Tokenize the World!

An Intro to Securities on a
Blockchain

David V Duccini, Founder & CEO, Silicon Prairie Online

Zachary J Robins, Attorney, Messerli & Kramer, P.A.
 Overview/1

• Who are we?

• What is a Blockchain?
• What is a Cryptocurrency?
• What are Alt Coins?
• What are Tokens?
• What are Smart Contracts?
 Overview/2

• What is an ICO and why does the SEC care?

• What are Securities?
• Registered vs Exempt
• What is a Registrar?
• Examples of Securities on a Blockchain
 Overview/3

• Next Steps…
• How do we get there?
• Players: Marketplaces, Protocols, Live Sales
• Future of Tokenizing Everything
• Q&A
Who are we?
• David
• Serial entrepreneur since age 16 - first computer was an Apple ][+
• Coding since 1980 in every major language (and a lot of minor ones)
• Wrote a BBS from scratch – forced to learn assembly language ;-)
• MSc Software Engineering, UST & MBA Carlson School of Management
• Zach
• Securities attorney
• Co-founder of Mnvest.org
• Co-Founder of Land.MN
Some of David’s hobbies
 Blockchain Defined

Simply defined a Blockchain is little more than a:

• Distributed
• Secure
• Logfile

A digital currency was in a lot of ways the first demonstrable use

What is Bitcoin ?
• A protocol that supports a decentralized, pseudo-anonymous, peer-
to-peer digital currency*

• A publicly disclosed linked ledger of transactions stored in a

blockchain

• A reward driven system for achieving consensus (mining) based on

“Proofs of Work” for helping to secure the network

• A “scarce token” economy with an eventual cap of about 21M

bitcoins
* I would argue it behaves more like a security like a Stock or Bond than a currency, a crypto-equity
Bitcoin Whitepaper – 2008.10.31*

* Halloween
Alt Coins: A Fork in the Road
• An “Alt Coin” is an Alternative version of an
existing cryptocurrency
• There are thousands of them
• Most are simple “forks” of Bitcoin, Ethereum or
PeerCoin
• Most are just “brand only” coins offering no new
innovation and are often just shills to make the
developers enriched in a mainstream crypto
It’s Better 2GIVE!
• https://2Give.Info
A Token of our appreciation
• A Token represents a new fractionalized store of a value
on an existing chain
• For example Ethereum’s ERC-20 token
• Any user can allocate a new number of units and bind it
to a particular address to create an “asset”
• Acts like a one way trap door for value
• Actual coins are sent to acquire the new sub-units and
the holders now have a fractionalized share of the new
“asset”
Not all Tokens have Liquidity

• Just because you area a token holder

does not mean you have any means
to exchange or convert them

• Liquidity is EVERYTHING!
Smart Contracts Require Smart
People
• A “Smart Contract” is a bit of code that is stored on the
blockchain and is invoked when it receives messages,
typically coins
• Simplified IF/THEN/ELSE logic that executes
• Your Smart Contract cannot be smarter than you!
• “The DAO”
– A “Distributed Autonomous Organization” which was exploited
to “steal” tokens
– The birth of “Ethereum Classic”
ICO - Initial “Con” Offering

• An Initial Coin Offering is an event

where a development team makes for
sale their new blockchain, AltCoin or
Token.
• Does ”ICO” sound like “IPO” ?
• The SEC sure thinks so…
Unregistered Securities ?
 How do you really feel about it?

“When you depart from the bitcoin or the ethereum, and you get into the
tokens, the hallmarks become pretty clear,” SEC Chairman James
Clayton.
What is a Security? Since 1940s it
includes…
any note, stock, treasury stock, security future, bond, debenture, evidence of
indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or privilege on any security
(including a certificate of deposit) or on any group or index of securities
(including any interest therein or based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a national securities
exchange relating to foreign currency, or, in general, any interest or instrument
commonly known as a “security”, or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or warrant or right
to subscribe to or purchase, any of the foregoing
What is a Security? Since 1940s it
includes…
• It is an investment of money
• There is an expectation of profits from the
investment
• The investment of money is in a common
enterprise
• Any profit comes from the efforts of a
promoter or third party
Exemption <> “Circle of Protection Spell”

• What is an exemption?
• Some examples
– State based
– Federal exemptions
• Who determines the exemption?
Registrar & Transfer Agents

• A Registrar is responsible for maintaining the

authoritative record of every shareholder
identity and ownership
• A Transfer Agent is responsible for recording the
movement of shares among shareholders
• Registrar & Transfer Agents are now typically
combined into a single entity
Examples of Securities on
Blockchains
• Corporate stock!
• Land and Property Registries
• Fractional ownership in:
– Artwork?
– Music sponsorship?
– Professional Athletes?
– Jet Engines?
Tokenized Securities: Players
Q&A
 What to know more?

2PM TODAY!

“Bountiful Blockchain
Beyond Bitcoin”

Jade Barker
 Contact Info

• Twitter: @TheLittleDuke
• Skype: The_Little_Duke
• LinkedIN: http://linkedin.com/in/dvduccini
• Twitter: @zjrobins
• Email: zjrobins@gmail.com
• LinkedIN: http://linkedin.com/in/zjrobins