EQUITY TOKEN OFFERING DECONSTRUCTED
Before looking at equity token development, let us take a brief look at equity tokens. Equity tokens are a more secure and technologically progressive way of obtaining funding for your fledgling project in comparison to Initial Coin Offerings (ICOs). Equity tokens hold intrinsic value as they are indicative of ownership in a third-party asset or venture and obtain their value from that particular token’s trajectory/course. They are comparable to stocks, options contracts, and futures.
With regard to regulations, the SEC treats them as conventional securities transactions. The only real difference between an equity token and a conventional stock is the procedure of documenting ownership. Equity tokens record corporate ownership on the blockchain.
ETO 101
ETOs are a variant of fundraising that consists of the issue of blockchain strategy. The following are some of the features of equity token offerings:
- Programmable equity — equity tokens provide owners with comprehensive control over illiquid assets through equity issues and programmable code.
- Secure wallet — A multi-signature and device wallet are developed on the blockchain, to make the network, trade and render funds safe/secure.
- Regulatory compliance — Through the development of SEC-compliant tokens, one is assured of high-end regulatory compliance.
- International capital investment — Equity tokens impart trust and reliability to investors coming to the crypto space which results in a bigger pool of capital investment.
- Personal blockchain — These popular tokens are developed on your blockchain providing you comprehensive access and control.
- Backend dashboard — With ETO development, you will be leveraged with a comprehensive panel to administer retail and institutional investors like dividends, buybacks, and announcements.
- Improved market — Gives assurance to investors with recognized structure and progression in tech domains which potentially results in obtaining trust for investors.
The types of equity tokens
Equity tokens fall under two categories:
- Dilutable tokens — In this type of token, plenty of stock can be authorized, but only a portion is issued to investors and other shareholders. The remainder of the stocks pending for issue will be utilized for later sales, and upon such sale, it is diluted for the existing shareholder pool.
- Non-dilutable tokens — These tokens are equivalent to a percentage share of the business and avert investors from diluting their equity position. In this kind of token, the portion of share value decreases when the cumulative number of the shares increases. Anti-dilution premium acts as insurance so that investors stay in the company without diluting their authority and assets.
The development process
The Equity Token Offering (ETO) development process consists of the following process steps:
- Registration on an exchange platform — this is the preliminary step. If your firm does not have a proprietary exchange platform, your firm’s registration and other docs are required for verification.
- Commercial terms — These are developed and include the terms provided to prospective investors. The venture value should be specified in addition to the cumulative investment amount available.
- Pre-equity token offering — During this phase, the token is provided to high worth investors before offering to the public.
- Public placement — this is the phase where the remaining fund is issued to the public and max funds amounts are obtained.
- Shareholder’s community — when any type of share is sold to the public, a shareholder’s community is developed; shareholders should have access to your firm’s activities; this includes vote platforms, reporting tools, and payment methods to token holders.
Thus, it can be seen how Equity Token Offering can benefit established businesses tremendously. It allows entrepreneurs to raise funds securely in a decentralized manner. Moreover, it allows them to save on precious time and resources. If you are planning to develop an ETO for your company, visit Blockchain App Factory. We offer premium services that use the best technologies and practices to give you a competitive advantage.
