Great post. I've been thinking along these lines myself. Utility tokens will hold their worth more than simply the next shiny thing.
I was toying with the idea of creating my own token for the island I live on, as there could be plenty of real-world uses when you consider the different Hive apps that interact with tokens.
The problem I have right now is that much of the information I am reading online suggests that just going ahead and creating a token (as an amateur enthusiast running a Hive community) might potentially lead to legal difficulties.
It seems that crypto-tokens fall into various financial regulatory categories (depending on your location), and that to run one, issue one and make one available on an exchange requires you to register with financial regulatory authorities and provide certain legal assurances.
Whilst this may all be fine for a fortune 500 company, what happens to us independent crypto enthusiasts just wanting to build a utility token for our community?
What you state is correct. There is a lot to be sorted out. In fact, some believe a lot of existing projects are going to face some bad days ahead when they get the knock on the door for regulators.
There are a few constants we can take away:
Do not sell the token. Many places consider that selling an unregistered security
No founders stake: if there is a point of vulnerability, the governments will go after it
Decentralize: build on decentralized infrastructure so there is no vulnerability there
Distribution: get the token distributed to a fair number of people, with no single person having a large amount.
From what I can see, there are efforts to get more layer 2 decentralized infrastructure in place to help this process.
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Thank you, that's very informative. The info here gives me some great areas to make further research. Yes, I think my island would benefit from having its own local token. I'll have to think whether it's worth the legal exposure I may be putting on myself as an individual.
It most likely would.
I would spend some time laying out a plan for the utility and how it is to be distributed. Hit me up on discord if you want some insight. I might be able to put you in touch with some who could help out with the technicals along with how to structure things to keep yourself removed from the equation.
If you are not directly profiting from the creation and distribution of the token, that removes a great deal of trouble (at least in the US). That is why you see SpkNetwork doing airdrops and giving the token away with the team behind it not getting anything more than anyone else.
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Thanks. I will, and I'll try and find you on discord when I've thought of a plan. I'd really like to get a project going - I think it could be great for the island. As you say, crypto is only just beginning and there will be real-world applications for it that we haven't even dreamed of yet.
The mass-scale adoption is inevitable. And he have a chance here to help to shape it into really beneficial ways. The risk is whether I want to open myself up to scrutiny - word get's round quickly on the island, so an island-specific token would certainly get attention one way or another!
That's an interesting take, and one that certainly needs thinking about. On the one hand, all crypto-currencies could potentially fall under some fairly stringent regulatory attention, should the authorities decide to turn their attentions to any of them.
And yet, there are many - utility tokens for one - that serve primarily as a useful mechanism within a game or project, rather than a traditional security.
For example, there have been many massive multiplayer games over the years that use in-game purchases or in-game items that can be bought or traded, which did not, before the age of cryptocurrency, fall under such legal scrutiny. But these days such games employ in-game assets as crypto-tokens (as in Splinterlands), which suddenly puts your project into the category of a financial institution.
I think my point is that governments are still lagging behind in many ways. They hear the word "crypto" in regards to a project and lump it in with securities and finance, when the tokenisation of the web will be far more nuanced than that.
It's just a shame that such legal ambiguity might either put some developers off, or place others developers into potential legal strife.