Last month, we announced Republic Crypto. PROPS was launched yesterday, Dec. 11 2017 (and fully subscribed within the first hours), as our first Crypto offering, giving unaccredited supporters of the PROPS Project and blockchain enthusiasts everywhere early access to PROPS tokens. At the same time, our partner CoinList launched a parallel PROPS offering reserved for high net worth investors only.
Why early access?
Early access often means more favorable pricing, and crypto-token sales are no exception. Large VC-backed blockchain projects like PROPS conduct a token presale in part to reward their vast network of investors and supporters with discounted pricing before holding a public token sale.
CoinList curates and lists token sales for some of most promising blockchain startups, but their regulatory framework limits their audience to only accredited investors—high net worth individuals comprising just 3% of the US population—leaving the general public out of one of the most transformative wealth-creation opportunities of our time.
PROPS has turned to Republic Crypto for a compliant and inclusive solution for the rest of its growing community. And in PROPS, we found our ideal launch partner—aligned in mission, technically adept, and validated by product traction and an impressive roster of investors.
How do we do it?
Republic Crypto offerings employ a new Republic-designed and industry-reviewed legal instrument: the Token DPA™ — Debt Payable by Assets. When investing in a Crypto offering, investors extend a cash loan to the issuer that can be repaid with the agreed-upon tokens in lieu of cash, at whatever the price to be set for the public token sale.
Because the debt also bears interest payable in tokens (20% in the case of PROPS), full repayment of the Token DPA would yield more tokens for the investor than she would otherwise receive by participating in the public token sale directly with the same money.
We recognize that blockchain technology, its applications, and crypto-currencies as a new asset class are still poorly understood and highly speculative. To enhance investor protection, we typically require that a significant portion of the capital raised from a Crypto offering be held in escrow, to be released to the issuer only if certain pre-set benchmarks are met.
That provides some downside protection for the retail, unaccredited public wishing to support blockchain projects still in development. As a (wholly unwarranted) hypothetical, should PROPS fail to launch, accredited investors participating through a SAFT would likely incur a total loss of invested capital, whereas investors participating through the PROPS Token DPA on Republic Crypto would receive back at least 80% of their invested capital even in that worst-case scenario.
We created the Token DPA with the goal of enhancing investor protection on the one hand, and simplifying legal complexity and administrative burden for token issuers and their affiliates. We appreciate the valuable feedback of partners and attorneys, and we will iterate further on the Token DPA with your inputs.
Tokenizing the DPA
We built Republic Crypto believing that crypto-tokens are the future of retail investment both inside and outside the blockchain industry. Creating the Token DPA as a new legal instrument for facilitating and democratizing token sales is only the first step—next up is our partnership with Dharma Labs to issue the Token DPA itself as tradable and programmable token.
With a tokenized DPA, investors receive unique pre-sale tokens representing their rights to future network tokens. These standard tokens are transferrable within the limits set forth by Regulation Crowdfunding, and benefit from an entire ecosystem of applications—wallets, exchanges, and more—already designed to support them. Dharma, a generic protocol for issuing debt agreements as tradable token, serves as the technology underpinning this. Looking further out, we see a future when all investment offerings on Republic and Republic Crypto will be tradable as crypto-tokens.
Now is always the right time for inclusivity
PROPS as the inaugural Republic Crypto deal exemplifies our core mission of financial inclusion—making it possible for everyone to invest alongside with the likes of Union Square Ventures. Including more people early in a project’s financing and development cycle necessarily helps strengthen and grow the network. With that in mind, Republic Crypto will announce more products and services aimed at promoting diversity—in terms of industry participation as well as functional applications.
Thank you for supporting our mission and for being a part of our community. And if you don’t have the patience to explain the risks and rewards of crypto-investing to friends and family at holiday gatherings this season, we’re here to help.