Issuance of utility token through Initial Coin Offering (ICO) requires apt execution of token sale terms and conditions. With the evolution of blockchain based business models relating to different cryptocurrencies, the token sale becomes an important transaction from the perspective of a company. This growth of cryptocurrency-based models received further traction when recently, El Salvador became the first country to accept bitcoin as legal tender. This announcement implies that businesses in El Salvador will have to mandatorily accept bitcoin as a payment option, along with the American dollar, the official currency. Although the government’s expectation is to provide a viable currency option to a vast majority of the population, which doesn’t have access to a bank account. Such announcements are definitely bound to boost the growth of business models built on crypto and issuance of utility tokens through different cryptocurrency exchanges.
Initial Coin Offering (ICO) or token sales have been gaining much attention recently, from both institutional investors and everyday people alike. An IPO represents a significant financial transaction that marks the initial public offering of a company’s stock. Many people are familiar with these IPOs of the past such as Enron and Microsoft. However, the new token sale model that has recently emerged on the market may be even more appealing. To explain, consider this — while an IPO represents a major deal, token sales represent a method of crowdsourcing small business deals via the Internet. The appeal of token sales comes from the fact that they enable investors to participate in an investment with little or no risk, outside of fees that are paid for initial coin offerings.
Additionally, tokens provide an alternative revenue stream for existing investors while potentially providing a great deal of liquidity for up-and-coming businesses. In the future, the use of ether could provide a similar income stream for companies and individuals. Regardless, it’s clear that many large corporations and high net worth individuals wish to use these models to obtain additional funding for their ventures. As was previously mentioned, an IPO represents the purchase of shares of ownership in a company.
A Token Sale is generally recognized as an Initial Coin Offering (ICO) and is a restricted period within which a sale of a specific volume of crypto tokens takes place. The tokens are introduced to the world and are commonly in trade for prominent cryptocurrencies. ICOs are seen as modern IPOs and are developing as the next generation of crowdfunding. Considerably, token sales operate on top of the Ethereum Blockchain system, employing a smart contract that accumulates Ethereum tokens and trades these for a fresh token proposed by the start-up business. This occurs entirely on a Peer to Peer (P2P) network, without any traders or brokers as middlemen.
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Advocate Rahul Dev is a Patent Attorney & International Business Lawyer practicing Technology, Intellectual Property & Corporate Laws. He is reachable at rd (at) patentbusinesslawyer (dot) com & @rdpatentlawyer on Twitter.
Quoted in and contributed to 50+ national & international publications (Bloomberg, FirstPost, SwissInfo, Outlook Money, Yahoo News, Times of India, Economic Times, Business Standard, Quartz, Global Legal Post, International Bar Association, LawAsia, BioSpectrum Asia, Digital News Asia, e27, Leaders Speak, Entrepreneur India, VCCircle, AutoTech).
Regularly invited to speak at international & national platforms (conferences, TV channels, seminars, corporate trainings, government workshops) on technology, patents, business strategy, legal developments, leadership & management.
Working closely with patent attorneys along with international law firms with significant experience with lawyers in Asia Pacific providing services to clients in US and Europe. Flagship services include international patent and trademark filings, patent services in India and global patent consulting services.
Global Blockchain Lawyers (www.GlobalBlockchainLawyers.com) is a digital platform to discuss legal issues, latest technology and legal developments, and applicable laws in the dynamic field of Digital Currency, Blockchain, Bitcoin, Cryptocurrency and raising capital through the sale of tokens or coins (ICO or Initial Coin Offerings).
Blockchain ecosystem in India is evolving at a rapid pace and a proactive legal approach is required by blockchain lawyers in India to understand the complex nature of applicable laws and regulations.
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