The initial coin offering (ICO) is an innovative crowdfunding model that allows startups to bypass traditional early seed investment. However, not all ICOs are created equal; in fact, there are at least three types of tokens issued through these crowd sales.
Investors often struggle to discern what category an ICO token falls into, which is why Strategic Coin offers educational information and in-depth ICO research reports to help investors make informed financial decisions. Below, this article explains the three major categories of crypto tokens:
One of the most promising applications of Ethereum-based smart contracts is the potential for startups to issue stock–or equity tokens–through initial coin offerings. This will benefit startups since the barrier to entry into the financial markets will be much lower than in the past. It will make stock trading more accessible to the average investor and allow shareholders to take a more active role in corporate governance since voting can be conducted transparently through the blockchain.
Due to the current lack of regulatory guidance, few startups have attempted to conduct equity token sales. However, Delaware recently passed a bill that allows companies to maintain a list of shareholder names on a blockchain rather than conventional methods, which will enable blockchain-based stock trading. Consequently, it is likely only a matter of time before equity tokens take a central role in the crypto finance industry.
A security is a broad classification that refers to any kind of tradable asset. Through ICOs, investors have access to a wide variety of securities tokens, ranging from coins redeemable for precious metals to tokens backed by real estate.
In the United States, these token sales and investments are subject to SEC securities regulations. SEC v. Howey established the guidelines for whether a financial arrangement involved an investment contract and was subject to securities regulations. As described by Cooley LLP Fintech Team Leader Marco Santori, an arrangement is a security if it involves “an investment of money. And a common enterprise. With the expectation of profit, primarily from the efforts of others.”
Presumably, most tokens are securities since the majority of ICO participants view crowd sales as investment opportunities. However, if a token does not meet the three requirements of the Howey test, it may fall under the classification of a “utility token”. Utility tokens, which may also be called app coins or app tokens, provide users with access to a product or service.
For example, Filecoin–which raised an ICO-record $257 million–plans to provide a decentralized cloud storage service that will take advantage of unused computer hard drive space. ICO contributors received tokens that they will be able to use to purchase storage space from Filecoin once the service has launched.
Since total supply is fixed, utility tokens may appreciate over time if demand for the product or service increases. However, investors should be wary of startups that describe their token as a utility or app coin but also market it as an investment because it is likely that regulators will consider the asset a security.
It is important to note that “utility token” is an organizational distinction–not a legal one. The SEC has not given official guidance on utility tokens, so the industry does not with certainty whether they are subject to securities regulations.
Restrictions during ICO:
US citizens only allowed to enter our crowd sale during a Pre-ICO stage. If you willing to invest in our project after the official ICO start, please note that you must be SEC accredited investor or have a minimum of 2 million USD net-worth.
Why Utility tokens:
We are planning to organize private and secure mining facilities all over Canada that is unfortunately limited in its capacity :
- British Columbia
Since we will have limited space we are creating platform utility tokens to give a fair chance to mine bitcoin without profit-sharing fees or cloud mining. You will be paying in Tokens or Canadian dollars for electrical usage and maintenance and slot colocation.
How are we different from anybody else:
We are hard at work to secure a partnership with utility companies on a promise that we won’t overload local power grids, in fact, we will create power plants ourselves with partnership from multiple vendors of energy generation business. We will use abounded resources in each province and generate electricity. Any unused electricity will be put or sold to the province’s pools to reinforce energy infrastructure needed for each project. Also, it will create an internal economy to boost our philanthropic activities all around the world.
After extensive research, we know what is missing for mining to be sustainable here and we want to fix the problem. This will boost Canada’s appeal to miners and in turn, will bring investments all over the world. Canada has many advantages that only a few countries have in this world and we want to use that advantage to make its appeal even stronger. We want to show everyone, around the world that bitcoin and mining, in general, is more empowering than many of the mainstream and politicians think.
- It’s not Financial sectors Enemy – its magic wand to be successful in this less trusted industry
- It’s not Energy sectors destroyer – its tool to boost its real potential and for the first time in many years do it on local level and in empowering way for much-needed infrastructure all over the world
Recent Ellen’s show and goat analogy response:
Dear Ellen, you can actually touch its benefits and its value way more astronomical than you think it is.
1) Financial Empowerment to 3rd world countries
2) Infrastructure revamp
3) 3rd Industrial revolution that can fix all wrongs of first two
– Financial needs: Did you knew that only 35% of the world population has access to financial tools we use every day?
– Infrastructure: 41% don’t have just electricity, but running water. 1.2 billion people don’t have electricity and number expected to grow by 2030 due to uneven economic growth and lack of tools to do that. But we want to prove that on localized level Bitcoin and digital currencies way more empowering than many think! They do have a value many seem to overlook and it’s more than money…
Did the world become so greedy that it forgot about anything but money?
So you are basically telling us that financial gains worth the loss of 20% of world population by 2030?
Great! Now, mothers nature will its a privilege that 40% of the world only have.
See Ellen, goat comparison was a miss.
That’s why governments afraid of us and some institutions think we came to destroy them. Their perception of things is so outdated and wrong. We are here to innovate and not to fight. We simply don’t have time to be Mike Tyson.
ICO Target: 168,000,000 CAD
Token Circulation Realese: 112,500,000 tokens out of 125,000,000 (90% supply circulation).
Are token re-issuable: No. They can be purchased ats utility token to use our services on the exchanges that will support it.
Have questions? Contact us: email@example.com