Initial Coin Offerings (ICOs) are considered securities, as the value of these tokens are based on the performance of the company that they represent. However, unlike traditional public shares that provide dividends, ICOs do not offer a direct link to the revenues of a company. Conversely, Nexus Securitized Tokens can represent partial ownership of a company, and the automated payment of dividends to token holders. 

Dividends

There are two models that can be used for paying dividends on Nexus, which are described below:

  1. Dividends can be paid out on a scheduled basis from available company profits, and executed by an officer as a single manual cryptocurrency transaction to the company registration address. Therefore, this approach relies on the trust of the officer to accurately reflect the total amount of dividends to be paid out. However, it replaces the requirement of the company to keep a record of all shares of ownership. This model will most likely be used by companies hosting a Securitized Token Offering (STO) that wish to pay dividends in the near term, since it is already similar to the traditional process, having the key difference that it functions with less manual administration. 
  2. Dividends can be paid out to token holders as revenue is generated, with a percentage of tokens reserved by the company for operating costs. This would ensure that investors receive their dividends daily, and would put a cap on the total operating expenses that the company is able to claim. We envision this method being adopted in the future, if supported by investors. This method is completely automated and trustless, being that it does not rely on any manual administration. It also has the additional benefit of ensuring transparent financing and operations of a company, to create a closer relationship between the company and its investors.

Capital Raising 

For the purpose of capital raising, a company registration would be published as an asset on Nexus, with the relevant documents hosted off-chain, such as bylaws or a business plan. The integrity of these documents is ensured through a ‘checksum’ or ‘fingerprint’, included in the registration of the asset. The asset would then be tokenized in order to raise capital from investors, dividing the shared ownership of the company. Nexus Securitized Tokens can also be used to facilitate the distribution of dividend payments from the future revenues of the company. Unlike traditional public shares, dividends are paid out to the token holders automatically by either of the aforementioned methods, requiring very little administration. 

Crowdfunding 

Similarly, other forms of fundraising can be facilitated by Royalties Tokens. For example, artists who wish to crowdfund for a music album (registered as an asset on the blockchain) can issue tokens pertaining to the ownership of the album. Tokens could then be used to give rights to future revenues of the album, ensuring that supporters are rewarded for their contribution. Today, creatives raising funds usually have to deal with large businesses, often receiving a less favorable deal than they would like. We envision that this new form of crowdfunding could benefit many different people looking for funding for their projects, though the future regulatory landscape and classification of these types of tokens is unknown. 

Patent Funding 

Tokenization can also be utilized for the purpose of patent funding and future dividend payouts. Below, we will outline a basic overview of how patent funding could be secured :

  1. An inventor comes up with a new idea that currently has a large market, and no competitive patents.
  2. The inventor establishes a company that will manage the rights of the associated patent(s). 
  3. The inventor registers/publishes the company information as an asset on Nexus, linking the founding documents such as bylaws with checksums.
  4. The inventor tokenizes the company, making the company registration owned by the token.
  5. The inventor publishes another asset, which is assigned ownership by the company, containing references to further documents that explain the business plan, manufacturing processes, patent availability, etc.
  6. The inventor holds a crowd sale of the tokens, establishing the first round of funding to pay for the legal registration of the patent, prototype, and go-to-market strategy.
  7. The inventor applies for ‘patent-pending’ status, and once received, registers an asset, again owned by the company, with the details of the patent.
  8. The inventor develops the product, and in an ideal scenario, gets it to market, generating revenue to the company. Any modifications to the patent status are modified in the patent object.
  9. The revenue generated is paid out as dividends, if this is part of the agreement with token holders, allowing the blockchain (tokens) to manage the rights to ownership of the patent. 

From the example above, the automatic dispersal of patent dividends is facilitated by either of the two aforementioned options for distribution. This will make the process of patent-funding much easier for inventors, while investors will have transparency and assurance that their ownership is valid.

Voting

With Tritium++, tokens will be usable for the purpose of voting, similarly to shares with voting power of a public company. This is important as it is becoming more evident that there are flaws within current shareholder voting structures, with new research coming to light that reveals: 

“Since 2003, there have been about 75% more shareholder proposals rejected by a margin of one percent of shares outstanding than proposals that were approved by a similarly narrow margin. As a result, there is a large and discontinuous drop in the density of voting results on these proposals exactly at the majority threshold of each proposal. These anomalies in the distribution of voting results reveal that there are substantial effects of vote rigging on the success rate of shareholder proposals.” [1]

Though our consensus mechanism can go only so far in relieving the above symptoms and psychological tendencies inherent to some, we believe mathematics and cryptography can help improve the condition of our current voting systems.

DEX

Contracts on Nexus can facilitate the exchange of any asset or token, without a third party or any permissions. No matter the value of the exchange, settlements on Nexus will be complete in under ten minutes. This allows the free movement of STO tokens between holders, without the need to rely on centralized or custodial exchanges. 

 “If an asset or token has to be listed by anyone other than the owner of the asset or token, it’s not a decentralized exchange” 

We envision that STOs will create greater trust with regards to raising capital on a blockchain, by providing higher levels of accountability and transparency compared to other blockchain based funding mechanisms such as ICOs, and will provide new methods of raising funds for various projects.