Welcome to Token Lounge

ICO’s present huge opportunities to investors when tokens are bought in private and pre-sale, due to the big discounts that became possible to negotiate. In the future we will see more and more ICO’s that will manage to complete their investing rounds direct from big private contributions instead of small public ones. We are in a position to get the most out of the private and pre-sales business, through leveraging the power of Smart Contracts, we can pool smaller investor funds whilst gaining private and pre-sale bonuses or discounts.

Glossary

• Wallet address: the address where the successful pool will invest the funds raised
• Pool manager: the person in control of the pool. Usually a member of the ICO being promoted.
• ERC-20 address: the token smart contract address.
• Pool owner: always Token Lounge team.
• Contributor: any person sending ether to the Pool to buy tokens.
• Open/Close date: the time during which the Pool is accepting contributions. Outside of those days, any contribution will be automatically sent back to the sender.
• Lock period: After Lock Period has past, all withdrawals are open.
• Rate: This is the typical rate for a crowdsale; how much tokens will can someone purchase with 1 ETH.
• Discount layers: This allows us to have multiple rates based on the total balance of the pool.
• Referral pool: A smart contract that allows indirect contributions into the pool. This follows the typical referral programme approach using the security of smart contracts, though.

The Problem

Private and pre-sale bonuses or discounts are open only to big investors, usually at least $0.5million, leaving all the other smaller investors to wait for the ICO or to go through the white listing process. To work around the problem, Token Lounge pooling was born.

With Token Lounge, a person (or Pool Manager) takes the duty to collect funds from several smaller investors until they reach a sum big enough to negotiate in an ICO private or pre-sale. Whilst this approach opens investment opportunities to smaller investors, it brings a new (maybe bigger) issue: now the investor needs to trust the pool management.

It is not rare that the address where all the contributions are collected is directly on an address under the Pool Managers control and nothing can prevent them to disappear with the collected funds. Furthermore, the manager could even invest the collected funds into the ICO at a discounted rate and never distribute the obtained tokens to the investors. Risks exist even if the management acts in full honesty.

A completely manual process is prone to human mistakes. For example, what happens if the manager loses control over the addresses of the funds? What if one contributor receives less/more tokens than expected? What if something happens to the manager, illness etc.? There are many questions to be asked about manual pooling.

The Solution

Instead of collecting funds under an address controlled by a person, we can lock all the contributions under a smart contract that follows specific rules to minimize the risks of funds being lost or stolen.

The solution we have built, is similar to a bank/escrow service, where the investors can send contributions to.

Token Lounge DApp

This is how it works in more detail:

• Through a UI (no code required), we generate a new smart contract for each ICO.
• We deploy the pool on behalf of the ICO. Until we set the wallet and manager address, the smart contract will be in a stage of “setup” and any eventual contribution will automatically be rejected. It is important to mention that the setup is a one way function, and once completed cannot be reverted. During the setup, we will also provide the rates for the pool (for example 1000 Tokens per Ether). Once we have completed the setup, we pass the control to the Pool Manager. From now on, Token Lounge power is restricted and we don’t have any control over the funds, whatsoever.
• Once the pool is setup, it is ready to accept contributions (given that the open date is also passed). For each contribution, we store the number of owed tokens to each Contributor, using the rate provided at setup. This information will be available through the Token Lounge DApp. Investors will instantly know the amount of tokens they will receive during the token distribution process.
• After contributions start arriving, there the following scenarios are possible:

1. Soft cap is not reached, in which case Contributors can withdraw their funds.
2. Soft cap is reached but closing date has not passed yet: from this point the contributions withdrawals are frozen but we can keep accepting contributions until hard cap is reached or the close date is passed.
3. Soft cap or hard cap is reached and closing date is passed: neither withdrawal nor contributions are allowed. Now the Pool Manager has time until the locking period to send the amount of tokens owed to the pool. If the Pool Manager doesn’t send the owed tokens before the locking period, then the funds remain untouched in the Pool and will be unlocked and open to withdrawal.

• Once the ICO we’re promoting has distributed the tokens to all token holders, including the ones outside Token Lounge (usually after the ICO crowdsale), we can now provide to the Pool the ERC-20 Address. Once the ERC-20 address is provided, the Pool will be able to see if the token allocated by the ERC-20 address are the in the same number that we expect from our balance sheet.
• The Pool has, in fact, an internal balance sheet that keeps track of the amount of tokens owed both to each contributor and to the pool as a whole. Only and if only the Pool Manager has sent to the Pool the owed total of tokens, the ICO Manager will be able to invest the Pool funds towards his Wallet Address.
• Once the Pool has received the expected owed tokens and the Pool Manager has invested its value, the Token Withdrawals are finally open. At this point, each Contributor can start withdrawing his token independently and immediately using our UI.
• Together with the Contributors, also the Pool Owner and all the referrer addresses can now withdraw their fees.

Conclusion

In this article we described Token Lounge; a secure and trust Less way of participating into ICO’s through smart contracts, as well as, a community building platform for ICO participants and their network. We explained the unique security aspects and how we manage to reduce investors risks. Future articles will delve more into the details of the internal mechanics of Token Lounge. So stay tuned!