4.1 Overview

There are three minimum obligatory requirements to convert real assets into RWA tokens:

a)legal effect

b)decentralization

c)alignment of interests

To ensure legal compliance, the offline Decentralized Autonomous Organization (DAO), which manages real-world aspects, and the owner of the actual assets need to enter into a formal legal contract. Besides, to maintain the principle of decentralization, the ultimate decision on the tokenization of Real World Assets (RWA) should be from the online DAO, which operates in the digital blockchain space. Finally, the offline DAO is required to adhere to the decisions made by the online DAO.

For this purpose, Elysia designed the following structure, explained in more detail:

4.1.1 - a) Legal Effect

This involves forming a legal agreement between the offline DAO (Decentralized Autonomous Organization) and the owner of the real asset. ELYSIA DAO LLC takes over the ownership of the real assets and creates RWA tokens for each asset. These tokens represent control over the assets (like deciding dividends, selling, or liquidating). Each "RWA token N" is specifically tied to a "real asset N", acting like a governance token for that particular asset.

4.1.2 - b) Decentralization

Owners of real assets are given RWA tokens through a process managed by the online DAO. The offline DAO, in this setup, acts as a holder of the real asset ownership, based on the online DAO's voting decisions. When an asset owner decides to sell their RWA tokens on the open market, whoever buys these tokens gains the ability to make decisions about the real asset (like dividends, selling, or liquidation) through a governance tool.

4.1.3 - c) Alignment of interests

There can be issues regarding custody when the property is movable and doesn't need registration, or default issues if the real asset is a financial product. In these situations, the offline DAO, being the owner of the real assets, will handle any legal procedures with the first issuer of the RWA token. The offline DAO's obligation to manage legal issues related to asset ownership is outlined in its articles of incorporation. Moreover, the interests of both RWA token holders and sEL holders are aligned because sEL holders who vote on issuing RWA tokens are compensated for their screening efforts, but only after the RWA tokens have completely expired.