After the ICO flood, the next crypto-based financing model is now in the starting blocks with ILP.
Initial Coin Offerings (ICO) poured more money into start-up funds in 2017 than the venture capital market. The crypto-based method of financing is about companies selling tokens that will later form the basis of their respective product or service. The buyer therefore speculates that the tokens will increase in value if the company or project behind it successfully positions itself on the market with the help of the sum received at the ICO.
However, the system raises the question of whether every company that has carried out an ICO in recent years really needs its own tokens to operate its product. It is this very consideration that has led the two Estonian companies Blockhive and Agrello to develop an alternative financing model. That’s what they call Initial Loan Procurement (ILP) and it basically works like a crypto-based equity loan.
ILP (Initial Loan Procurement): This is how the crypto-based equity loans work.
The lender purchases an Ethereum-based token. This concludes a crypto-based contract that involves the buyer in the issuer’s future profits. The idea behind it is that the contracts filed in the Blockchain are legally secured. In addition, the identity of the investor should be verified in advance to prevent misuse of the technology for the purpose of money laundering. The two aspects should also lead to ILP being much better integrated into the existing regulatory landscape than ICO.
Tokenote:Estonian Join Venture to popularize ILP
To give companies the opportunity to conduct ILP, Blockhive and Agrello and Join Venture have established Tokenote. For interested startups, the platform looks after vendors’ verification, the legal aspects and issues the underlying tokens called Future Loan Access Tokens (FLAT), which in turn form the basis for the actual loan.
Author: Marko Vidrih