A PROJECT BY MANDAR PARNERKAR AND VINAYAK MANE ICO FRAMEWORK A PROJECT BY MANDAR PARNERKAR AND VINAYAK MANE

WHAT IS ICO? AN ICO IS A TYPE OF FUNDING USING CRYPTOCURRENCIES. MOSTLY THE PROCESS IS DONE BY CROWD FUNDING. OF LATE THOUGH, THE PRIVATE ICO’S ARE BECOMING MORE POPULAR. AN ICO CAN BE A SOURCE OF CAPITAL FOR STARTUP COMPANIES, BYPASSING THE REGULATORY COMPLIANCES AND VC’S, BANKS AND STOCK EXCHANGES. THERE IS ALSO A RISK WITH ICO’S AS THEY ARE PRONE TO SCAMS AND SECURITY VIOLATIONS.

SAFT (SIMPLE AGREEMENT FOR FUTURE TOKENS) FRAMEWORK The developer of a token-based decentralized network enters into a written agreement, called a SAFT, with accredited investors. The SAFT calls for investors to pay money to the developer in exchange for a right to tokens once the network is completed. The investors typically get a discount. The developers don’t issue any pre-functional tokens at this stage, but they do file the required forms with the SEC. The developer uses the money to develop the network. This could take months or years. Still no pre-functional tokens are issued. Once the network’s basic functionality exists, the developer creates the tokens and delivers them to the investors, who can sell tokens to the public on the open market to realize their profit. The developers themselves can also sell tokens to the public at this point as it is now a consumptive use-token.

LIMITATIONS OF SAFT FRAMEWORK The SAFT doesn’t achieve much for tokens that are themselves securities (e.g. limited partnership interests like the DAO token). Using a SAFT won’t make a securities token any less of a security. The SAFT only works for “utility tokens.” It won’t aid utility tokens where purchasers remain reliant on the efforts of the token sellers (or others) for their expectation of profit after the token is circulating. Examples include situations where the seller relies on the issuer’s promises to buy back the tokens to increase the price, or where the seller promises to develop the truly valuable functionality at some point after the sale. The SAFT framework is focused on bodies of US federal law and not generally applicable worldwide, although it can be beneficial in regards to US regulation it can very well be deemed as an illegal practice in other jurisdictions, potentially excluding many international contributions. SAFT approach also has the unfortunate effect of excluding the general public from participation, as only accredited investors could part-take in the first part of token sale. Recently SEC has started sending subpoenas to some of the projects following SAFT framework on the ground that “Artificially dividing the overall investment scheme into multiple events does not change the fact that accredited investors purchase tokens (albeit through SAFTs) for investment purposes, and likely will not prevent a court from considering these realities when assessing whether these tokens are securities” Simple Agreements For Equity (SAFe) is still preferred in some of the jurisdiction https://www.tzero.com/

RICO (RESPONSIBLE ICO) FRAMEWORK Responsible Initial Coin Offering ("RICO") is an ICO framework that enables anyone to easily and freely build a decentralized ICO. RICO was developed so that developers can flexibly design various ICOs and run them completely on smart contracts. With RICO, it is possible to compress the enormous labor required for an ICO and to focus on product development. RICO powered ICOs run upon the Ethereum Blockchain. By using RICO, your ICOs will be completely transparent and fair for all supporters. Since 2017, ICOs have spread rapidly. However, some of these are fraudulent or leave supporters in a disadvantage. Most normal people can not detect this and end up losing money. If this continues, more and more authorities around the world will judge that ICOs are dangerous and might want to centralize the market by making regulations more strict. The way to solve problems with current ICOs is to realize a standard method upon which ICOs can be built fairer and more transparent. If fair and highly transparent ICO methods spread, there is the possibility of eliminating fraudulent projects through simple trustless principles. With RICO it is possible to start a more responsible ICO by introducing a model in which the ICO project owners will bear the cost of issuing the first token. Also, RICO also supports the "DAICO" model announced by Vitalik Buterin in the beginning of 2018.

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