Standard Tokenization Protocol: The Decentralized Tokenization Network
2. Use Cases
Standard Tokenization Protocol’s STP-Standard is an open-source standard that defines how tokenized assets are generated, issued, sent, and received while complying with all necessary regulations. The protocol allows assets of all kinds to be tokenized in a way that makes them fully compliant across jurisdictions and transferable across any ERC20 platform.
Tokens built on top of the STP-Standard will use the protocol’s on-chain Compliance Validator to verify compliance with relevant regulations (i.e. KYC, AML, Accreditation, etc.) as well as any issuer-specific requirements (i.e. ownership concentration, holding periods, voting). The Validator Committee will serve an advisory function to ensure the Compliance Validator is enforcing the most up-to-date legislation at all times.
The main feature of the protocol is the onchain Compliance Validator (pictured above). It serves two main functions: Jurisdictional Compliance (i.e. tokens constituting a security under a specific region) and Issuer Compliance (i.e. no investor can own more than 49% of the outstanding token supply). First, it must ensure adherence to the respective laws of the jurisdictions included in the protocol’s code; second, it must ensure compliance with the parameters and restrictions imposed by the issuer prior to asset issuance.
In order to ensure the protocol is enforcing compliance of the most up-to-date regulatory standards at all times, an initial committee will be established to validate operational accuracy. It will be comprised of a token holder-elected group including but not limited to the industry’s leading thought leaders, advisors, securities lawyers, and regulators across jurisdictions to make sure any change in the regulatory landscape is reflected in the protocol.
STP Token offerings offer a way to execute token offerings in a compliant and fully transparent manner. By combining features of public offerings (IPOs), token offerings (ICOs), and blockchain-based smart contract programmability, STP offerings provide benefits that have previously been impossible, several of which are outlined below.
The level of transparency provided by STP tokenization enables brand new features such as 1) real-time cap tables; 2) public confirmation of legal compliance at all times; 3) clear legal guidance for all jurisdictions included in the protocol; and 4) the preventative rejection of non-compliant trades via the token’s code. This represents a fundamental shift from reactive to proactive compliance, which was not possible before regulated STP token offerings and the STP Compliance Validator.
The ability to program value to move from one person to another if and only if certain conditions are met has enormous potential to create value and dramatically lower operational costs. Pre-programming transfer or distribution features into an issuer’s STP token would significantly reduce the manual and labor-intensive process of issuing quarterly token distributions by replacing administrative and back-office functions with a simple smart contract. Later on, more complex examples will emerge such as hybrid tokens that auto convert between equity and debt-like instruments based on underlying performance and other predefined parameters.
Investors could soon be participating in decentralized crowdfunding by sending tokens from their wallet directly to the STP network and automatically receiving new STP-Standard ‘XYZ’ tokens in return. This transaction will occur onchain so investors can see that the tokens were issued fairly and according to the STP-Standard. These tokens will run on the STP protocol with all relevant jurisdictional and issuer-specific restrictions encoded directly in the Compliance Validator.
The STP-Standard upholds the principle of disintermediated transfers of asset ownership as a core tenet — enabling direct, peer-to-peer token transfers with no third-party involvement. The onchain Compliance Validator confirms that these transfers are executed in accordance with the pre-programmed rules of the issuer and/or regulator. In this way, the STP-Standard ensures parties are able to directly transact with each other while ensuring compliance is upheld at the token level. This feature is not possible in the traditional financial world and is a core feature of the STP-Standard.
New Financial Products
The tokenization of assets will also enable the creation of brand-new financial products. For example, using the STP-Standard to tokenize a valuable wine collection would enable the owner to use that STP-Standard token as collateral for an onchain loan of DAI. This will further unlock value trapped in historically valuable assets and allows that value to be put to work more productively in other ways.
Standard Tokenization Protocol’s platform token (STPT) will be tokenized using the Standard Tokenization Protocol Standard. It will not only serve as a prime example of STP-Standard asset tokenization, but will also power the incentive structure that aligns all participants and strengthens the overall network. The token will be necessary for the proper functioning of the network and have the following utility:
1) Issuance Fee: Issuers will pay an initial issuance fee to the Standard Tokenization Protocol, denominated in STPT, to initiate the tokenization of their asset. Any issuer-specific requirements, parameters, and rules around token transfers will be implemented by Standard Tokenization Protocol into the Compliance Validator as part of the initial issuance fee.
2) Compliance Validator Gas: Senders of any STP-Standard token will need to use some amount of STPT tokens as Gas to power the Compliance Validator when a transaction occurs. This Gas is then pooled and paid out to stakers and Validator Committee members as a reward for honest network behavior.
3) Staking: The network also enables a Proof of Stake mechanism that allows token holders to stake an amount of STPT proportional to their confidence that all Compliance Validator requirements are met, and they either earn Compliance Validator Gas tokens in return as a reward for honest behavior or else lose their stake to reward honest stakers.
4) Governance: Token holders may also delegate their stake to a token-elected Validator Committee. The validators who comprise this Committee will earn STPT for submitting publicly auditable proof that the Compliance Validator matches the laws of their jurisdiction or is otherwise functioning properly. The Validator Committee STPT rewards should incentivize these groups to participate in a meaningful way and become integral participants of the Standard Tokenization Protocol network.
Standard Tokenization Protocol’s decentralized smart contract platform ensures that compliance considerations (both jurisdictional and issuer-specific) are met at the token level at all times. Its native STPT token facilitates the incentive alignment of network participants by rewarding honest actors and stakers with STPT tokens for their respective roles in maintaining the integrity and performance of the STP network.
Standard Tokenization Protocol originates a new method of fundraising and issuance that is more transparent, accessible, fair, compliant, and efficient in today’s digital world.
A new standard for digital assets.
Anyone interested in learning more can visit us at: https://stp.network/
If you’re an issuer interested in tokenizing your asset, please reach out to us at: firstname.lastname@example.org
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