Tokens

Your company's unique digital tokens and units of account to determine the share of entitlement of profit distributions and liquidation proceeds and the number of options to those entitlements for each token holder. Tokens are similar in nature to digital shares that demonstrate who owns what. Each token represents a slice of your company’s value. These digital tokens keep track of ownership and benefits in a clear, transparent and secure way.

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Profit Share Tokens are digital tokens that function as a robust tradable instrument that can be used to claim a right to a share of profit distributions or liquidation proceeds.

The term 'Profit Share Token' denotes your unique token's entity tied to the immutable ID on the distributed ledger network Hederaa; meaning it is permanently linked to you. Each amount of that Profit Share Token, however, is denoted with 'PST'. While your company may only have one unique Profit Share Token, it may issue as many PSTs as it deems fit, legally underpinned by the pool size that you yourself set in your Shareholders Agreement, in your company's General Meeting or by your Management Board.

Think of PSTs as your company’s own internal, fully transferable currency. For example euros and dollars are currencies, whereas units of that currency are denoted with a symbol (e.g. "EUR" or "USD") and individual amounts of that currency can be denoted with that symbol (e.g. EUR 10 or USD 10).

Option to PST Tokens—OPT

Options to PST Tokens are digital tokens that function as a robust tradable instrument that can be used to claim a right to an option to buy a PST at a predetermined price—the strike price.

Also here, the term 'Option to PST Token' denotes your unique token's entity tied to the immutable ID on the distributed ledger network Hedera, while each amount of that Option to PST Token is denoted with 'OPT'.

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Distributed Ledger

Hedera

Profit Share Tokens (PSTs) and Options to PST Tokens (OPTs) are created on the Hedera distributed ledger network.

Unique ID

Both a Profit Share Token and an Option to PST Token has a unique and immutable ID on the distributed ledger based on Hedera's asynchronous Byzantine Fault Tolerant (aBFT) Hashgraph consensus protocol—mathematically certified as the highest possible level of network security for distributed systems. An example of such an ID is '0.0.1234'.

Name and Symbol

Token Name

You can set the Token Name of your company's Profit Share Token for human-readable representation. The Token Name is directly linked to you Profit Share Token's ID. An example of a Token Name is 'Apple Juice Inc Token'.

Token Symbol

In addition to the Token Name, you can set the Token Symbol of your company's Profit Share Token. The Token Symbol is similar to a ticker symbol of publicly traded shares (e.g. MSFT for Microsoft shares). This symbol is useful for conciseness in representations of your unique token. Additionally, the Token Symbol is used to denote individual units or fractions of your Profit Share Token—your PSTs. An example of a Token Symbol is 'APPLE'. Then, one may hold e.g. 10 APPLEs.

Purpose

Unit of Account

Your company's Profit Share Token is used as a unit of account: to determine the share of entitlement to profit distributions and liquidation proceeds for each token holder, the number of tokens held by one individual is divided by the total number of issued tokens. So for instance, if you hold 10 APPLE tokens, and a total of 100 APPLE tokens are issued, you may claim entitlement to 10% of a distribution to PST holders. This is also highly beneficial as your cap table increases in complexity and fractionalisation.

Tradability

The technical properties of the digital tokens on the distributed ledger and their immutable public audit trail make them suitable for trade between parties. Control over any amount of tokens can be proved to be factually limited to their holder, and any transaction impacting those tokens (e.g. when a certain amount of tokens is transferred from one party to another) is permanently recorded on the ledger. Tradability may be contractually and technically restricted (partly or fully) by the company to align trading policy with the company's interest and to ensure compliance with relevant laws and regulations.

Frictionless administration

By using digital tokens as unit of account for determining each holder's share of entitlement to profit distributions and liquidation proceeds, there is no need to perform heavy and complicated reconciliation calculations of transactions for each issuance and trade of tokens, as normally is required when issuance and transactions are performed with (digital) paperwork. The company only needs to look at the amount of tokens held by each token holder at the moment a profit distribution or liquidation proceed payment is planned.

Read more about how the participation plan and deed of issuance are structured to govern the rights of token holders in the next articles.

Restrictions

Limited trading

To protect the organisation and its stakeholders, and because securities laws and regulations can be highly impactful when not adhered to, trading of Profit Share Tokens is fully restricted by default. Tokens cannot be transferred between accounts, except from the organisation’s account to a participant’s account at the moment of issuance. This reduces the risk of accidental breaches of (international) securities law that may occur when stakeholders transfer tokens without sufficient legal preparation and controls in place. If you would like to enable tradability for your organization or for individual participants, reach out to our support.