FUNDING MECHANISMS - how they work


What is an ICO
You’re probably familiar with IPOs, or Initial Public Offerings, where companies sell stock to raise funds. Simply put, ICO is a similar play and stands for Initial Coin Offering. With the advent of blockchain technology, we are now able to make trustless transactions without requiring intermediary parties. The technology itself is a big step towards solving the issue of digital trust. Given this advancement, technology startups are now turning towards blockchain technology in order to raise funds from people around the world. This is an exciting development in crowdsourcing projects and means people can now invest in upcoming startups with few limitations. Startups that do initial coin offerings basically accept cryptocurrencies in exchange for token sales. These tokens are technically a lot like shares (not legally) and investors buy them in hopes of future profits as the prices of these tokens go up.

How do ICOs work?
All ICOs begin with an idea. A startup comes up with an idea for a blockchain related project and proposes it to the community. If the startup finds traction, they go ahead and formally draft a white paper that provides all the details — from the team working behind the project to its technical aspects and future plans. Other particulars are decided then, including the number of tokens that will be distributed, the price of each token and how the tokens will be used in the project’s ecosystem. Marketing campaigns are launched after this to gain momentum and an ICO date is unveiled when the token sale is scheduled to begin. There is usually a defined time period to raise the required funds, after which the sale closes. Investors then start receiving their tokens and plans are made for them to go live on exchanges for trading.



ILP structure issues Future Loan Access Tokens (FLAT), which are a form of “access tokens”, so creditors can transfer their loan agreements to others. Tokens will be issued to the creditors who lend funds to the company. Each company using Tokenote ILP structure can brand their tokens as they wish.

User identification and verification are a critical function to prevent fraud and anti-money laundering. Such procedures, or Know Your Customer (KYC), need to be completed before loan agreements can be digitally signed. Agrello ID, a digital identity and signature solution, provides the support necessary for Tokenote’s ILP system.

Tokenote ILP structure, developed by Blockhive, is based on cryptocurrencies. The creditors lend in cryptocurrencies and receive FLAT tokens. Tokenote can support cryptocurrencies including Ethereum. The system was developed in cooperation between Blockhive and Agrello.

Loan Agreement
Each creditor has to sign a loan agreement, before receiving FLAT tokens. Tokenote’s ILP system uses Agrello smart contracts that can be digitally signed using the Agrello ID. Each contract is recorded on the blockchain.