Category: Tokenomics

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Manhattan property worth $30 million, tokenised with blockchain

Categories ICOs, E&S Group, Tokenomics, Ethereum, Real Estate, Property

Manhattan property worth $30 million, tokenised with blockchain

A new condo development in the heart of Manhattan is set to become the first to be tokenised via the Ethereum blockchain. The unit consists of 12 units, each at 1700sq ft, located in 436 & 442 13th St in the East Village, one of the most sought-after areas in the city.

Listed by Ryan Serhant, a celebrity real estate agent, he and the developer decided to turn to tokenisation as a new way of financing the project. This could pave the way for other projects to follow suit as well as offering a better alternative for both the project and the investors.

“The market in New York is always strong, but it can take some time to sell for the right price in a new construction building. With blockchain tokenization, we can remove the unruly pressure of traditional bank financing, which is much healthier for the project and all of the stakeholders. Tokenization is paving the way for a new forefront in real estate development,” Serhant said.

Tokenisation is a way of representing ownership of a product or asset in a digital way on the blockchain. This new way of financing is the result of a collaboration between Fluidity and Propellr, two businesses that have come together to offer fully compliant services that enable the creation, distribution, and transfer of digital securities.

Todd Lippiatt, CEO of Propellr stated;

“Traditional securities structures and issuance frameworks haven’t evolved in a long time. With blockchain technology, a transparent and trustless ecosystem can start to solve the information asymmetry that hinders the market’s potential for liquidity. This asset, structure, sponsor, and sales team showcase this evolution. With proper discipline and respect, the future is bright for tokenized securities.”

Propellr is a management, creation, and servicing platform for digitally held assets and it is also the parent company of a FINRA registered broker/dealer called Propellr Securities. Their aim is to use their financial and capital market experience to both offers and sell tokenised securities under the Reg D Rue 506 (C).

Fluidity is the company behind AirSwap which offers technology services to broker/dealers, financial institutions, and issuers for tokenised securities. The partnership between Fluidity and Propellr means that they can now accept fiat payments as well as both solicit and sell securities in line with the law.

Investors in the project are able to choose between receiving analogue or digital assets in the securities which means that all kinds of investor are covered. AirSwap technology will also be utilised the process, as well as tokenising securities and helping a fully compliant secondary market to emerge.

“Along with our flagship AirSwap, we’re building a system that brings local assets online using blockchain technology. This makes them available for trade on a global marketplace—directly among buyers and sellers. Fluidity is forming the foundation of a new system of tokenization and trade,” Don Mosites, co-founder of Fluidity, stated.

E&S Group recently became the first business of its type to tokenise its services– this is also something we can help you do. Whether you want to tokenise your products and offerings or tokenise an asset such as property, our team of experts can guide you through the process, so get in touch by sending us an email at [email protected]

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The inevitability of security tokens

Categories Blockchain, Cryptocurrency, ICOs, Tokenomics, Tokens, Utility Tokens, Security Tokens

The inevitability of security tokens

Over the last couple of years, we have seen the emergence of the token economy and since then it is marching on at an incredible rate, despite the regulatory and technical hurdles that have been cast in their way. Without getting unnecessarily over complicated, we can break down blockchain issued tokens into three distinct types.

Utility token

A utility token is the most organic type of token for a blockchain-based system as they provide the function of using the blockchain that they operate on. From a legal point of view, they can truly be considered as a digital product rather than as security and the issuance of this kind of token is not subject to as many issues. A utility token is usually integrated into the digital product and can offer some functionality within the product ecosystem.

Backed token

Another type of token is called a “backed” token. These are digital currencies that are backed by fiat currency or a commodity. These are somewhere between a utility token and a security token, in the same way that a traditional commodity instrument and currency cannot exactly be considered as a security.

Equity token

The most controversial and complicated type of token is a security or equity token. These tokens are backed by an equity or profit in a business that does not even have to be related to blockchain. Throughout most global jurisdictions, these type of instruments are regulated by the Securities commissions with the most famous being the US SEC which provides very stringent reporting and compliance rules.

When it comes to the regulatory perspective, issuing utility tokens is the least complex whilst security tokens are the most complicated. This is why blockchain entrepreneurs are attempting to avoid securities laws by attaching some utility function to their ICO token and gaining a legal opinion that it is not a security. In the majority of cases, it does not bode well for businesses when they try to avoid the scrutiny of the SEC.

Stakeholders need to understand that not every ICO token can be a utility token as some projects quite clearly require a security-based token. A good example of this projects is that promise a buy-back of their tokens which essentially qualifies them as a security. It is reasonable to assume that eventually, all markets will use blockchain technology regardless of the nature of the instruments in question. This means that the emergence and development of security tokens are inevitable, despite all of the present legal complications.

E&S Group is a leading corporate & law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

For more information click the link.

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What is a non-fungible token?

Categories Blockchain, Cryptocurrency, ICOs, Technology, Tokenomics, Tokens

What is a non-fungible token?

There is a lot of talk in the crypto-community surrounding fungible and non-fungible tokens but what are they? In this article, we hope to cast some light on what they are and how they can be used.

What does non-fungible mean?

When something such as a token is called ‘fungible’ it means it has the possibility to be replaced by something else that is identical and interchangeable. A good example of this could be a grain of rice or a €5 note in your wallet. If you want to lend that €5 to someone, you can and it doesn’t matter if they do not repay you with the exact same note.

When something is non-fungible, they can look and appear identical at first but each will, in fact, have its own unique information and attributes meaning it is not possible to swap them. A good example of this would be a plane ticket – two plane tickets may look the same but each has different passenger information, destination details, and even prices.

Based on these two definitions, a non-fungible token is one that may have others similar to it, but that carries its own information and attributes meaning it cannot be interchanged with another token of the same, or any other type.

What makes a non-fungible token different from another token?

Most cryptocurrencies are fungible in nature; for example, if you send a BTC and receive a BTC, they will be different coins but you won’t be able to notice the difference.

Whilst we can compare a fungible token to a €5 note, a non-fungible token is best compared to a baseball card – each has a unique set of data and varying levels of rarity. If you were to send a token to someone by accident and get a different one in return you could potentially lose a lot of money.

There is another feature that you also need to consider and that is that fungible tokens are divisible which means you can send a fraction of it to someone, rather than the whole thing. On the other hand, a non-fungible token must be traded or sold as a whole and cannot be divided in any way.

What are non-fungible tokens used for?

Cryptokitties is a good example of a use case for a non-fungible token. As any cat owner knows, it is not possible to simply replace a cat, nor can you divide one. Cryptokitties is a blockchain powered platform that recreates this concept in the digital world, storing each cats personality and genetic material in a digital format. These kitties can be bought or sold using ETH and some are more expensive than others. The platform was a huge success with the most expensive kitty selling for $120,000.

Since the launch of Cryptokitties, many other similar examples have followed.

What are the pros and cons?

A non-fungible token allows you to store and detail more of the attributes that make them unique. You have the ability to include vast amounts of metadata about each asset as well as details of ownership that can be verified in an immutable fashion.

In terms of cons, non-fungible tokens have been criticised due to the fact that the ERC-721 protocol is in its early stages. Some say that it is tricky and complex and that developing a decentralised application is a time-consuming task.

How are non-fungible tokens created?

It can be expensive and complicated to create non-fungible tokens and it can sometimes take months to create a DApp- something that is not practical in the fast-paced world of blockchain.

As a result, some platforms are trying to create a framework that can be adopted and tweaked, but that ultimately unifies and standardizes the tokens. One such platform is Oxcert which provides a plug and play platform meaning that non-fungible tokens can be developed and verified quicker. This means that companies wishing to develop a non-fungible token do not need to acquire a high level of blockchain understanding, and can still avail themselves of the various benefits.

If you have any questions in relation to ICOs, please contact us on [email protected]

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What are the pros and cons of KYC when it comes to ICO token sales?

Categories ICOs, ICO Legal Service, E&S Group, Tokenomics, Know Your Customer, Anti Money Laundering

What are the pros and cons of KYC when it comes to ICO token sales?

When it comes to the cryptomarket, KYC is one of the most hotly debated topics, otherwise known as Know Your Customer. The number of ICOs that are legally required to undertake KYC procedures on a daily basis is growing exponentially. Due to this, it is extremely important to have a clear understanding of the why, how, and what for is KYC in the world of crypto.

For those that don’t know, KYC is the process of verifying the identity of each and every client or customer. Every backer is supposed to go through the KYC procedure as well as to pass it before they can continue. This is a legal and regulatory requirement in many jurisdictions and helps ICO projects know that they are doing business with a legitimate entity.

Standard KYC procedures

Standard KYC checks require a scanned copy of the passport as well as requiring to make a “selfie” while holding the document to avoid issues of fake identity. In addition to this, proof of address is also often requested in the form of utility bills or bank statements. KYC is governed by AML regulations which stands for Anti Money Laundering, but AML can be a lot more in-depth.

If for example, and ICO project has a strong KYC procedure during the token generating event, it is a good sign of legitimacy for banks and it also means that the project is unlikely to encounter difficulties working with other financial institutions.

Drastically varying regulations

When we speak globally, KYC and AML regulations vary drastically depending on the jurisdiction.

Citizens of some countries such as India and China are not allowed to take part in ICOs, and then, of course, the US has its own set of peculiarities.

The main purpose of KYC is to verify an individual’s identity, something that is diametrically opposed to one of the key selling point of the sector – anonymity. But whilst this is something of a paradox, it does ensure the transparency of transactions and this is something that we cannot forget the importance of.

These are the main advantages of implementing KYC with your ICO:

  • Stopping scammers from maliciously taking part in ICOs
  • Stopping criminal acts such as money laundering
  • Keeping investors assets safe
  • Circumnavigating fiscal, legal, and reputational issues
  • Building credibility with banks

When it comes to AML, ensuring your KYC is up to speed is critical. By doing so, not only are you compliant with international regulations, but you are minimizing the number of critical acts whilst guaranteeing the safety of your token sale. In other words, it is a way of protecting ICO projects and those that back them whilst ensuring the utmost in transparency.

KYC can be undertaken at these different stages:

  • Before tokens are purchased
  • Before registration
  • Before the output of tokens

E&S Group takes matters of AML and KYC very seriously and ensuring the safety of its clients is paramount. Our team of legal and corporate professionals can assist with all matters in AML and KYC, ensuring you are compliant with the set legislation, to set up procedures for you to retain your integrity. Being up to speed on the requirements and knowing when to undertake different levels of KYC requires expert guidance. You can contact us here or by sending an email on [email protected].

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Why businesses need to realise the importance of tokenisation

Categories Blockchain, Cryptocurrency, Tokenomics, Tokens, Ethereum

Why businesses need to realise the importance of tokenisation

One of the most important implementations of the blockchain technology is to reliably record and verify information monitoring when and where it was added to the network.

This combined with its ability to synchronize in real time with an unlimited number of nodes in any location, means that all involved parties can get the same information at the same time. This also means that all stakeholders can have the utmost confidence in the truthfulness of that particular information. The result of this breakthrough is that you can treat blockchains like an infallible digital notary that can record truthful information and share it in seconds. Whilst this is incredibly useful, it does have significant limitations.

Being able to know where and when a product was manufactured, and have an opportunity to trace its entire history is a powerful way of reducing fraud. Whilst this is incredibly useful, it is not an economic unit that can be bought or sold.

The power of digital tokens

Digital tokens, on the other hand, are designed for economic activity and blockchains are perfect for processing them.

Let us consider something complicated such as a packet of prescription medication. Not only is there a requirement to record when and how it was manufactured and packaged, but when the time sell it to pharmacies or distribution partners comes, we still need to keep track of it.

If we create a digital token that represents the packet of medication, we would be able not only to trace the full history of the packet, but also to buy and sell the token by moving the token in between accounts.

Public blockchains such as Ethereum are mainly based on the ability to combine both complicated business logic with smart contracts and an unlimited number of digital tokens. Tokens that represent money can be considered as fungible, whereas other types are unique. Either way, we can safely say that the future of business is in contracts that involve exchanging products and service tokens for money tokens.

Through the use of digital tokens, we can create a type of sophistication that exceeds the existing financial and operational business world by being cheaper and less complex – all using the same single system. The future of business contracting will involve the exchange of product and service tokens for virtual payment tokens.

When we combine tokenisation with the complicated business logic that is facilitated through smart contracts, we can represent very complex business transactions faithfully and much more reliably than companies do at the moment. It is not unusual for companies to discover that their ability to negotiate an agreement often far exceeds their ability to keep their side of agreed.

Example of use

A good example of use case would be a volume purchasing agreement. Generally, businesses beyond a certain size often have many different resource planning systems as well as numerous subcontractors and subsidiaries which can make executing simple tasks very complicated. If you cannot track volume, you cannot get discounts but with blockchain and a smart contract for procurement, it is possible to always calculate the correct price for each PO.

As the token economy matures and businesses put more and more products, services, and assets onto public blockchains, we can expect the delivery of complex financial services to be made digital as well.

Everything from receivables factoring to trade finance can be a one-click activity and once participants have created a trustworthy track record of doing business over the blockchain, a record of precision will far exceed the reliability and accuracy of a traditional credit report.

But to get there, the first and most important step is for businesses to embrace tokenisation and to move far away from just treating blockchains like a techy, digital notary.

At E&S Group, we can help you to understand the benefits of tokenising your business and services. Furthermore, we can take you through every step of the transition. Contact us today by sending us an email on [email protected] to find out more.

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$1 Trillion of VC investments to become liquid through tokenisation

Categories Cryptocurrency, ICOs, Tokenomics, Tokens, Investment, Cryptoeconomics, Venture Capital

$1 Trillion of VC investments to become liquid through tokenisation

Institutional and large capital investors are increasingly looking at the crypto market as a way of finding new investment opportunities, as well as solving issues they are facing in traditional markets.

Take venture funds for example; investors have to commit their investments to sit in a startup for between 3-7 years, and an estimated $1 trillion is currently held in such a manner, with no room for movement. This results in a situation where profitability is reduced as well as the overall efficiency of their holding. Of course, if the project is successful, the investor is set to receive excess profit but there is never a guarantee of the project meeting the yield expectations, let alone getting back the funds that were invested in it.

Venture capitalists are always treading a fine line because if the project fails they lose everything they invested, but just the fact that they are investing for long periods of time means that they miss out on other opportunities to generate revenue.

A study was conducted by Cambridge Associates that looked at the performance of 27,000 venture startups over the last 20 years. It was found that the amount of venture projects that returned less or the actual amount of invested capital never exceeded 60%. So let us consider that out of the $1 trillion of investments, 60% will return the amount invested in seven years, this could take $600 billion away from the global economy.

The tokenisation of venture projects could offer a solution to issues surrounding liquidity, as well as reducing the risk of investors and making VC assets more attractive. Security tokens can offer investors a range of financial right such as dividends, equity, a share in profits, voting rights, and buy-back rights. These transactions can be completed over the blockchain and crypto investors would be able to gain access via depositories or wallets that are registered in a decentralised ledger.

This development of tokenised venture assets is already well under way and one company, VNX Exchange in collaboration with ADDCAPITAL are planning to issue tokens for $20 to finance venture products. They will also be used to create high yield projects, allow early venture capital withdrawal, and greatly expand the range of qualified venture investors that have the possibility of investing.

It is believed that such new dynamics would have an extremely positive impact on the development of startups, change the culture of investing and fundraising for entrepreneurs, and significantly boost the global economy.

If you have any questions in relation to ICOs, please contact us on [email protected]

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Why our world needs tokenomics?

Categories Economy, Blockchain, Cryptocurrency, Regulatory, ICOs, Technology, Trading, Tokenomics, Tokens, Market, Market Cap, Cryptoeconomics

Why our world needs tokenomics?

There is no doubt that blockchain technology is going to pay a pretty big part in our future. Blockchain has the capacity to unlock a previously untapped economy of trust and it also has the potential to completely revolutionise many sectors from finance to healthcare and everything in between. But before it can reach its full potential, there is one extremely important thing missing: an established and well thought out theory of tokenomics.

Moving forward with blockchain technology and its implementation will require a significant increase in the advancement of tokenomics analysis. We are currently in the midst of a truly unchartered territory – governments and regulatory authorities don’t have a clue what is happening and even those involved directly in the industry are lacking clarity and certainty. Whilst the concept of tokenomics has been around for centuries, there is not much knowledge on artificial economies such as the of crypto world. One way that token economies can be analysed more closely is through the use of agent-based modelling, but there is still a lot of work to do.

Why study token economics?

Firstly, because tokenomics is extremely important. With the advent of blockchain technology, we are seeing more and more startups move towards using market business models. These models facilitate the incentivisation of users to make them more proactive in their day to day life. For example, a government could incentivise users to pay their taxes over the blockchain network. A retail company could offer discounts if clients use the blockchain to make their payments. Knowing and understanding how best to create and promote rewards through a particular economy requires a proper understanding of tokenomics models.

Also, token economies can also fall foul of all the problems that traditional economies have. For example, inflation, volatility, and crashes are all issues that can affect the long-term viability of a blockchain based business. Token economies do make it possible, however, to automatically collect data on transactions which can then be used to calculate metrics such as the total traded volume or the velocity. The tokenomics research community has a lot of work to do when it comes to being able to utilize the unique opportunities that are offered by the blockchain. By doing this they will be able to better understand how to solve some of the presented challenges.

The issue of token pricing

Some of the other issues that are at the forefront of the challenges faced by the sector include understanding token pricing. There is no definitive answer on how tokens should be priced, or how many should be issued. There is also much work needed when it comes to the equation of exchange that is used to help derive valuations for cryptocurrencies, some of which can be used to provide a better understanding of token pricing for ICOs. The problem is that at the moment, there is no proper model around this topic and until there is, the sector will struggle to find its feet.

Long-term viability

Many ICOs that have been launched made use of a model where tokens are disposed of as they are used up. This means that as the number of tokens decreases, supply becomes limited and the price goes up. Whilst this is attractive to investors and speculators, it doesn’t give much information or hope for the long-term viability of the token.

Controlling speculation

Unfounded speculation has caused untold amounts of damage to the crypto-economy, but it can also be one of the driving force behind the popularity surge of cryptocurrencies. Speculating and trading are not bad things per se, rather it is when they get out of control and result in market crashes similar to the one that we saw in January. Control needs to be exerted so that speculation is allowed, but does not wield power that can see a market decimated in days.

The economics of the future

Blockchain is not going anywhere anytime soon and it is becoming clearer that it is set to become an integral part of our lives. ICOs have raised an astonishing $6.5bn to date, but without a proper tokenomics model, many are sadly destined to fail. As ICOs mature, the same is required by tokenomics and understanding topics such as the ones mentioned above is an integral part of blockchains long-term success.

 

Are you looking for ICO Legal Advice? Click this link to know more.

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A Half Year Report on virtual currencies in 2018

Categories Blockchain, Cryptocurrency, Regulatory, ICOs, Malta, ICO Legal Service, Law, The Blockchain Island, DLT Regulation, Smart Contracts, E&S Group, Technology, Trading, Cryptocurrency Exchange, Tokenomics, Regulation, Tokens, Binance, Utility Tokens, Security Tokens, DLT

A Half Year Report on virtual currencies in 2018

2018 has been an interesting year for crypto with colossal crashes, much-needed market adjustments, and of course, the emergence of a large number of new tokens and cryptocurrencies. Along with significant advances in regulation and legal frameworks that seek to understand, support, and protect those stakeholders operating within this new industry, there is no doubt that the rest of 2018 is going to be just as, if not more exciting as the previous six months.

Mid-January Market Crash

If you were holding Bitcoin in December 2017, you probably couldn’t believe your luck. As the value of a single Bitcoin headed towards $20k, a mad rush to invest ensued and predictions on where the price may head reached stratospheric new heights. Then on January 16th 2018, Bitcoin investors woke up to a nasty shock. The value of their coins had dropped by 15% and this news had a knock-on effect on the value of all other altcoins, causing a huge slump in the value of the market. The excitement and hype that had surrounded cryptocurrencies just a few days before, disappeared just like the profits of those who invested in it.

As prices continued to fall, investors started to panic. They started selling their coins in an effort to nip their losses in the bud and the moniker “Black Tuesday” was coined. Some crypto-coins saw losses of up to 40% and it seemed like many naysayers predictions were coming true and that the bubble had finally burst. Some voices remained steadfastly optimistic however and maintained that price slumps were common in all markets, not just the crypto one. After such an exponential increase in value, it was naturally expected that the market would correct itself because after every meteoric rise comes to a reverse-swing of the pendulum that needs to be ridden out – January was exactly that. As prices are now more stable it is hoped that they will increase at a steady rate, signalling a new era of market stability and maturity.

TRON Makes a Name for Itself

Since January of this year, TRON has experienced a steady increase in value. Despite a few issues, mainly caused by the crypto price-crash, it seemed to have found its niche which suggests a bright future for both the platform and its cryptocurrency.

TRON is a decentralised, blockchain-based, protocol project that functions as a content distribution platform for the digital entertainment industry. Whilst the platform itself is yet to go live the TRX coin is gaining significant traction.

Created by Justin Sun in 2017, the concept behind it is to establish a global network of free entertainment content which allows creators to publish, store and distribute their own content without the need for an intermediary. Whilst its value per coin was only $0.30 in January, it is expected to hit $1 by the end of 2018.

Its main selling point is that it is not just another cryptocurrency. It has a platform that solves a problem and offers functionality to a range of users and publishers. Over the last year, TRON has increased in value by 1.39% making it one of the top crypto coins in terms of growth, making it one to keep your eye on as we progress through 2018.

The Unexpected Rise of Litecoin

Many have dismissed Litecoin as “the poor man’s Bitcoin” but despite this, its popularity has increased drastically over the past few months. It was initially launched via an open-source client on GitHub in 2011, a sort of spin-off of the original Bitcoin Core client, but it offered much lower block generation times, a higher number of coins, a modified GUI, and a different hashing algorithm.

In 2013 it experienced a big surge in value and by May 2017 it had secured a spot as one of the Top 5 global cryptocurrencies in terms of its market cap. Now accepted by a wide range of online retailers, its adoption is increasing and many are seeing it as a better alternative to the rather bloated and over-inflated Bitcoin.

12 and even 6 months ago, blockchain was not something that was widely understood but as we progress to the end of 2018, it is expected that we will see a dramatic uptake of blockchain integration across a diverse range of sectors. Following in the footsteps of IBM, Microsoft, and Maersk, even smaller SMEs are likely to be interested in harnessing its potential.

Litecoin is predicted to peak at a value of over $600 per coin by the end of 2018 and there is no doubt that it has huge potential. Negating many of the issues that are faced by Bitcoin users, it presents a practical, simplified and completely viable alternative to the crypto-giant.

Malta Takes the Lead in Industry Regulation

In the last 12 months, it has seen cryptocurrency, blockchain and ICOs negate a minefield of regulatory and legal issues. Problems around its classification, AML and KYC regulations, and the reluctance of many banking institutions to support the burgeoning technology has resulted in many setbacks for the crypto world but that is all set to change.

The island of Malta has long been a hub for digital technologies and it is well known for its iGaming, Finserv and Fintech industries that when combined, account for around half of the country`s GDP. Then, in March 2018 the Government announced the drafting of three new bills that would seek to provide legal and regulatory clarification on DLT, crypto, and ICOs. These bills are the Virtual Financial Assets Bill which would provide a regulatory framework for ICOs and virtual currencies, the Malta Digital Innovation Authority Bill and the Technology Arrangements and Services Bill which will oversee companies that operate within the market, as well as providing a much-needed guidance and clarification.

This makes Malta the first jurisdiction in the EU, and the world to create a comprehensive legal framework that not only protects all stakeholders including operators and investors, but also supports the growth and development of the industry. By ensuring explicit legal clarification as well as adherence to AML and KYC regulations. This means that the industry will receive a much-needed confidence boost and will help to increase the  level of public trust in this new market sector.

Binance Relocates to Malta

As a result of Malta’s decision to support cryptocurrencies and related industries, an exciting announcement came just a few days later. Binance is the largest cryptocurrency exchange in the world and commands 10% of the global trading volume as well as having a market capitalistion of $1.3billion at the time of writing. Its founder Changpeng Zhao started Binance in July 2017 and in just a couple of short months, it has grown to be the market leader.

Following the introduction of restrictive laws in Japan and China regarding cryptocurrencies and exchanges, Binance was on the look out for a more welcoming and flexible home. On March 23rd, Binance announced their move to Malta and the crypto community rejoiced. Such a vote of confidence is a big deal for the small EU country and it is expected that such a move will encourage many other companies and startups to follow suit.

The Blockchain Boom

This time last year, most people had heard of the blockchain but only in the context of it being intrinsically linked to Bitcoin. Now, the technology has broken away from just monetary uses and has earned a lot of attention for its potential. In the last few months, more and more use cases have come to prominence at blockchain has found uses in industries such as logistics, healthcare, politics, real estate, and even crypto-powered beer vending machines. It has also been tipped to completely revolutionize the way we vote, as well as provide microloans to SMEs in developing countries and to solve the energy crisis in third world countries.

 

E&S Group is a leading corporate & law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

For more information click the link.

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Token design for Digital Crowdfunding Campaign

Categories Blockchain, Cryptocurrency, ICOs, Technology, Tokenomics, Tokens, Cryptoeconomics

Token design for Digital Crowdfunding Campaign

One of the key concepts behind an Initial Coin Offering (ICO) is to use the blockchain as a way of bringing together a decentralised and self-contained mini investment economy. The token that is created and “sold” as a part of the ICO is the key access point into this ecosystem and removes any need for a third-party middleman. When it comes to designing a functional token, it is the most important part of the new system as this alone will decide the flow of payments and rewards to anyone that uses the system.

Cryptoeconomics

When developing an ICO, first of all, the creator must determine the cryptoeconomics that is behind the token. This should include the maximum number of tokens that will be created, the value of each token (usually based on BTC or ETH), any discounts for purchasing it early, and how the token will be distributed to backers, founders, developers, and other users. Consideration and careful planning must also be given to marketing, legal, and security processes and strategies.

The key to determining the tokenomics behind an ICO should begin with estimating the size of the digital ecosystem as well as exactly how users and contributors will engage the system. One should also consider the number of transitions that are expected to be made and enough tokens should be issued to not only run the core system but to allow system growth over time.

Creating a digital ecosystem

The token can and should be optimised to the full for a range of different goals. For example, whilst most ICOs issue tokens that allow the building of the system and running it on a basic level, creators should take a much longer view and price the value to facilitate an increase in the usage of the platform. One could also price the token to encourage developers to create a digital ecosystem that exists around the ICO.

It can be difficult to develop a plan for the entire life of the blockchain system, as predicting the future has never been an easy task. Due to this fact, many developers consider issuing another type of token at a later date that can provide users with a higher level of access to the digital ecosystem as it matures past a certain point.

Developers also have the option to create different types of token for the ICO which can give unique benefits to users. As the system continues to grow, new applications and higher value benefits can become available.

 

To learn more about ICO Legal Services in Malta please follow this link.

Contact us directly on +356 20103020 or by email at [email protected] to find out more.

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A guide to token usage, utility, and value

Categories Blockchain, Cryptocurrency, ICOs, Malta, E&S Group, Technology, Tokenomics, Tokens, Utility Tokens, Security Tokens, Data, Cryptoeconomics

A guide to token usage, utility, and value

There is no shortage of information available about cryptocurrencies, but there is very little in the way of defining exactly the type of tokens. When it comes to technical details about blockchain, the concept of a cryptocurrency coin is well understood; a programmable currency until that is linked to a blockchain and relates to smart contract logic in the context of a certain software application. But when it comes to the non-technical details, what is a token?

A token is another way of naming a privately issued currency. When we consider sovereign governments that issue currency, they do so with set terms and governance, directing how the economy functions with fiat currency as the medium of value. Then, we have the blockchain with new types of organisations who issue their own currency in the form of digital assets, otherwise known as cryptocurrency. These issuers are setting their own rules and terms around their operations and essentially creating new, self-sustainable micro-economies.

In other words, what was once the sole preserve of governments, is now in the hands of anyone that has the capability to create their own tokens.

A few years ago, no one was talking about ICOs or STOs, or even token models, and with much confusion still present around these phenomena, this article is designed to make things a little clearer.

Tokenomics vs Cryptoeconomics

At E&S Group, we believe that there is a difference between tokenomics and cryptoeconomics. When we talk about cryptoeconomics we refer to the incentive structures that are designed to facilitate the creation and subsequent transaction validation of a particular cryptocurrency. For example, the cryptoeconomics of Bitcoin is designed to give Bitcoin miners a reason to mine new BTC. These miners validate each Bitcoin transaction and then receive newly minted BTC as a reward for their efforts.

Individuals, businesses, and users of BTC then pay a transaction fee to the miners so that their transaction is included in the mining of the next block. This means that even when all BTC has been mined (something that is estimated to happen in 2140), miners of Bitcoin will still be incentivised to keep mining and validating transactions.

This is what we refer to as cryptoeconomics. Whilst it is quite similar to tokenomics in terms of the incentivisation of stakeholders to ensure specific behaviour, there are some differences between the two.

Tokenomics focusses specifically on the application layer of a token so that the goal of it is to ensure that a crypto-token is used within the ecosystem as intended.

This means that tokenomics is not just about the supply and transaction validation of a token, but more about the things that happen afterwards. When we consider tokenomics, we have to consider what the token is used for and what behaviour we are trying to elicit.

Having explained that tokenomics is not the same as cryptoeconomics, we must define exactly what tokenomics entails as depending on who you speak to, it can have different meanings. For some, the tokenomics of an ICO refers to certain token metrics including supply and the amount that is reserved for founders and advisors to the project. Others believe that tokenomics is a four-layer model that comprises of token functionality, token distribution, token workflow, and token governance.

Token use

A token must have a purpose, and during the ICO boom this was mainly to raise funds to the project, but now things are changing. Even if the main goal is to raise funds, the token still needs to have an additional, secondary purpose. Eventually, the aim is for investors to use the token and not just to invest in it for later speculation.

Whether the token is used to start an online platform, or whether it is to incentivise another kind of behaviour, it is of the utmost importance that the purpose of the token is clear. To be able to set up a long-term sustainable token, it needs to be designed with the tokens utility clearly set out, because if not, it will hurt the business.

Token Utilisation

A second part of the tokenomics is the way that the token will be utilised. Once you have established your purpose, clarification needs to be given as to whether the token will be used, when it will be used, and how it will be used. Consideration also needs to be given to how often it will be used and by whom. Just because you have a clear purpose for the token, does not mean that people will use it effectively, therefore you need to do token research to understand how the token will be used.

Token utilisation is as important as token value. For example, what happens when the token increases in value due to speculation? In such cases, users of the platform will be less likely to use it for its intended purpose and more likely to hold it so that they can cash in at a later date.

Token functionality

Programmable money is a term that has been used to describe cryptocurrency tokens but you also need to have an idea of what sort of functions the token will have.

For example, in the case of a security token offering, a company can issue its shares as a token, therefore, providing a financing mechanism for the company whilst also providing value for the shareholders. To be able to provide such value, the token needs to be structured in such a way that allows people with no tokens to vote and receive dividend payments. Functions such as dividend payments of voting are clear examples of functionalities that could be programmed into the token.

Token Distribution

Another aspect of tokenomics is the way that it is distributed. Often, ICO projects make mistakes in their token distribution by making it fixed that is issued at just one time moment.

If we look at fiat currencies, their supply is never fixed, instead, the central bank is able to print more money or a local bank can provide a loan. These are both means of creating money where previously there was none. From this, we can ascertain that a fixed token distribution is likely to have negative effects on its value, inflation, and of course, usage. For these reasons, it is incredibly important that special attention is paid to how the token is distributed, for example:

  • When will the token go into circulation?
  • When will it leave circulation?
  • How much will be released at first?
  • How do current and projected utilisation and value coexist?

Token Value

The value of the token is another important aspect of tokenomics. When a token is issued as a share or security, the value of the token should be clear and straightforward. For example, if a company is valued at $50 million, and 10 million equity tokens are made available, each token/share should be worth $5.

If a token doesn’t have a clear value, things can get a lot more complicated. If an issuer thinks that a token is worth X, the market may put it at a different value. This can become even more complicated when you want to enable users to exchange tokens for specific services. If the value of a token falls in the market, the price should be adjusted by the issuer.

Tokens that work in the long-run

Tokenomics has a lot of complicated and very different facets that include token purpose, utility, functionality, distribution, and supply. But there are many others that can be taken into consideration such as mechanism design, stakeholder interviews, and token governance, meaning the good token design is not as easy as some would believe.

Even if all of these things have been given consideration, the task is still not completed because to properly set up a tokenised business due attention to other parts of the business such as the token market, the business technical infrastructure, and the token and revenue model. This is not an easy task and it is one that requires the help and guidance of a professional.

E&S Group has solid experience in designing tokenomics infrastructures, as well as advising companies on all of the other important aspects of creating a successful project. For further information please send us an email on [email protected]

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