This week was all about the actual nuts and bolts of a tokenomic model; our partners at Horizen Labs Ventures broke down the percentages that go to each type of user and stakeholder, and how to figure those out. This is where our cohort must make big decisions that impact the future of their business even years down the line, and cannot be easily changed.
Out of the 100% of the token supply, our founders decided how much of the token is given or sold to the foundation treasury, the community of early adopters, developers looking to build with the token, the founders themselves, liquidity pools, public sales, private sales, advisors, and even more!
Mentor Talk: Andrew Albertson from Fenwick & West LLP
From our legal sponsor Fenwick, we were honored to have partner Andrew Albertson bring his seasoned advice to our cohort. Andrew has a history of advising Web3 and token startups, and gave a comprehensive overview to compliance. Token projects have many complex compliance issues specific to their operations, as the legal system has very nebulous view of decentralized governance, securities laws, open uncontrolled protocols, and more.
Associate at Fenwick, Benjamin Helfman, joined Andrew to go over a brief refresher on the Howey Test, which is how the SEC developed guidelines on what assets qualify as a security. Tokens that do qualify as securities have a very large set of requirements and restrictions they must comply with, or else risk regulatory action.
Alex Michelson from Hedgey
The subject of Hedgey’s talk was token compensation: using tokens to pay the team, investors, clients, and more! This is a unique force in the Web3 landscape, but extremely integral to the success of many token projects. With the ability for tokens to be programmed in a myriad of ways, the incentive can be balanced between the sender and receiver with lockup periods or other restrictions.
Investors can often be one of the largest recipients of tokens, either from token warrants or discounted token rights, or just OTC token purchases. Because the main incentive for these recipients is different than the founders or community members, their profit incentive must be balanced with the growth of the token project itself, so they aren’t immediately sold at an inopportune time.