What is the Simple Agreement For Future Tokens (SAFT)?
Introduction
With over 6,000 projects and counting, it’s safe to say the blockchain ecosystem is booming. However, blockchain is not just about building a product, the market has matured and investors backing a project play an important role in the success of the startup.
It is for this reason, many blockchain businesses explore funding rounds. Not only does the boost of capital help with a project’s development and marketing, but the name attached to the funding also raises a project’s credibility.
One of the preferred ways blockchain businesses raise capital during seed rounds is by selling their project’s native tokens. This type of token sale helps projects bypass the formal framework required to tap into global financial markets. However, the agreement between investors and the project still needs to adhere to international, federal, and state law — this is where the SAFT can help.
What is a SAFT Agreement?
The SAFT agreement is a contract between authorized investors and a cryptocurrency project. The document states that the investors will finance a project in exchange for discounted crypto tokens at a specific date.
While tokens transferred on the blockchain are not considered securities, the SAFT itself is considered a security and adheres to United States of America’s securities regulations. Thus, complying with the laws, rules, and regulations of one of the strictest jurisdictions worldwide.
Simple Agreement for Future Tokens (SAFT) vs. Initial Coin Offerings (ICO)
SAFT’s are often confused with Initial Coin Offerings (ICOs). ICOs involve a project selling their tokens to regular, shortlisted users on a launchpad. Whereas, SAFTs only deal with accredited investors. According to coinspeaker, “an accredited investor is an individual who has legal permission to deal in securities. They also meet certain requirements pertaining to income, net worth, professional experience, etc.”
This difference between investor classes is what classifies the SAFT as a security that meets the basic requirements of American jurisdictions.
Limitations of the SAFT Agreement
The SAFT framework ensures regulatory compliance for projects throughout the world but comes with a few limitations:
- Focused on the U.S. Federal Laws: As you’ve noticed, the SAFT framework is built to satisfy criteria under the U.S. federal laws and regulations. This limits the SAFT to U.S. markets only and can be deemed illegal or invalid in different jurisdictions and countries.
- Only accessible to accredited investors: Blockchain’s ethos is community. And the SAFT framework restricts retail investors from investing and getting behind a blockchain project in its early days.
While drafting a SAFT is the safe thing to do for investors and entrepreneurs, enforcing the agreement can get complicated, especially if both parties are in different jurisdictions. Drafting the SAFT may be easy but lawyer fees to ensure the agreement is valid and executable across countries can drive costs sky-high.
To circumvent these issues is why PAID advocates embedding the SAFT framework to the blockchain!
Why A SAFT Agreement on the Blockchain?
A blockchain-based SAFT agreement offers the following advantages:
- Efficient: Your bet agreement is embedded as a smart contract, code that self-executes as soon as both parties sign, enforcing validity immediately. No more contracting a lawyer to validate the agreement after both parties have signed.
- Secure: The SAFT agreement is a sensitive and confidential document. By embedding it to the blockchain, you ensure that the agreement can never get lost or corrupted.
- Immutable: Once an agreement is signed it is set in stone and becomes unalterable. No more fighting lengthy dispute resolution processes.
PAID DApp and the SAFT Agreement
The SAFT agreement helps new entrepreneurs and freelancers protect themselves and navigate a highly globalized economy. It is going to be one of the many contract templates that PAID Network will be offering as part of the release of PAID DApp. These on-chain solutions will ensure our community is protected, allowing you to safely choose from a variety of templates to secure your business interests and #GETPAID.
The launch of PAID DApp, will be another step in the creation of the decentralized world. It leverages the power of the blockchain, demonstrating the disruptive impact of this new technology. With our referral agreements, NDAs, and other templates, PAID is showing that on-chain solutions can play a major part in disrupting and enhancing legacy legal services.
Is a bet agreement not the right type of document for your business? Check out our guide on CIIAA, mutual NDAs, Consulting Agreements, or Advisory Agreements.
Learn more about PAID Network and the ecosystem we are building for our community HERE!
About PAID
PAID Network seeks to redefine the current business contract, litigation, and settlement processes by providing a simple, attorney-free, and cost-friendly DApp for users and businesses to ensure they #GetPAID wherever they are in the world.
PAID technology leverages Astar to operate on both Ethereum and Polkadot ecosystems. PAID makes businesses exponentially more efficient by building SMART Agreements through smart contracts to execute DeFi transactions and business agreements seamlessly.
PAID streamlines backend legal operations with SMART Agreements, so that projects can focus on making their brand bigger and better.
For any questions for the PAID network, please feel free to reach out to us on our:
