What Is a Simple Agreement for Future Token (SAFT)?
A Simple Agreement for Future Token (SAFT) is an investment contract that guarantees the eventual transfer of ownership of crypto tokens from developers to investors.
It enables developers to secure financing before the token’s launch while granting future ownership rights to SAFT holders.
The contract outlines the investor’s contribution and the amount of discounted tokens allocated to them and specifies the future date for transferring cryptocurrencies.
Exploring Exclusivity and Regulation
SAFTs are distinct from initial coin offerings (ICOs), which are more commonly used for token financing.
Unlike ICOs, SAFTs primarily target accredited investors rather than the general public.
This exclusivity restricts public access to the security, requiring SAFT holders to meet specific criteria related to income, experience, net worth, and other factors.
This setup enables financial institutions like investment banks and hedge funds to participate in token financing without regulatory concerns.
Meanwhile, cryptocurrency developers benefit from accessing financing channels connected to mainstream financial institutions.
SAFTs can be utilized to kickstart cryptocurrency development before initiating an ICO once the project demonstrates potential.
Navigating the Regulatory Bridge
SAFTs also differ from cryptocurrencies themselves as they are regulated financial instruments.
Unlike tokens, which exist on the blockchain outside of governmental jurisdiction, SAFTs comply with regulatory and legal frameworks within specific jurisdictions.
They are tradable securities within the mainstream financial system.
With their unique characteristics, SAFTs bridge the gap between blockchain and mainstream financial institutions, occupying a distinctive space within the realm of tokenomics.