132444AA, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=49764110

One of our favourites in the BitCar office is the McLaren F1, which has seen a phenomenal price appreciation over the last 10 years. As can be seen below, the car had a value of just over $1,000,000 in September 2006, rising up to over $15,000,000 in 2017.

McLaren F1 Value Change over time

Why Put Cars On The Blockchain?

“Blockchain” has become a buzz-word of late with the unprecedented coverage and awareness surrounding cryptocurrencies, which in-turn has resulted in many startups implementing the technology for the sake of saying they’ve done it.

BitCar implements blockchain technology to solve a number of industry inefficiencies, namely: speed, verification of ownership, peer-to-peer trading, and fractional ownership.

Speed: By placing assets on the Ethereum blockchain, the purchase of an interest in an Exotic, or the ability to trade it, can be done in a matter of minutes. This transactional speed applies to the next two points.

Verification of Ownership: When purchasing a car in real life, whether it be in a showroom or auction, there is a lengthy process to sign pieces of paperwork, and to verify that the entity you’re buying it from is indeed the true owner. Not only will BitCar only target cars with the cleanest title — but the blockchain will act as an immutable ledger of past ownership. All of this can be done in a matter of seconds, and is information that will be available to all. The blockchain also eliminates the need of a middleman to process all of the above.

Peer-to-Peer Trading: Due to the immutability of a blockchain, the ownership of an interest in an Exotic will be undisputed. This enables the opportunity to have fast peer-to-peer trading, where ownership rights (in the case of BitCar, represented by the CAR asset token) can be transferred from one user to another without the opportunity for two users to claim ownership at the same time.

Fractional Ownership: BitCar’s aim is to disrupt the Exotic car ownership market. Access to this asset class was restricted to the extremely wealthy until fractional ownership was available. Now, via BitCar, everyone can purchase an interest in a portion of an Exotic, which they can hold or peer -to-peer trade on the Platform. When the Exotic is sold after its term of 5–15 years, the returns pass back to the CAR asset token holders. Alternatively, users also have the option to liquidate before this term, and exchange their CAR tokens for cryptocurrency.

In its early days of inception, the BitCar team toyed around with the idea of incorporating other alternative assets into the Platform, such as wine and art. However, it soon became clear that the issue of fakes would eventually be a problem. Therefore, to minimise risks, Exotics were selected as the asset class of choice due to the sheer difficulty required to fake a car.

So Do We Get To Drive Them?

BitCar treats the Exotics like pieces of art, and the third-party Agents who handle the physical car have strict guidelines to ensure that the cars are stored, insured and maintained properly. With this in mind, the cars will not be driven, as this will only add downward pressure to the value of the Exotic. However, this is not to say that BitCar will not have track days at local racetracks to allow users to experience the force of a real supercar. Additionally, BitCar aims to have these Exotics displayed in public spaces like airports, museums and showrooms to allow people to see the cars firsthand.

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