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As from yesterday we've started to dig deeper in blockchain technologies, I've decided to write an article about not very popular term to general & new crypto members but currently lots of blockchain projects i.e 'Dual Token Sales'.
In this article I'll discuss about 'Dual Token Sales' and wether it is good or bad for the projects.
Many projects are issuing two tokens, one is a security token and other as utility token. Security tokens are used to raise funds for the project development and the utility token is to serve the network.
The main purpose behind this type of dual token system is to help projects become more complaint with regulators.
Dual token sales are new type of funding options where one token Is designed to raise funds and other as utility. There are many projects adopting this type of model including a very popular project MakerDAO.
In 2017, crypto market exploded and the main way to raise funds for the project development is to issue tokens and making them available to the investors. This type of process is known as ICO (Initial Coin Offering) and there are multiple voids seen by the regulators.
As US securities and Exchange commission was issuing warnings to the projects and shutting down crypto projects.
Now the crypto industry has to react against regulators and has to solve this problem. So the crypto industry comes with the solution to the impending regulations and legal actions, new token models were being experimented such as Simple Agreement For Future Tokens (SAFT), Security Token Offering (STO) an Dual Token Sales (DTS)
The Startups were adopting Dual Token Sales method to raise money while avoiding the wrath of regulators.
As I already mentioned, lots of projects are adopting Dual Token Sales system, some of them are emerging and some of them are already well established. Here we'll take on some of the projects adopting Dual Token Sales method.
MakerDAO is one of the best example to explain dual token sales. They've two tokens, one is MKR and other is DAI. MKR is a governance token of the MakerDAO platform which helps other token DAI for price stability, which is a stablecoin.
The mechanism is, if the price of DAI stays equivalent to the one USD, the MKR tokens are destroyed and it benefits the the MKR holders due to the smaller supply of MKR tokens. And opposite to that if the price of DAI fluctuates far from one USD, then MKR tokens are created and MKR holders has to deal with increased supply of MKR tokens. MKR token holders also get the right/ power to vote on the changes in platform.
While finding the solutions to the legal actions of regulators, many methods are experimented and many are still in experiment. Will dual token sales method stand against them ? Well no one can actually tell that.
But till now, none of the blockchain project wich adopted dual token sales method were not shut down by SEC. And MakerDAO shows many uses of dual token sales method beyond only dealing with regulations.
At this stage the future of Dual Token Sales method is neither dark nor bright, but it's actually helping lots of projects keeping them away from regulators.
So friends this is it from my side on Dual Token Sales method, hope you enjoyed article.
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