Page 4 - February 2018 Disruption Report Flip Book

CRYPTOCURRENCY FJEABNRUUAARRYY 22001188
CRYPTOCURRENCY
A new funding approach for a new economy
“When the Internet Economy was being funded, it was relatively easy to do an IPO,” wrote DailyFintech’s Bernard Lunn. “Now the bar is far, far higher. The Equity Token platforms, emerging from the wild anarchic long hot summer of ICO, will be the funding platform for Blockchain Economy. Many people said this would happen. Few guessed how fast it would happen.”
The initial coin offering (ICOs) is an innovative crowdfunding model that allows startups to bypass traditional early see investment. ICOs come in three flavors—equity tokens, securities tokens and utility tokens. And all tokens are not created equal. There are three forms of ICO tokens that broadly fit into three categories:
1. Equity tokens. One of the most promising applications of Ethereum-based smart contracts is the opportunity for startup companies to issue stock—or equity tokens—through ICOs. Equity tokens lower the barrier for startups to the capital markets. Moreover, ICOs make stock trading more accessible to the average investor and allow shareholders to take a more active role in corporate governance since voting is conducted transparently through the blockchain.
The ICO innovation is democratizing early stage—so-called “seed” stage—investing. “A well-designed ICO that reduces both technical risk and market risk because those who can evaluate technical risk and market risk buy the Tokens is a game-changer for investors, workers and customers,” wrote Daily Fintech’s Bernard Lunn. “Message to regulators – don’t throw out the baby (game-changing innovation) with the bathwater (scammy ICO promoters). Smart regulation that is tech driven not just throwing the lawyers around can be a win for both entrepreneurs and investors.”
To date, few startups have attempted to conduct equity token sales because of the lack of regulatory guidance. Delaware recently passed a bill allowing companies to maintain a list of shareholder names on a blockchain rather than conventional methods, which will facilitate blockchain-based stock trading. Many expect it’s only a matter of time before equity tokens play a central role in the crypto finance industry.
2. Security tokens. A security token is a broad classification of digital currency that refers to any kind of tradable asset, ranging from coins redeemable for precious metal to tokens backed by real estate. Security token sales and investments are subject to SEC regulations.
3. Utility tokens. Presumably, most tokens are securities since the majority of ICO participants view crowdsales as investment opportunities. If the ICO does not meet the three requirements
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