Determine Business and Token Financial Model

The asset being tokenized is typically embedded within an income-generating process that makes an asset valuable. For example, real estate is part of a rental business or a vessel is a key asset in a shipping operation. Token offered to investors usually provide exposure to the business based on the underlying asset rather an asset directly. Correspondingly, the token structuring process should consider the commercial characteristics of the asset.

There are assets for which such a logic doesn't apply directly, such as commodities, at least when they are tokenized directly. Still, they are embedded in a commercial context and should make sense within it, among other things, by enabling a sustainable business model for the issuer.

In particular, the following characteristics should be considered:

• What is the economic model of the business?

• How do investors receive a return on the investment?

• Token offering target. Note that it might differ from the asset value as the business might need additional funding that exceeds the asset value or, alternatively, only part of the value is offered to investors.

• Number of tokens offered

• Targeted investor audience

• Exit strategy

  • Token repurchase from ongoing revenues

  • Token repurchase from asset/business sale

  • Secondary trading

This information is relevant for future regulatory considerations, as it determines the applicable regulations.

Data points:

• Business plan

• Financial model/projections