To start using the Cashlink Studio you need an asset contract defining the rights and obligations of investors and the issuer. We strongly advise you to include a specialized and experienced law firm in this process. We know that working with lawyers can be a time-consuming process. We therefore offer you to assist in this process as consultants. We have out-of-the box templates for an equity-like participation right and other assets that have been used in previous issuances. We also know many technical caveats you need to consider when issuing a digital security.
As a start, we have put together this checklist that you can use to get an understanding of what to consider in the process of structuring a digital security from a technical perspective.
Name: The name serves to identify your digital security during the issue on the blockchain and on the secondary market.
Symbol: The three or four-digit symbol is used to quickly identify the digital security on the secondary market or when transferring shares. It is often used instead of the complete name.
Calculation factor: Using the calculation factor, you determine what value a piece of the digital asset should represent. In the simplest case, one piece corresponds exactly to one unit of the underlying asset. The calculation factor in this case is 1. The higher this factor, the more digital assets you can issue.
Lockup period: A lock-up period is often defined when securities are issued. During this period, your digital assets cannot be transferred. This is technically ensured. Thus you have the possibility to enter the primary market alone without the influence of investors who want to sell directly again.
Define the rights that each investor should be entitled to. All rights and obligations under the asset contract shall be represented by the tokens on the Ethereum blockchain.
The rights under the asset contract are not represented by a security or certificate and the investor shall not be entitled to claim securitization.
Payment scenarios must be defined that correspond to the list of current owners of the asset that can be queried from the blockchain at any time.
The smart contracts provide a way to split or aggregate pieces of the underlying asset into one token. For example if you set the calculation factor to a value of 100, then 1 piece of the asset (for example an equity share) equals 100 tokens.
If the rights of the asset contract are no longer valid, the tokens will be burned (destroyed). For example if a bond is paid back, the tokens will be destroyed (because there is no claim any longer). In case of dividend payments the tokens are not burned (the claims still persist).
In case of a hard fork, the issuer can technically decide which part of the network to use. You can define more detailed off-chain governance structures for such a case in the asset contract.
Smart contracts can be updated by the issuer due to security reasons. You can define more detailed off-chain governance structures for such a case in the asset contract.
The content of the asset contract will be set out in the smart contract underlying the assets. You should include the address of the smart contract within the asset contract.
The content of this asset contract and of all its amendments should be stored in public immutable storage where it can be retrieved by cryptographic hash of a file with such content. The investor should have access to the asset contract and all amendments by inspecting the smart contract which is publicly available on Ethereum blockchain.
Tokens representing the rights under the asset contract are freely transferable and all rights and obligations from this contract can only be transferred by means of transferring at least one token.
These are certainly the most important topics you need to discuss with your lawyer while structuring the asset contract. If you have any further questions we can forward your request to experienced law firms that have extensive knowledge both of the legal framework and the concrete technical requirements of the Cashlink Studio and Cashlink Digital Asset Network.