For companies interested in offering regulated ICOs, this popular new model could offer a nice option. A SAFT is a simple agreement for a future token. It is true to its name: it is simple. This is because the purchase agreement offered to the ICO investors is just a simple promise to deliver the company’s tokens when they are ready. The token could be ready in 1 year or 3 years or whenever. It does not matter. Investors who are excited about the prospects of this token will wait patiently. So why isn’t every ICO using it?
It was just a matter of time before the SEC started to pay attention to what is really going on with ICO marketing. Celebrities like Floyd Mayweather, Paris Hilton, and Jamie Foxx have been busy sending tweets and posting on social networks their endorsements for ICOs. Really? What would they really know about blockchain architecture? And did they read the whitepapers that they were promoting? Probably not. What they did do is receive tokens in exchange for promoting the ICOs. The problem is this: According to the SEC, it might be illegal.
Who wants regulators when companies are so successful raising capital via ICOs and investors are able to instantly trade their investments for more crypto than ever before? Behind the scenes things were not so rosy. Take Tezos, for example. I wrote about it in early September and since then it may have become the first example of the excess in ICOs. That is OK because the remedy is quite simple: regulation. Regulators are not the big black wolves people make them out to be. They are here to provide investors confidence in the marketplace by allowing investors to make informed decisions. The ICO world is about to change: Welcome ICO 2.0.
Yes it is true., The shark himself is now in the ICO game in full force. The company he is endorsing is has a new blockchain app called Mercury Protocol. They are going to replace Facebook and Mark wants in. The only problem is this: The deal is another ERC-20 utility token that is sold to investors without any regulation.
So why are investors going for it? It turns out investors are purchasing these token with the expectation of profit. They can trade them on one of the dozens of exchanges all over the internet. When the Ethereum ICO was completed and they raised $18M, the market was still small. Investors had to wait many months before the ether started to rise in value. Today, it is 95,000% higher than it was when initially sold. This is why ICOs have captured people’s imagination.
Enter the ERC20, a small piece of code using a standard created by the Ethereum community. This list of code can be completed in 30 minutes and a company now can sell its newly minted token for millions if not hundreds of millions of dollars in ether or Bitcoin. Many companies will create 1 billion tokens, give themselves 30%, keep 10% in treasury, and then sell the remaining 60%. This is how a company can get $50M or more in no time. There are over 9,363 ERC20 token smart contracts according to Etherscan!