Rethinking the Security Token Model
*Please Note: Bitlit LLC is not creating an ICO at the time of this writing, and the content in this article does not consist of financial advice.*
With the increasing prevalence of companies choosing to raise funds via Initial Coin Offerings, many often ask what value investors in said ICOs are receiving in return for their capital.
The Utility Token
Companies and organizations often label their tokens as utility tokens for this reason: the inherent value that recipients of utility tokens is the ability to utilize a service or application that is restricted to those who don’t own the tokens. The utility token model has lost a considerable amount of its credibility due to scams, however, as several projects that have sold utility tokens ultimately develop products that do not require a standalone token and appear to have mishandled the money of their investors. Utility token models are also overlooked by some regulators. The United States Securities and Exchange Commission does not honor the concept of a utility token, for example, and labels nearly all tokens sold during ICOs as securities.
The Security Token
On the other hand, companies can opt to label their tokens as security tokens and provide their investors with corporate stake, voting rights, or the ability to resell their tokens for profit at a later time. The value in these security token models is relatively limited at times, though. Traditional securities such as equities often provide the aforementioned value proposals in addition to dividends.
The Dvdnd Token
We at Bitlit believe that dividend-paying tokens are the next step in formulating a decentralized financial system that can rival the systems of today. With this being said, I’d like to propose the Dvdnd token to kickstart the development and experimentation of dividend-paying tokens on the Ethereum blockchain.
Found here, the Dvdnd token is an ERC20-compatible token that allows token holders to redeem a portion of the token contract’s Ether balance in the form of a dividend. The amount of the contract balance that holders are allowed to withdraw is directly proportional to the amount of the total token supply that the holders own; users who own more tokens are allowed to withdraw more Ether. The owner of the contract (the address that deploys it) can load earnings as Ether into the contract for users to redeem as dividends and can transfer ownership to other users for them to have the responsibility to load the contract with Ether. I invite all to contribute to the development of the Dvdnd project at https://github.com/getabitlit/dvdnd.
The Dvdnd project is meant to be forked, modified, and incorporated into other projects so that dividend-paying tokens can become more common in the Ethereum ecosystem. Any feedback would be very appreciated.
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