In the past month, we’ve now seen three separate personal token offerings go live via Roll. Here’s a recap on those offerings for those who may have missed them.
While the sentiment around personal tokens was largely positive to begin, we’re now seeing a lot of discourse on crypto Twitter in which prominent community members are stepping up to question the legality and ethical nature of these sales.
I'm not a fan of what I'm seeing in the personal token space lately.
That's it. That's the tweet.
— Anthony Sassano | sassal.eth (@sassal0x) May 6, 2020
In this article, we want to shine a light on both sides of the conversation, hopefully better informing our readers on the risks that come with the potential benefits of this new asset class.
Before we dive in, it’s worth noting that most of the heat is coming from the fundraising aspect of personal tokens. Prior to these raises, few criticized the notion of using a personal token for a claim on someone’s time and work. Alas, let’s see what the community had to say.
Roll Social Currency
Let’s start by identifying some of the common characteristics of the first wave of Roll sales.
- Fixed 10M total supply
- Roughly 15-25% being offered to the public in the initial offering
- Raise targets in the 5 figure range ($20-50k typical hard cap)
- “Backed” by a combination of reputation, products, and assets (Future income for $ALEX, NFTs for $WHALE, DeFi Weekly subscriptions for $KERMAN)
- Redeemable for consultations and exclusive insights from the issuer
- Declared governance rights over future decisions
- Disclaimers that investing in these offerings is extremely risky
Perhaps the most contentious nature of these sales is that while issuers very clearly state the degree of risk, there is little to no diligence being conducted or legal filings being registered – largely due to the small scale of these rounds. For those unaware, standard securities offerings require participants to conduct KYC and limit specific jurisdictions (like the US) to accredited investors only.
Hey @kermankohli did you file a Reg D? Are you making sure U.S. investors are accredited?
Did you file your Reg S?
— DavidHoffman.eth (@TrustlessState) May 6, 2020
As for the fillings themselves, they typically run between $1-20k in legal costs, eating up the vast majority of the target raise. Now, this does not go to say they do not need to be filed, it’s more so illustrating the sentiment of the issuers when approached with this question.
Taking this a step further, issuers have been very vocal that these tokens are meant to be utilities, thus obfuscating the need for securities fillings. This is not saying they are utilities, just stating how the issuers are presenting it.
the reason I haven't done so is because, while yes some I have seen clearly violate securities laws, they are so tiny in $ amount I think it is irrational to apply securities laws to them
— _gabrielShapir0 (@lex_node) May 6, 2020
Others have chimed in on this conversation with a harsher tone, illustrating very blatantly that these offerings are not being handled with the proper amount of diligence and compliance.
If this is what you think, you should definitely not be releasing your own personal token that’s 100% going to be classified as a security in many jurisdictions. The risk that @kermankohli is taking to raise $30k is absolutely not worth it https://t.co/UDFKlEetnp
— Larry Cermak (@lawmaster) May 6, 2020
What it ultimately boils down to is the major reason why crypto got such a bad rep following the 2017 ICO boom. For those who weren’t around, we saw rampant amounts of issuers raising millions of dollars from uneducated investors with no legal repercussions when nothing of value was delivered. To many, this is reminiscent of a time in which token issuers would walk away with investors’ money, leaving them out to dry with nothing in return.
“My main issue with personal tokens is that they are starting to look like 2017-era ICOs where people are investing in things that they don’t understand and the valuations are insane.”
The Value of Social Capital
Security or not, there’s no denying that personal tokens come with an extremely high degree of risk. However, it’s also important to recognize that these offerings are exploring an entirely new form of value – reputation.
Perhaps the biggest differentiator between an ICO from 2017 and a personal token sale of today is that if any of the aforementioned issuers were to exit scam or fail to uphold their end of the bargain, their reputation with both investors and the wider Ethereum community would be tarnished forever. While many were willing to take this risk for millions of dollars, its far more unlikely that this first wave of issuers would sacrifice their future career for such a small lump sum of money.
1. Correct, and I mention both of these very explicitly in both the form and post.
2. Yes they can, they will lose their respect for me and I stand to lose the opportunity to work with them and building a valuable relation. Long term games > short term games. pic.twitter.com/jzKWyx8N8d
— $KERMAN (@kermankohli) May 6, 2020
Amidst the contention, the first personal token sale issuer – Alex Masmej – released his first shareholder report, giving participants access to a shareholder-only retrospective of his progress since the offering was conducted.
Just released my first $ALEX Monthly Update to all sale's participants, AMA
-Exclusive $ALEX ISA mechanics
-Where I'm at
-My new project
– & more!
— Alex Masmej ☄️ (@AlexMasmej) May 6, 2020
The Bigger Picture
As if crypto wasn’t already hard enough to regulate, this new wave of personal tokens is throwing a new wrench into the mix. If one thing is for certain, we’re definitely exploring largely uncharted territory which is exciting at the very least.
Early experiments in people selling equity in themselves are happening on Ethereum.
Nascent today, especially from a legal/regulatory POV, but a glimpse into the future.
— Fred Ehrsam (@FEhrsam) May 6, 2020
With this, we’d like to once again remind our readers that personal tokens are a very slippery slope and that we are almost confident many malicious actors will soon enter and try and ride the hype train. With this in mind, we strongly encourage users to proceed with caution and go above and beyond their normal crypto investment due diligence before investing in any personal token sale.
While it remains unclear how they will play out in the coming months, we’ll be sure to keep you in the loop on any important updates as they come about. In the meantime, enjoy a couple of the best takes we saw in the past 48 hours.
Announcing $CYRUS. $20 million hard cap (50% retained by team, 25% Foundation, 20% integration partners, 5% public sale).
— cyrus.ismoney.eth (@cyounessi1) May 6, 2020
Based on advice from my advisors, and to satisfy public demand, I have raised the Initial Uniscam Offering to $100 million. Sale goes live in 15 minutes, but will run for one full year. https://t.co/DREMt7Z3j9
— cyrus.ismoney.eth (@cyounessi1) May 6, 2020
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Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.