Transferable equity instruments based on blockchain

Transferable equity instruments based on blockchain

Short answer questions

What is blockchain? How does it relate to cryptocurrency?

What role do smart contracts play in blockchain securities issuance?

Briefly describe the system and method for issuing and purchasing tokenized securities using a blockchain platform.

How is investor authentication performed in tokenized securities issuance?

What role do "whitelists" and "blacklists" play in tokenized securities issuance platforms?

Explain the four main stages in the life cycle of a BITE token.

What is a blockchain oracle? How does it play a role in tokenized securities issuance?

What is the functional difference between proxy contracts, escrow contracts, and aggregation contracts?

Explain how tokenized securities issuance platforms ensure compliance with the regulations of the U.S. Securities and Exchange Commission (SEC).

What are the main advantages of tokenized securities issuance compared to traditional securities issuance?

Answers to short answer questions

Blockchain is a decentralized database used to record transactions in a peer-to-peer network. It ensures transaction security through encryption technology and ensures that records cannot be tampered with through timestamps and hash links. Cryptocurrency is a digital medium of exchange that uses cryptography to secure transactions and control the creation of new units of currency, and blockchain technology is the underlying technology of cryptocurrency.

Smart contracts are automatically executed codes on the blockchain to implement the terms of the agreement between the two parties. In blockchain securities issuance, smart contracts are used to create, issue and manage tokens representing securities and automatically execute the terms and conditions related to the securities issuance, such as investor certification, payment processing and securities transfer.

The system includes a user device for investors and a server for the tokenized securities issuance entity, both of which communicate with the blockchain platform. The server creates tokenized securities and deploys tokenized securities contracts on the blockchain platform, and the user device interacts with the server through a graphical user interface to register, pass certification, review documents, accept terms and ultimately purchase tokenized securities.

Investor certification can be completed through a third-party certification agency or a self-certification function provided by the platform. For third-party certification, the user device will communicate with the certification agency's server to obtain a certification certificate. For self-certification, the user device will submit certification documents to the platform's server for verification.

The whitelist contains a list of verified qualified investors who are allowed to participate in the tokenized securities issuance. The blacklist contains entities or individuals that are prohibited from participating, such as competitors, affiliates, or individuals marked by the U.S. Office of Foreign Assets Control (OFAC).

The life cycle of a BITE token includes: a pre-sale period, during which potential investors can register, review documents, and purchase BITE tokens at a discount; an issuance period, during which qualified investors can purchase BITE tokens; a silent period, during which the resale of BITE tokens is restricted to prevent insider trading; and a trading period, during which BITE tokens can be freely traded on the secondary market.

Blockchain oracles are agents that connect blockchains with data from the outside world. In tokenized securities issuance, oracles can automatically retrieve investor certification information from various sources (e.g., the database of a certification service agency) and update the qualified investor whitelist on the platform.

A proxy contract allows one party to act on the platform on behalf of another, thereby enabling the transfer of ownership. Custody contracts encrypt and securely store information that can only be accessed by the owner. Aggregation contracts combine multiple participants into a single entity to facilitate transactions.

The platform ensures compliance by implementing SEC rules and guidelines in tokenized security contracts, such as investor certification, anti-money laundering (AML), and know your customer (KYC) regulations. The platform also leverages smart contracts to automatically enforce these rules to reduce the risk of noncompliance.

Tokenized security issuance provides greater accessibility, liquidity, and transparency. It also reduces costs and provides automated compliance compared to traditional methods, thereby reducing risk and increasing efficiency.

Glossary

Blockchain: A decentralized database used to record transactions in a peer-to-peer network and is secured by cryptography.

Cryptocurrency: A digital medium of exchange that uses cryptography to protect transactions and control the creation of new currency units.

Smart Contract: Code that is automatically executed on the blockchain to implement the terms of an agreement between two parties.

Tokenized Securities: A digital token that represents ownership of a real-world asset (such as stocks, bonds).

BITE Token (Blockchain Instrument for Transferable Equity): A tokenized security that represents transferable equity.

Oracle: An agent that connects the blockchain to data from the outside world.

Proxy Contract: A smart contract that allows one party to act on the platform on behalf of another party.

Escrow Contract: A smart contract that encrypts and securely stores information that only the owner can access.

Aggregate Contract: A smart contract that combines multiple participants into a single entity to facilitate transactions.