Customized tokens operate as digital currency and can be easily generated through a number of decentralized, highly-programmable platforms, including Ethereum, Omni, NXT, Stellar, Waves and others.
These platforms are designed to house the construction of complex Smart Contract System (SCS) applications that run without any prospect of downtime, fraud, or third-party meddling. Yet while tokens promise so much potential, “two opposing fears are holding back the move to token-networks: a fear of the absence of governance on one side and a fear of regulation on the other.”
How can companies considering a token launch-generating event address these fears? By initiating the proper governance framework which would alleviate those concerns. Along with the right personnel, this framework should include policies and procedures that outline specific methods employed in day-to-day operations and which provide clear parameters in decision making.
Proper Governance Framework Helps People Feel Secure About a Token
With a framework of proper governance in place, people feel more secure about a token launch. But what does this framework look like?
Put together a good advisory board: When choosing an advisory board for your project, try to find people with diverse areas of related expertise. Specify who has the power to appoint people in decision-making roles. Members should have relevant cryptocurrency experience sufficient for the project to succeed, because these people will provide guidance and mentoring to the project. When carefully chosen, they can lend credibility and value to your project and become a huge asset in your promotion campaign.
Establish a strong project team: A team needs skillful leaders; this means people with actual leadership experience. This team will include market specialists, PR managers, designers, legal advisors, accountants, community managers, analysts, project managers, etc. Look for people with personal achievements and practical expertise in the field who bring a special set of skills needed for blockchain application development. This may translate to people with experience running a similar business, developers with an active Github account, and marketing experts with a notable portfolio.
Create a white paper: The project white paper is a key document. In it, developers should define the goals of their project and the means of achieving them clearly and in relatively simple terms. Ideally, a well-written white paper will define the legal framework between investors and developers. This should include terms and conditions and a complete explanation of token distribution, including when and how tokens will be dispatched to investors.
Professionally written, solid business outline and plan: Development of reliable and complete information is essential in a business plan. Include marketing strategy and set time-marked objectives. This information works as a guide for creating strategic plans, managing existing business, and provides potential investors with important facts.
Establish risk management and compliance processes: SEC Chairman Jay Clayton has stated, “Market participants should use caution when promoting or touting the offer and sale of coins without first determining whether the securities laws apply to those actions. Similarly, those who operate systems and platforms that effect or facilitate transactions in these products should be aware that they may be operating unregistered exchanges or broker-dealers that are in violations of the Securities Exchange Act of 1934.”
Written policies and procedures should create a system of checks and balances to be sure everything is in compliance, with applicable regulations and approved by the Board. Senior management should be involved in this oversight to ensure compliance with applicable regulations.
Running a token sale is time consuming and takes a concentrated effort, money, and involves risk. If you aren’t sure your application should be built on the blockchain, take a step back and do more research to make sure the choice is right for your company.