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Blockchain Application for business > Chapter C2. Use Cases of Blockchain: Finance Industry > Flashcards

Chapter C2. Use Cases of Blockchain: Finance Industry Flashcards

1
Q

ICO

A

ICOs, initial coin offerings, have quickly grown to become the premier fundraising mechanism for financing Blockchain based projects.

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2
Q

soft cap vs hard cap

A

A soft cap is typically the least amount of funds a project needs to exist. In other words, it is the amount of capital a team aims to raise at a minimal level. Conversely, the hard cap is the absolute highest limit that the team would take (given the tokens available at the ICO stage).

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3
Q

From the presale to the main sale of an ICO, the discount on the token is traditionally rising.

Select one:
True
False

A

False - the discount declined to a point where there was a zero-percent discount offering for the token at its full price.

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4
Q

Problems of ICOs include…

Select one or more:

a.
low certainty about the future of the investors capital

b.
low regulatory barriers

c.
the lack of a business plan by ICO companies

d.
the potential lack of data security

A

a, c and d

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5
Q

Problems with ICO:

A
  1. no regulation on how these crypto platforms could or would operate made it impossible for the project to deliver certainty to traditional insurers.
  2. The potential lack of data security.
  3. The lack of a business plan for many ICO companies.
  4. Both Industry regulators and more traditional investors saw
    ICO projects as an investment vehicle with no consumer protection.
  5. very unclear about what
    would happen with an investor’s capital.
  6. Tended to have decentralized tokens that were not backed by any kind of hard asset.&raquo_space; potential liabilities.
  7. Different regulatory barriers in various jurisdictions across
    the globe began rising against ICO projects in order to
    protect investors.
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6
Q

Security Tokens are:

Select one or more:

a.
never an asset

b.
not regulated by securities law

c.
a representation of a security investment contract

d.
contracts that represent a value, but not stored in a blockchain

A

c.

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7
Q

Security tokens are…

A

just like any other token or digital contract; they are a representation of a security investment contract on a Blockchain.

They are contracts that represent a value and are stored on a Blockchain.

Because of its fiscal nature, they are also regulated by
securities law.

These security tokens are defined by their value separate from external factors and tradable opportunities.

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8
Q

Are security tokens regulated?

A

Considering that these tokens are an investment contract that can be tradable, they must be regulated.

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9
Q

Security tokens are defined by their value separate from external factors & tradable opportunities.

Select one:
True
False

A

True

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10
Q

As ICO campaigns get closer to their hard caps, the FOMO (fear of missing out) decreases.

Select one:
True
False

A

False

> > As campaigns got closer to their hard caps, even more FOMO was generated, resulting in growing demand for the token/coin.

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11
Q

A problem of STOs can be…

Select one or more:

a.
the lack of a business plan by STO companies

b.
the implementation of a single token protocol among different platforms

c.
the potential increase in demand for traditional illiquid assets

d.
unclear regulatory framework for worldwide trading

A

b and d

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12
Q

What makes security tokens so promising?

Select one or more:

a.
Transparency

b.
Insurance

c.
Dividend guarantee

d.
Reissuance

A

a, b and d

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13
Q

Which legal tests can be used to define whether a token generating event is a STO?

Select one or more:

a.
Munchee test

b.
Reves test

c.
Johnson test

d.
Trump test

A

a.

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14
Q

The Securities Exchange Commission of the United States has defined initial coin offerings and security tokens as security offerings that both fall within the following three tests:

A
  1. The Howey Test
  2. The Munche Test
  3. Reves Test
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15
Q

Which limits do soft and hard caps define?

Select one or more:

a.
Hard caps define the maximum amount of capital a team would take

b.

Hard caps define the minimum amount of capital a team wants to raise

c.
Soft caps define the maximum amount of capital a team would take

d.
Soft caps define the minimum amount of capital a team wants to raise

A

a and d

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16
Q

Security tokens are defined as….

Examples:

A

value representations based on Blockchain that can be regulated by security laws.

Real Estate, Derivatives, Debt, Equity and Utility Tokens launched at previously but now considered as securities

17
Q

Tokenization of assets & security transactions:

A
  • real state
  • startups
  • mature companies
  • energy
  • ART
  • funds
18
Q

7 key benefits of security tokens:

A

① COSTS REDUCTION WITH FASTER SETTLEMENT & AUTOMATED COMPLIANCE ($6B estimated costs reduction & immediate settlement)
② AUTOMATED REVENUE SHARING AND DIVIDEND PAYMENT (~3,000 USA Stocks pay dividends)
③ STARTUP FUNDRAISING THROUGH STOs (Equity
Crowdfunding)
④ SECURITY TOKENS HAVE LOWER RISK OF REDEMPTIONS (Cross boarder trading, no discounts or GP approval for early redemption)
⑤ ADVANTAGE OF SECONDARY LIQUIDITY (pulverized liquidity opportunity for current illiquid assets/real estate)
⑥ 24/7 MARKETS WITHOUT FRONTIERS (available to 4.1B internet users)
⑦ FACILITATES TRANSFER OF OWNERSHIP (fluid markets – interoperability)

19
Q

When did SEC determine ICO’s to be securities offerings?

A

2017

20
Q

Digital Securities (STOs) regulations:

A
  • Regulation Crowdfunding (CF) (raise money from anyone)
  • Regulation D (accredited investors)
  • Regulation A+ (non-accredited investors and raise up to %50M USD annually)
21
Q

Problems with STOs:

A
  • lack of liquidity
  • unclear regulation
  • interoperability among different STO Issuing platforms
22
Q

Opportunities with STOs:

A 
• global equities $70T (US 30%)
• Global Bonds $92T (US
42%)
•4.1B Global Internet
Users
23
Q

ATOMICS SWAPS:

A

ERC 1404 - Simple Restricted Token Standard for corporate governance, banking, and securities laws compliance

24
Q

The advantages of Regulation _______ in the US are less bureaucracy and that unaccredited investors can participate.

A

crowdfunding

25
Q

________ tokens can represent shares of company stock and are defined as value representations based on blockchain.

A

Security

26
Q

The fact that only accredited investors are allowed to invest and issuers are responsible for verifying investors is a disadvantage of regulation ______ in the US.

A

D

27
Q

______ tokens represent future access to a company’s product or service.

A

Utility

28
Q

Smart contracts involve…

Select one or more:

a.
a seller

b.
a buyer

c.
a middle-man

d.
the risk of disputable ownership

A

a and b

29
Q

A “security” can be defined as…

Select one or more:

a.
a representation of ownership or rights to ownership

b.
a financial instrument

c.
an investment contract

d.
unexchangeable and unnegotiable

A

a, b and c

30
Q

A problem of STOs can be…

Select one or more:

a.
unclear regulatory framework for worldwide trading

b.
the lack of a business plan by STO companies

c.
the potential increase in demand for traditional illiquid assets

d.
the implementation of a single token protocol among different platforms

A

a and d

31
Q

Blockchain is a technology that…

Select one or more:

a.
allows for copies of files

b.
provides an encrypted file

c.
incorporates immutability

d.
prevents double-spending

A

b, c and d

32
Q

A security token may represent shares of company stock.

Select one:
True
False

A

true

33
Q

Utility tokens…

Select one or more:

a.
represent future access to a company’s product or service

b.
cannot be exempt from federal laws governing securities

c.
are designed as investments

d.
are also called user tokens or app coins

A

a and d

34
Q

Which types of STO regulations exist in the USA?

Select one or more:

a.
Regulation C

b.
Regulation D

c.
Regulation D+

d.
Regulation A+

A

b and d

35
Q

Blockchain is a technology that allows for double spending.

Select one:
True
False

A

false

36
Q

Security tokens are tokens…

Select one or more:

a.
that can represent shares of company stock

b.
that are subject to federal securities regulations

c.

that are not designed as investments contracts

d.
that are expected to increase in value due to the efforts of others

A

a, b and d

37
Q

A utility token is the same as a security token.

Select one:
True
False

A

False

Blockchain Application for business (14 decks)

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