On Tokens and Crowdsales: How Startups Are Using Blockchain to Raise Capital

Published on by Coindesk | Published on

User tokens are earned by providing value to these networks.

Equity tokens are used to finance the development of the network, but are not needed to access the services provided by the underlying protocol.

Deploy the network and secure user tokens via mining.

Allocate a portion of the pre-sale tokens to the founding team as a reward for ideating and developing the network.

Advertise the network and sell user tokens to anyone, anywhere.

Write a smart contract for a DAO, with a pre-defined number of equity tokens allocated to the company founders.

Since DigixGlobal is the company that ideated the network, published the white paper, wrote the DAO smart contract in ethereum and holds a substantial amount of equity tokens, they became the default service provider of the DigixDAO. Regulation on token crowdsales.

Equity tokens sold represent shares of the DigixDAO. While the Monetary Authority of Singapore does not consider tokens as securities, the legal sale to US citizens depends on the SEC's interpretation of the tokens under the Howey test.

The last approach is to keep the network and issuance of tokens independent from its creator.

Following the Nakamoto business model, the network creator secures its share of tokens by being the first miner in the public network.