Step 10: Select Type of Tokens

Mandatory

In this step, the user selects the specific type of token to be issued, aligning the token structure with the nature of the underlying asset, the issuer’s objectives, and investor preferences. Each token type represents a unique financial or ownership structure.

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Select the desired token type from the predefined options.

Token Types

Security Tokens

Security tokens represent ownership, debt, or a share of revenue, often complying with securities regulations. They provide investors with legally enforceable rights.

1. Common Stock

   1. Represents ownership in a company, granting shareholders voting rights and a share of the company’s profits in the form of dividends, stock buybacks, and liquidation proceeds. Common stock exposes holders to the benefits of both periodic income distributions and growth in the value of an underlying asset.

   2. Use Case: For companies looking to issue equity-based tokens that allow participation in governance and profit sharing.

   3. Why It’s Important: Aligns with traditional equity offerings while leveraging tokenization for easier transferability and fractional ownership.

2. Convertible Debt

   1. A form of debt that can convert into a predefined amount of equity (usually common stock) at a later date.

   2. Use Case: Suitable for early-stage companies seeking debt financing with a future equity conversion.

   3. Why It’s Important: Offers a hybrid structure combining certainty of a fixed income stream with a potential equity upside for investors.

3. Loan Note

   1. A legal agreement where the borrower promises to repay a loan under agreed terms, including interest and a repayment schedule.

   2. Use Case: Ideal for issuers offering fixed-income investment opportunities.

   3. Why It’s Important: Provides a straightforward debt instrument for investors seeking predictable returns.

4. Fund Unit

   1. Represents an investor’s share in an investment fund, such as a mutual or hedge fund.

   2. Use Case: Enables tokenization of pooled investment vehicles for easier management and transferability.

   3. Why It’s Important: Enhances liquidity and accessibility for investors in fund structures.

5. Income Sharing

   1. A contractual arrangement where an investor receives a portion of the income generated by an asset or business over a specified period.

   2. Use Case: Useful for businesses or assets with predictable revenue streams, such as royalties. Incoming-sharing tokens can also sometimes serve as a replacement for common stock if the issuing company is located in a jurisdiction where issuing shares is unfeasible.

   3. Why It’s Important: Aligns investor returns with asset performance.

6. LLC Membership Interest

   1. Represents ownership in a Limited Liability Company (LLC), granting rights to profits, losses, and voting.

   2. Use Case: Suited for businesses organized as LLCs to tokenize ownership stakes.

   3. Why It’s Important: Provides legal and financial clarity to tokenized LLC membership.

7. Preferred Stock

   1. Grants priority over common stockholders in dividends and liquidation proceeds, typically without voting rights.

      1. Use Case: For companies wanting to offer tokens with structured priority returns.

      2. Why It’s Important: Attracts investors seeking stability and predictable returns.

8. Participation Certificate

   1. Represents interest or a share in a specific asset or business venture, often in private investments or real estate.

      1. Use Case: Ideal for tokenizing specific projects or revenue streams.

      2. Why It’s Important: Offers flexibility for fractionalized project participation.

9. Revenue Sharing

   1. A financial arrangement where investors or partners receive a percentage of a company’s revenue based on pre-established terms.

   2. Use Case: Suitable for businesses with consistent revenue that can share proceeds with investors. It's a great option for creating trust if revenue is significantly easier to verify than the cost structure.

   3. Why It’s Important: Provides passive income to investors aligned with the issuer’s growth.

Commodity Tokens

• Represents ownership or rights to a physical commodity (e.g., gold, oil) or digital commodity, enabling fractionalized ownership or trading.

• Use Case: Tokenization of tangible or intangible commodities for easier market access and liquidity.

• Why It’s Important: Opens up commodities to fractional ownership and trading on blockchain platforms.

Asset Participation Tokens

• Represents fractional ownership or rights to the income or appreciation of an underlying asset (e.g., real estate or intellectual property) without granting direct control.

• Use Case: Ideal for tokenizing assets like real estate, art, or intellectual property, allowing investors to benefit from asset appreciation or revenue.

• Why It’s Important: Provides a streamlined, scalable approach to shared asset ownership while maintaining operational control for the issuer.

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Why This Step is Important

1. Customization. Enables the token issuer to select a structure that aligns with their financial strategy and investor appeal.

2. Compliance. Ensures the token type fits within regulatory frameworks based on its nature and jurisdiction.

3. Investor Clarity. Clearly defined token types improve investor understanding and confidence in the offering.

4. Flexibility. Offers a diverse range of options to suit various asset classes, industries, and business models.

By providing a clear selection of token types, issuers can tailor their offerings to meet regulatory, financial, and investor needs while maximizing the utility and appeal of the tokenized asset.

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