Initial Coin Offerings (“ICOs”)

On July 12, 2017, DLA Piper Palo Alto hosted an ICO event and panel discussion alongside DareToKnow. Speakers included:

  • Spencer Bogart, managing director of Blockchain Capital,
  • Juan Benet, founder and CEO at Protocol Labs,
  • Vinny Lingham, co-founder and CEO at Civic Technologies,
  • Natalia Karayaneva, CEO at Propy, and,
  • Matt Chwierut, head of research at Smith & Crown.

Bogart mentioned that there are two primary reasons for a company to hold an ICO, or crowdfund the sale of a digital bearer instrument whose sole record is on the blockchain,

  1. To build and incentivize its user base, and
  2. To raise funds.

Bogart went on to say that most traditional financial institutions are unable to work with the ICO technology and government regulation, while necessary, may discourage the best developers. He gave two examples of bitcoin advancements such as: multi-signature transactions and time-lock transactions, which would often require hours of legal time but through bitcoin are reduced to a few lines of code.

Further, Karayaneva discussed how a business model may be successful on the blockchain through the real estate sector. She stated that blockchain allows for the tracking and recording of various property transfers in places such as Switzerland, Dubai, Singapore, Estonia, Delaware and the Ukraine.

Karayaneva organized a token sale for Propy  and differentiated between utility tokens and security tokens. If the goal as a token creator is to grow the ecosystem and attract others to the platform, a utility token is appropriate. This will allow the token creator to conduct the token sale with a lower legal risk. On the other hand, security tokens are similar to obtaining a share in the company, entitling holders to a portion of the company’s revenue, dividends and voting power. To issue a security token, the token creator must register with the SEC and follow BSA, FinCEN and other regulations.

Benet concluded the event in saying that financial and legal transactions have high transaction and high settlement costs, however, with blockchain– transactions and settlements are virtually free.

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