Tokenization as an alternative to crowdfunding and the stock exchange.
The increasing adoption of blockchain technology and cryptocurrencies, which are its particular use case, makes more and more people and companies turn their eyes towards tokenization.
Possibilities and previously unavailable economic models enable lowering the threshold for entering investments, both for the organizer and the investor. So what is tokenization? How do tokens work, and why is it worth stocking up on the Kanga Exchange? You will find the answers to these questions in the text below.
Before I get to the point, I would like to make the reader aware of two fundamental things.
1. Tokenization is not cryptocurrencies! (despite using blockchain technology)
Of course, a token can be a cryptocurrency, but that’s not what it’s about. Simply said, a token represents the conclusion of an agreement between the issuer and the “token holder” (holder – holder, token holder – token holder). There is always an organization behind the token: a company, foundation, or a natural person.
2. Blockchain is a trusted third party!
- blockchain has no central authority or supervisory institution (applies to public blockchains such as Ethereum or Bitcoin) – decentralization
- each participant of the network has a copy of the information
- is freely available and cannot be turned off
- the information written in it is unchangeable
What exactly is tokenization?
Tokenization is a process that binds a project/service or any other asset (e.g., shares in a company, in precious metals, etc.) with a digital token. Contrary to centralized solutions – the token cannot be copied or forged.
What are the types of tokens?
What a given token is, says (or at least it should) in its regulations and the so-called White Paper / Light Paper (simplified prospectus)..
We distinguish three main types:
- Loan token – the token represents the fact that a loan agreement has been concluded between the issuer of the token and its holder. This agreement is no different from a paper loan agreement. The loan should be returned with the agreed interest, and the issued tokens should be recovered.
An example of such a token is the MT01 token – https://trade.kanga.exchange/ieo/MT01
Regulations and teaser – https://www.percent.com.pl/dokumenty
- Token Utility – a token is giving access to a selected service or product. Cryptocurrency exchanges often choose this form. The KNG token is the best proof of this. With its help, you can pay for selected services within the Kanga Exchange ecosystem. It gives access to airdrops for sold tokens and rewards its owners with a share in the income.
- Security Token – definition from Wikipedia
Security tokens reflect real assets, e.g., in the form of stocks/shares in a company, bonds, real estate ownership, debt ownership, etc.
As part of the STO issue, one of the parties entrusts funds, and the other issues tokens that give the buyer the right to participate in the company’s profits or guarantee a constant return on investment. When dealing with a security token, this contract is secured by Blockchain technology, thanks to which all participants of the offer can see who, how many and what tokens have been purchased.
Security tokens are structured in such a way that they are legally similar to securities. By creating this, investors who entrust their capital to the company have a sense of greater security. (https://pl.wikipedia.org/wiki/Security_Token_Offering)
Security vs. Utility tokenization
Bearing in mind the above division, we can distinguish two main types of tokenization – Security and Utility tokenization.
|Regulated by Polsih Financial Authority||No||Yes|
|Type of company||Anyone or natural person||Simple Stock Company|
|Possibility of linking in a selected aspect of the company/project||Yes||No|
|Possibility to carry out multiple tokenizations within the organization||Yes, e.g., for a new service||No (tokens are inextricably linked to the company’s shares)|
|Airdrops / Marketing||Yes||No|
|New economic models||Yes||No|
The main advantage of Utility tokenization over Security is the possibility of collecting funds without losing control over the enterprise. Additionally, you can create unprecedented business models.
Since examples best illustrate it, let’s take a few tokens issued/listed on the Kanga Exchange.
The KNG token is the only means of payment in the Kanga Exchange ecosystem. It is a deflation token issued in the amount of 21,000,000.
The holders of this token have two options:
1.) trade it on the secondary market; at the time of writing the article, it is listed in the USDT cryptocurrency (https://trade.kanga.exchange/market/KNG-USDT)
2.) freeze it on a dedicated proof of stake sub-account (i.e., stake KNG token) and get a part of the revenue collected by Kanga.
How it’s working?
If you buy tokens on IEO, sell or buy cryptocurrencies on the exchange or in stationary exchange offices, or use the Kanga Pay payment gateway, you will be charged commission. After collecting it, the system does two things:
1) buys as much as possible the KNG token from the KNG / USDT market
2) the purchased tokens are distributed among the users of the KNG proof of stake token;
What did Kanga gain from this?
First, thanks to the trust of early investors, Kanga was able to raise funds and grow to where she is today.
Secondly, since the system buys tokens, it creates a demand for them.
Thirdly, by sending these tokens to proof of stake accounts, their supply is reduced, and users who have frozen their KNG (temporarily withdrawn from circulation) are rewarded.
Now you probably ask yourself, dear reader, how does Kanga make money, since all the income is sent to the proof of stake?
Kanga froze ~ 20% of all available tokens; thus, 20% of the revenue returns to the company.
Was such an economic model possible in the pre-blockchain world? 🙂
Another interesting model is the one behind the JPW21 token. By purchasing this token, you are, in fact, buying a share of the whiskey barrel. After three years, you can exit the investment in two ways:
1. Collect a bottle of Palikot Whiskey (1 token = 1 bottle of 0.5l)
2. Recover own contribution + 50% of the profit on the sale
In addition, by freezing JPW21 tokens for proof of stake, the ml whiskey derivative token is generated – 0.152207 per day. Having the right amount of this token, we can exchange it in the online store for a bottle of Palikot Whiskey.
What should you remember?
When preparing for tokenization and the formal and technical requirements that must be met, one must not forget about what is behind the success of each fundraiser. This applies to tokenization, crowdfunding, or listing.
Marketing and the community around the project are the most important. You can have a significant project MVP, an excellent token economy, but if the world doesn’t know about you, the fundraiser may not meet the issuer’s expectations. Take care of it and prepare an appropriate budget for promotional activities before broadcasting.
Why is it worth getting tokenized on Kanga Exchange?
First of all – we will provide you with all the necessary tools:
- IEO – primary market.
- Secondary trading.
- Centralized proof of stake mechanism
- 3 tier affiliate program and much more
Secondly, because we charge the initial fee in your tokens, we share them with our community, which “stake” KNG tokens. It is an effective way to reach potential investors.
Thirdly – it is cheaper than equity crowdfunding or going public.
How much does it costs?
- 1-2% – we charge in your tokens. We dispose these tokens between the stakeholders of the KNG token.
- 2-5% – commission on sales.
- Marketing budget (importantly: Kanga does not provide marketing services, the entire campaign from planning to implementation will be on you). We know from experience that, on average, ~ 10% of the target amount should be prepared for promotional activities.
By choosing tokenization as a method of financing your project, you save time (definitely fewer formalities) and money (subtract two zeros from the price of entering the traditional stock exchange☺). Additionally, if you choose Kanga Exchange as a platform for issuing, you can attract investors with attractive tools and business models unavailable in the classical world.