Step 11: Select Token Rights

Mandatory

Select the rights associated with the token. Issuers can choose multiple rights based on the nature of the token and its underlying asset.

Token Rights and Their Importance

Dividends
1. Token holders receive a share of the company’s profits, distributed periodically as dividends.
2. Importance in Metadata:
  1. Clearly defines the financial benefit for token holders.
  2. Provides transparency regarding profit-sharing obligations.
  3. Facilitates automated dividend distributions via smart contracts.
Liquidation Proceeds
1. Token holders are entitled to a share of the company’s assets or proceeds in the event of liquidation.
2. Importance in Metadata:
  1. Ensures token holders’ claims are recognized during liquidation events.
  2. Establishes the priority of claims (e.g., senior vs. junior creditors).
  3. Builds trust by clarifying potential outcomes for token holders.
Redemption at Face Value (Maturity)
1. Token holders can redeem the token for its original issue value when it matures.
2. Importance in Metadata:
  1. Defines a fixed financial return for investors.
  2. Provides clarity about the redemption process and maturity timeline.
  3. Enables smart contract automation for redemption execution.
Redemption at NAV (Net Asset Value)
1. Token holders can redeem their tokens at the asset’s current net asset value.
2. Importance in Metadata:
  1. Aligns token redemption with the asset’s performance.
  2. Demonstrates transparency in valuation and redemption processes.
  3. Allows dynamic adjustments to token value based on NAV.
Corporate Voting Rights
1. Token holders gain voting rights in company decisions, such as electing board members or approving strategic initiatives.
2. Importance in Metadata:
  1. Codifies governance rights, ensuring token holders’ voices are recognized.
  2. Automates voting processes through blockchain-based governance mechanisms.
  3. Provides transparency and accountability in decision-making.
Fixed Income Payments
1. Token holders receive regular, fixed payments, similar to interest on bonds.
2. Importance in Metadata:
  1. Clearly defines periodic payment terms and amounts.
  2. Automates payment distribution via smart contracts.
  3. Enhances investor confidence by offering predictable returns.
Revenue Sharing
1. Token holders receive a percentage of the company’s revenue, as per pre-defined terms.
2. Importance in Metadata:
  1. Ensures transparency about revenue-sharing percentages and schedules.
  2. Builds trust by automating revenue distributions through smart contracts.
  3. Aligns investor interests with company performance.
Profit Sharing
1. Token holders receive a share of the company’s profits, typically tied to net income.
2. Importance in Metadata:
  1. Defines profit-sharing criteria, ensuring clarity and fairness.
  2. Automates distributions based on audited financial results.
  3. Strengthens investor trust by aligning rewards with profitability.
Conversion to Equity
1. Tokens can be converted into equity shares under specified conditions.
2. Importance in Metadata:
  1. Clarifies conversion terms and conditions, enhancing investor understanding.
  2. Provides flexibility for investors seeking long-term ownership.
  3. Automates conversion processes, reducing administrative overhead.
Liquidation Preference
1. Specifies the priority order for token holders in receiving proceeds during liquidation, ahead of other equity holders.
2. Importance in Metadata:
  1. Codifies priority claims for token holders, reducing disputes.
  2. Attracts risk-averse investors by offering assurance in adverse scenarios.
  3. Enhances transparency by detailing the liquidation hierarchy.

Why Metadata for Token Rights Is Important

Transparency
1. Clearly defines the rights associated with tokens, providing investors with detailed information before purchase.
2. Ensures there is no ambiguity regarding the benefits and obligations tied to token ownership.
Automation
1. Embedding rights in the metadata allows for automated execution of dividends, revenue sharing, or voting through smart contracts.
2. Reduces administrative burden and enhances operational efficiency.
Compliance
1. Codifies token rights to meet regulatory requirements, ensuring legal clarity.
2. Provides an immutable, auditable record of the token’s terms and conditions.
Investor Confidence
1. Clearly documented rights build trust and attract a broader range of investors.
2. Metadata allows stakeholders to verify token terms easily, fostering greater participation.
Scalability
1. Ensures that as tokens are traded on secondary markets, rights and obligations remain intact and transparent for new holders.
2. Facilitates interoperability with platforms requiring token standardization.

Limitations

In the default version of the STV3 smart contract, token rights are indicated as boolean values. Automation of distributions, governance, liquidation claim seniority and similar matters are unique to each issuer and thus require a custom configuration. Please contact the Stobox Enterprise Sales Manager if you would like to discuss such a setup.

Metadata and Smart Contract Integration

Embedded Rights. Each selected right is embedded in the token’s metadata within the smart contract.
Dynamic Execution. Rights such as dividends, voting, and redemption can be automated through pre-defined conditions in the smart contract.
Investor Protection. Immutable metadata and automated exeuction protect investor rights reduce the cost of asset servicing.

By including token rights as metadata, issuers create a transparent, immutable, and functional token structure that aligns with investor expectations and regulatory requirements, paving the way for a successful and trustworthy tokenization process.

Last updated 3 months ago

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