ICO emerged as a pioneer for raising funds for the business and it also helps in acquiring higher value of your token. With the rise of this instrument, many possibilities were brought into fruition. Moreover, Equity Token Offering services has become a distinct domain altogether. Equity token is one of the most effective tools for traders and it could be more effective when designed keeping the business in mind. Even for crowdfunding purposes, this token has proven its efficiency in many ways.
There is a proper categorization of tokens and each variant has its own specification. Mainly, there are three types of tokens which are:
- Security Token
- Utility Token
- Equity Token
There has been very little information scattered about equity token so far. Utility tokens have been distributed many time with ICO and now, security tokens are much talked about. Therefore, we are going to talk about equity token in article and will try explain its functions as simply as possible.
What is Equity Token?
With equity token, you can invest in any company and get hold of some shares of it. The value of these shares will be equated with the percentage of token invested in the company. Shareholders get their fair share of ownership through a just system of dissolution.
The equity token holders enjoy the essential authority to access the shares of company that represents their ownership. As per this system, the rights of shareholders and token holders are the same, both the holders have irrevocable right over the ownership of the enterprise. The voting rights are distributed to the token holders using blockchain technology. Raising funds become very easy with this particular token as it is considered as company asset.
Equity Token Offering
There is an in-built method integrated into this fund-raising mechanism which allows token holders to gain ownership. With the help of blockchain technology, the traditional approach of keeping a paper ledger is maintained with revamped security structure.
It is a secure process which also includes the dilution of shares and raising capital in several rounds. This process is executed in two different stages which are:
It is a secure process which also includes the dilution of shares and raising capital in several rounds. This process is executed in two different stages which are:
- Private Locked Stage
- Public Liquidity Stage
Equity tokens also perform dilution and anti-dilution, here’s how they do it:
Dilution
By following this process, the quantum of ownership from the shares of stock of the company is reduced. For instance, 50 shares are allotted to 50 different shareholders with each of them holding 1% ownership over the company. At this particular point, a secondary offering is made with another 50 shares for a different lot of 50 individuals, But this time, the ownership has been increased 5%. This process also results in decrease of ownership percentage for each investor.
Anti-Dilution
The equity position is prevented to get diluted by this process. Under this particular situation, when the total number of shares are increased, the overall value of stock get decreased. When the new shares are issued in the rounds of equity, it also results in the increase of share value. The total ownership of current shares depends on the number of shareholders and issue of the preferred shareholders the price touches the lowest.
These processes also also determine the percentage of ROI for token holders.
Advantages of Issuing Equity Tokens:
Equity Token Offering owes its success to the following salient attributes:
- Control – It is helpful in keeping the control of company intact by not dispensing the non-voting shares. However, it allows them to invest keeping the profits unaffected.
- Assured Security – By implementing the blockchain technology, this particular instrument becomes very secure for every participant.
- Value Keeping – As company goes ahead in making profits, tokens retain their value.
- Cost Effective – Services can be rendered at a very affordable price with this instrument.
- Verified – For transactions and investment purposes, it is fully provided.
With Coin Developer India, you can get this services at a very affordable price. We ensure, that the tokens adhere to the regulations the impact your business. We can also help in ICO token development, security token development and initial exchange offering services. With our services, you can surely launch your business and ensure that it becomes an absolute success.
