[Disclaimer: If you’re new to blockchain, there are many new terms in the blockchain lexicon. If you’re an financial executive, fintech investor, capital markets / securities regulator or exchange, I believe this an important trend worth watching. Note this is not legal, financial or investment advice.]
October 2, 2016. Location: <Everywhere that you can access the internet/>
The Ethereum platform is once again the blockchain platform of choice for a new token sale crowdfunding or ICO (Initial Coin Offering).
The SNGLS token crowdfund raised and closed a funding of approximately $US 7.5 million worth of Ether (the Ethereum blockchain’s currency) in about 25 minutes today. We don’t know the identity of the contributors, although we do know their Ether accounts.
To give perspective on how quickly the blockchain space is evolving, consider that it’s October 2016, a mere 4 months since the attack on the DAO (Decentralized Autonomous Organization), a global crowdfunded token sale which brought in the equivalent of $US 150 million of Ether during the month of May 2016.
While the SNGLS ICO (Initial Coin Offering) is more modest in size than the DAO, and the DAO itself followed on token crowdsales such as Ethereum and Lisk, SNGLS is part of a new kind of blockchain business model, dubbed CODE (Centrally Organized Distributed Entity). Below we’ll see how the founders will use the funds to build a new venture called SingularDTV.
Yes, $US 7.5 million is immaterial compared to the $1B market cap of Ethereum itself.
My view is digital currency ICO’s are becoming a viable and globally accessible method of project funding.
Think of SNGLS as another weak signal of the upcoming avalanche of ICO’s in the wings.
As an side also check out Synereo, another ICO which funds a distributed social network and reputation system.
So let’s take a look at SNGLS…
What is the SNGLS token and How does it Work?
In a nutshell, SNGLS are an Ethereum token, which is a small piece of software code (aka “smart contract”) that has programmable functions, that can be accessed like an API. The token code was embedded into the Ethereum platform. When used as a funding mechanism, “investors” (loose use of the term) or funders, send digital currency to the token code, and the token code itself tracks – in an internal ledger – how much value each contributor sends to it. It’s like a container that can then be instructed to move ownership between its owners or to another account. The creators of the token have the ability to move funds from this token’s account to another.
In this case, the SNGLS crowdfunding token has a unique identity (Contract address: 0xbdf5c4f1c1a9d7335a6a68d9aa011d5f40cf5520) on the Ethereum public blockchain.
For the curious, every contribution to the token contract is visible in the public Ethereum blockchain via a blockchain explorer available on the web. Note that the addresses aren’t connected to real life identities, so we call these transactions “pseudonymous”, not anonymous.
For example, the first funding transaction to the token can be viewed here by its transaction hash: 0xbd435a7c9a4e217b4663508b459f4f3ff9f220d0e9d701e919c65d8562b363c2
The following 2 screenshots help us see that the first transaction was for 5 Ether, contributed by someone with an Ether account funded by their Poloniex exchange account
And a previous transaction shows us the flow of funds from the Poloniex wallet to the user’s Ether account..
How does SNGLS Fund a New Venture?
According to the team, which is largely made up of Ethereum veterans from Consensys, an investment in SNGLS supports a new business venture:
SingularDTV’s ultimate goal is the creation and prosperous growth of a decentralized entertainment industry.
The SingularDTV token is called “SNGLS”. SNGLS are fungible and conform to Ethereum’s universal token standards. SNGLS represent a pro rata claim on intellectual property – film/TV/software – as well as a pro rata gross of revenue generated by such intellectual property.
The total number of SNGLS in the SingularDTV ecosystem is 1 Billion. 500 million of these will be generated for the SingularDTV audience at the ETH equivalent of 1.5 cents per token for a total ETH equivalent of $7.5m to:
1.) launch a documentary film division dedicated to educating the world about Ethereum, blockchain and decentralization;
2.) produce Season 1 of our sci-fi epic television series ‘Singular’, about the human race’s journey into a technological Singularity;
3.) build a rights, revenue and royalty management platform and;
4.) build a transaction video on-demand portal.
Of the remaining 500 million SNGLS tokens not offered to the world, 400 million belong to the founders and 100 million to seed/development investors. All gross revenue claimed by the 400 million founders tokens will be placed in a “Vault” where SingularDTV’s Smart Contract System (SCS) will ensure this revenue is re-invested back into the SingularDTV ecosystem to create film/TV content as well as decentralized tech/apps for the entertainment industry. Founders will not have access to these tokens and will only receive dividends or revenue from these 400 million tokens in the event of a future exit. These above mentioned measures surrounding founders tokens are representative of SingularDTV’s commitment to growing a decentralized entertainment industry. Founders will receive commensurate compensation as budgeted on a per project basis to act as SingularDTV’s executive team. The remaining 100 million tokens held by our seed/development investors enjoy the same attributes as the 500 million sold to the world. They can be held to receive revenue/IP benefits from SingularDTV projects in perpetuity, or traded on the open market (There will be a total of 600 million SNGLS tokens on the open market.) Please see our Summary Overview on www.SingularDTV.com for more details or please ask us anything.
Since SNGLS conform to Ethereum’s token standard, the tokens would be expected to be fully tradeable in the open marketplace, through digital currency exchanges.
It’s worth noting that, unlike the DAO organizers who didn’t articulate clear jurisdiction, the founders of Singularity DTV have taken special care with the organizational structure.
Location of Smart Contract System: The Smart Contract System is located in Alderney, Guernsey, Channel Islands. Consequently, the SNGLS creation and allocation and the assignment of the development and execution of the CODE Smart Project to the Workshop (to be founded) are considered to be executed in Alderney.
Applicable Law: The applicable law is Swiss law. Any dispute arising out of or in connection with the creation of the SNGLS and the development and execution of the CODE Smart Project shall be finally settled by the ordinary courts of the registered domicile of the defendant.
The project’s governance terms attempts to spell out fairly clear legal structure and terms, that put the responsibility on the token holder to comply with their local regulations:
We have been working with the legal architects of the Ethereum Foundation, Swiss law firm MME Partners, to develop a new hybrid structure we are calling the SingularDTV CODE (Centrally Organized Distributed Entity). The SingularDTV CODE has been designed specifically to be regulatory and tax compliant, as well as protect the token holders from liability.
Due to the unique specifics and experience required to make informed strategic decisions in the film and television industry, and the fact that SingularDTV is also a unique fintech hybrid, the complex matter of governance will remain centralized and the responsibility of the SingularDTV executive branch. Additionally, the Centrally Organized component of the SingularDTV CODE increases security by materially reducing potential attack vectors in our Smart Contract System (SCS).
The Distributed Entity component in our SingularDTV CODE is primarily tasked with distributing revenue to our token holders – which shall commence upon revenue being generated – and subsequently with maneuvering through the SingularDTV platform to watch content and participate in other emergent activities the platform will provide.
Representations and Warrantees Associated with Generation of Tokens: By creating SNGLS, the User represents and warrants that: User has a sophisticated and deep understanding of the functionality, usage, storage, transmission mechanisms and intricacies associated with cryptographic tokens, like bitcoin (BTC), Ether (ETH), and other cryptographic tokens based, for instance, on the Ethereum ERC-20 Token standard (https://github.com/ethereum/EIPs/issues/20), created to enable different functions, and blockchain-based software systems;
* User has carefully reviewed the code of the Smart Contract System located on the Ethereum blockchain at the addresses set forth under [correct cite] and fully understands and accepts the functions implemented therein;
* User is legally permitted to create and obtain SNGLS in the User’s jurisdiction;
* User is legally permitted to receive software and contributing to the Smart Contract System for the development of the CODE Smart Project;
* User is of a sufficient age to legally create and obtain SNGLS;
* User will take sole responsibility for any restrictions and risks associated with the creation of SNGLS by the Smart Contract System as set forth in these Terms; User is not submitting ETH to the Smart Contract System to obtain SNGLS for the purpose of investment;
* User is not obtaining or using SNGLS for any illegal purposes;
* User is obtaining SNGLS issued by the Smart Contract System for the primary purpose to enable, participate in, and support the development, testing, deployment and operation of the CODE Smart Project being aware of the commercial risks associated with the CODE Smart Project;
* User understands that the creation of SNGLS is not intended in any way to involve the purchase of shares or any equivalent in any existing or future public or private company, corporation or other entity in any jurisdiction;
* User understands that the transfer of ETH to the Smart Contract System, the creation of SNGLS and the development of the CODE Smart Project carries significant regulatory, reputational and/or financial risks as further set forth in the Terms;
* User understands and expressly accepts that there is no warranty whatsoever on SNGLS, the Smart Contract System and/or the success of the CODE Smart Project, expressed or implied, to the extent permitted by law, and that SNGLS are created and obtained and the Smart Contract System is used at the sole risk of the User on an “as is” and “under development” basis and without, to the extent permitted by law, any warranties of any kind, including, but not limited to, warranties of title or implied warranties, merchantability or fitness for a particular purpose; and that
* User understands that User has, other than as implemented in the Smart Contract System in case the Activation Threshold has not been reached, no right against any other party to request any refund of the ETH submitted to the Smart Contract System for the creation of the SNGLS under any circumstance.
Not a Prospectus
Of most interest to regulators, and arguably in clearer terms than the DAO, the legal position of the founders is that the tokens themselves do not constitute a securities offering.
Not a Prospectus or Solicitation of Investment; Not an Offering of Securities: This contract does not constitute a prospectus of any sort, is not a solicitation for investment and does not pertain in any way to an offering of securities in any jurisdiction. This contract is not made in accordance with, or subject to, laws or regulations of any jurisdiction that are designed to protect investors.
Analysis by Smith + Crown also helps to illustrate the ICO and the new business model:
SingularDTV is an Ethereum-based token “for a Blockchain Film & Television Entertainment Studio & Distribution Portal, with a Smart Contract Rights Management Platform”. The initial project plan consists of several parts – an original television series, a documentary division, a digital rights management (DRM) platform built on Ethereum, and a video-on-demand portal based around Ethereum. They are launching a crowdsale for their token SNGLS.
The SNGLS tokens will confer holders with a claim to a portion of revenues and IP to show content. They will not have voting or governance rights, but they may have additional rights in the future. The tokens can also be used to pay for and view content. They will be released near the middle of autumn 2016, and S-DTV intends to list them on crypto-currency exchanges.
The tokens represent ownership in a unique decentralized organizational structure called a Centrally Organized Distributed Entity (CODE). They developed a legal and tax infrastructure in collaboration with law firm MME, which helped developed the structure behind the Ethereum Foundation. They clarify that they did not change this in reaction to The DAO events.
Conclusion: What is your organizations blockchain token strategy?
ICO’s are a new kind of funding and business model made possible by blockchain technology.
When delivered on a public blockchain that exists everywhere simultaneously, anyone in the world who has digital currency can participate.
The tokens can however represent anything… such as reward points and credits….and we then get into the realm of marketing and more.
Given the relative ease of deploying the crowdfunding software code, my view is that regulators will be quite busy in the years to come, dealing with an avalanche of ICO’s.
P.S. Don’t believe me? Try it for yourself…..
Check out another project at www.Statas.io – it’s an Ethereum-based token generator system currently deployed on the Ethereum Testnet – essentially a development environment.
It gives anyone in the world the ability to create a custom token, in literally a few minutes at virtually no cost. Once deployed on the Ethereum MainNet, thousands or millions of these digital tokens could be unleashed, and since they use standard token software code, they could behave just like a digital currency.
What that means is that a your very own [insert your name] Token could be around the corner…
To learng more, connect with me on Twitter at @AlanWunsche
For more information, see https://singulardtv.com/