Top Five Best Securities Tokens
Securities tokens, or tokens that represent ownership in a debt or a commodity, are becoming the next big thing. The idea of offering tokens in a way that is compliant of current securities regulations is creating a workaround to issuing an ICO, which is increasingly becoming suspect in the eyes of state and national regulators.
While securities tokens are relatively new, there are some that reflect how these tokens are changing how blockchain crowdfunding works. This article will look at five of the best securities tokens currently available or that will be available soon.
BCAP (Blockchain Capital)
The first securities coin to be introduced in a public offering, Blockchain Capital has been making news as of late. Formerly Crypto Currency Partners, the blockchain venture capital company has been meeting its fundraising goals, with the firm’s assets reaching a total value of $250 million, as of the first quarter 2018.
As the first securities token offering (STO). BCAP helped to forge the path other STOs will travel. For example, BCAP limited its offering to accredited investors. BCAP also developed a blueprint that future upcoming STOs will follow, while investing in ICOs that followed the best practices reflected by the blueprint. The firm, conceptualized by Brock Pierce and co-founded by brothers Bart and Bradford Stephens, also managed to bring in high-profile talent as venture partners, including bitcoin developer Jimmy Song.
“You’re going to see us continue to invest globally in the leading crypto companies, but also kind of the next generation of entrepreneurs and sectors outside of financial services,” Stephens told CoinDesk. “We’ve made investments in healthcare companies, in logistics companies, in identity management. To date we’ve seen a lot of focus on financial services and we really see that broadening.”
“We really focus on the engineering team. It’s a lot of the developers that are the rock stars in this community…It’s not just about finding the best investments, but also about moving the industry forward.”
With a market capitalization of $11.7 million, BCAP is currently being traded on EtherDelta and Liqui. BCAP invest in blockchain companies, such as ABRA, AlphaPoint, BitAccess, BitGo, BlockOne, Coinbase, Kraken, and Ripple. The company’s token, BCAP, has a net asset value – as of the writing of this article – of $3.51.
The initial token sale was considered to be a success. In hours, BCAP reached its cap of ten million dollars. The fund’s managing partners received 2.5 percent in management fees and a 25 percent performance fee in accordance with the offering’s memorandum. The remaining profits were distributed accordingly to the token holders.
“Blockchain Capital is an unrivaled leader in its specific area of the FinTech sector,” BCAP’s website reads. “It consists of entrepreneurs, advisors, and partners who are actively involved in blockchain development. In the last three years, the company has invested in 72 more companies.”
“The founders of Blockchain Capital see Blockchain technology as a profound invention that provides a good, fast and cheap channel for transferring money or trading assets. In doing so, the main aim is to minimise counterparty default risk. Counterparty default risk means that a lender is in danger of not being able or willing to pay back the amount paid out. Due to the nature of the blockchain technology, this risk is significantly reduced. The company’s vision is to leverage the advantages of blockchain to invest venture capital in the FinTech sector successfully.”
Science, Inc. is a well-known and well-heeled startup studio. With successes like Dollar Shave Club and FameBit, Science, Inc. was named one of Fast Company’s Most Innovative Companies. Science, Inc. also distinguished itself by investing in ICOs – a move that distinguished the company from other venture capital firms.
In a move that is in line with its blockchain-friendly philosophy, the incubator has launched a STO of 100 million Science Blockchain tokens at $1 per token. The STO will fund portfolio companies, with token holders enjoying 70 percent of the incoming income. More so, the company has announced plans to buyback tokens, establishing equity appreciation for the tokens and potentially frustrating the Howey Test for determining if the tokens have securities liabilities.
“The gross proceeds of this Offering will be transferred to the Incubator, which will in exchange grant the Issuer the sole limited partnership interest of the Incubator,” the memorandum reads. “Subsequently, the expense reimbursements pertaining to this Offering will be transferred by the Incubator directly to the applicable service providers, leaving the Incubator with the net proceeds. The Incubator intends to use such gross proceeds to pay offering expenses (including compensation to Argon Advisors and legal expenses in connection with this Offering) and to invest predominantly in blockchain technology enabled businesses. North Capital Private Securities, a member of FINRA/SIPC, has been appointed as placement agent for the offering of these securities and will receive transaction fees based upon the successful placement of securities for the Issuer. Total Offering expenses are expected to be less than 10% of the gross proceeds of this Offering.”
At the end of the sale, $12.2 million was raised. “We believe that blockchain is the next major platform for innovation and a foundational technology – that it has the ability to change the way both business and social structures work,” Science, Inc.’s website reads. “For this reason, we are creating a new incubator to partner with leading entrepreneurs to build a portfolio of blockchain and cryptocurrency related businesses that are positioned for long term success. We expect many of the companies will take a long journey to success, so we will work with entrepreneurs to set up their businesses with this in mind, which means appropriate legal, technical, and operational structures and controls. Like any other business, a blockchain-related business must have solid operational underpinnings to survive and thrive, and we are perhaps the best in the world at providing this guidance to emerging businesses while reducing or eliminating the common causes of startup failure.”
“In short, we want to use our expertise at company building to help what we anticipate will be the best blockchain entrepreneurs build the software giants of the next century. We believe our token holders should benefit from access to a stream of new tokens from our carefully incubated portfolio companies.”
Lottery playing is an obsession for Americans. The primary source of entertainment in the United States, Americans spend $80 billion a year on lottery games, including electronic games. This is an average of $325 per year per American adult. This is more than what is spent on movies, music, games, books, online entertainment, and sporting events.
What makes these statistics more stunning is that most Americans do not play the lottery. In the 43 states and the District of Columbia that offer lotteries, only 49 percent of all adults admitted to buying a state lottery ticket. Typically, the money you have and the more education you have, according to Gallup, the more likely you are to play the lottery.
As such, it would make sense to market a lottery to blockchain investors. They are typically well-educated, fiscally affluent, and with a demonstratable will to gamble. While lotteries are inherently inefficient, the notion that 37 percent of the revenue goes toward state and local government programs make them unlikely to go anywhere soon. As it was once said, lotteries are the only tax that people are happy to pay.
Lottery.com (formerly AutoLotto.com) is seeking to cash in on this. A mobile lottery service, Lottery.com is seeking to introduce a STO that will help bolster the flagging millennials lottery market. “Our vision is to raise significant funds to help solve the most pressing humanitarian needs across the globe using impact raffles, sweepstakes, and other games of chance. Lottery.com is a domain leader in taking officially sanctioned games mobile. Utilizing the experience and technology of the company’s mobile lottery platform, the company is revolutionizing legacy fundraising models into a platform capable of raising billions for charities and humanitarian needs.”
Lottery.com offers a platform to check the winning numbers and get news about the national and state lottery games. The STO will create a new game administered by Lottery.com where tickets are purchased and paid off by smart contract. The revenue of this will be shared with token holders and used to fund charitable endeavors globally.
With most state lotteries abandoning their mandates for funding education and instead either going toward the state’s general fund or replacing budgeted monies for local education, Lottery.com’s venture may be a way for those burned on the states’ games to feel good about “public gambling.” However, if the raffle is too successful, it is likely that Lottery.com will face blowback from the states.
There has been little to no innovation, short of the introduction of blockchain, in the venture capital industry. The same model has been used for decades: an investor or investment group is approached by a company seeking seed capital. For exchange of a stake in the company, the investor provides funds and other support to the fledging firm. This model, however, is hands-on and does not translate efficiently to a virtual ecosystem, such as a STO.
SPiCE VC seeks to change the game and bring it into the future. “Tokenization of securities is now in its first year. For this completely new ecosystem to grow from zero to trillions – an entire infrastructure has to be built,” the SPiCE VC website reads. “Every aspect of the old way of managing ownership, needs to be replicated and improved as ownership becomes digital on the blockchain.”
“We will therefore invest in two main areas, where we believe SPiCE has an advantage of access, expertise, and the ability to bring players in our group (investors and investees) to work together with our portfolio. 1. We will invest and benefit from the massive growth of multiple infrastructure plays across the tokenization ecosystem. Everything from primary issuing platforms, to exchanges, tokenization protocols, financial services, banking services, automated legal, compliance and regulatory solutions, marketing services, valuation services… anything that is needed for the industry to grow as fast as we think it should.”
“2. We will invest and benefit from the success of the best tokenized projects. We have the access to find them and the visibility for them to find us. We have the expertise to help them, the connections to bring all the partners they need, and the relationships to know which of them are the most promising. We believe it is critical that the first projects to come out with this new model are super successful and show the way to the rest of the industry. These projects will typically include investment in return for equity, payouts, as well as in some cases, utility tokens.”
SPiCE VC seeks to differentiate itself by the way it handles investors’ rights. While investors in traditional venture capital funds need to take seven to twelve years to gain access to those funds, token holders in SPiCE gain equinity in the fund as both a tradable asset and through rights to exit benefits.
The peer-to-peer cloud storage platform Sia has previously offered a cryptocurrency, SiaCoins, that facilitates transactions between renters and hosts. Sia’s proposed second token, SiaFunds, will allow investors a share of the 3.9 percent transaction fee the service extracts for the service. What makes this STO interesting is that 750 of the 10,000 SiaFunds are being offered as Regulation D security tokens, allowing the security token to be issued as a utility token. This “duality” may be the way forward for companies seeking to balance utility and security token issuances.
“Siafunds are not debt or equity securities and, specifically: (a) do not provide their holders with rights of any form with respect to the Company or its revenues or assets, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights in the Company; (b) are not a loan to the Company; and (c) do not provide their holders with any ownership or other interest in the Company,” the SiaFunds private memorandum reads. “Siafunds do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, outside the Sia Storage Platform. Siafunds issued to third parties do not trade on any cryptocurrency exchanges. Instead, they may only be obtained by way of private resale. Nebulous does not track the resale of the Original Siafunds and there are no restrictions on the resale of the Original Siafunds. Nebulous believes that, as of February 8, 2018, there were no more than 134 holders of Siafunds.”