Our path to tokenship began at the cross-roads of Venture Capital and Private Equity. Being approached early on with offers from seasoned veterans of institutional capital was tempting, but we knew that if we succumbed to those forces, our mission would be tainted.
Over the past few years, decentralized cryptocurrencies — especially Bitcoin — have been subjected to corporations that have managed to place a wedge between the technology that is needed for mining and the miners themselves. Profit margins for cryptocurrency mining equipment manufacturers range from 100% to 500% depending on the market price of the cryptocurrency. This extreme profit-margin is accepted because of the perceived risk of development, as well as horror stories in cryptocurrency mining equipment history that is filled with bad-actors. Many believe that the manufacturers of today have professionalized the space, however, there is much room for improvement. Please refer to the Hacker Noon article I wrote for more background on this topic.
At NODE Haven, we deliberated long and hard, contemplating every avenue of funding. In the final analysis, we found that the only way to truly and most effectively decentralize the economic power that mining equipment manufacturers hold is through a public token sale. Even though we had a gut-feeling that this was the right direction, there was no map or even a compass. We believe very impactful projects can come out of this new age of funding, and we have strong belief in the impact of our mission to increase accessibility to the world’s most advanced technologies.
To fulfill this mission, NODE Haven was formed to develop the mining equipment used to secure the billions of $USD value stored within cryptocurrencies. Our flagship offering will be a 7nm Bitcoin ASIC miner. Through our research, we identified only one other project that will be using funds raised during their token sale to develop and produce cryptocurrency mining equipment. This was Russian Miner Coin, which has a hybrid hardware and cloud mining model that was not compliant with SEC laws, nor did we believe this model served our mission well. At this point, we went back to the drawing table and looked to the past for inspiration.
We embarked on a journey through time, reading case-law and studying business models to find analogs that suit the relatively new funding mechanism known as a token sale. The goal was to build a business model that leveraged tokens effectively, and out of our study came a model that we coined the “Product Development Vehicle” (PDV). The PDV model most closely resembles a consumer co-operative that rewards NODE Haven for driving prices down, as oppose to increasing profit margin like traditional company structures. Please refer to another Medium article that we wrote that goes into the qualities that emerged out of development of the PDV. Hopefully others will be able to adopt similar systems.
The NODE Haven whitepaper more strictly outlines the PDV model using a system of equations. The goal of our implementation is to give independent cryptocurrency miners the same advantages that large integrated manufacturer/miners have. We hope that this will decentralize the power that the holders of these advanced technologies have.
Now this isn’t the whole story and this should be stressed to anyone following in our foot-steps. The PDV model went through many many many different iterations in order to finally settle into what it is today. We had to diligently test the models to ensure that there was nothing that could be construed as profit sharing or a dividend like traditional shares of stock. This would result in a security regardless of the Wyoming law concerning Blockchain Tokens.
We are forever grateful for the women and men that prepared the way for us to take advantage of Enrolled Act №27 or House Bill №70. In order to help others to make the move to Wyoming and come completely into the light we will justify using the the Act №27 as a reference. Let’s jump right in.
Section a(i) is very easy to comply with and the link to the Notice of Intent is here.
Section a(ii) is one that we needed to spend some time on. Initially, we had thought we had two functions for the NODE utility token that were very important. The two functions of the NODE token were to reserve equipment and to purchase products. The purchase of products was explicitly outlined in the bill but the reservation utility was not. So, you might ask, how does that fit in?
In order to redeem products from the PDV the customer needs to pay a reservation fee in NODE tokens. This fee allows the purchaser to obtain the PDV pricing which is based on cost to produce the product. We wanted people to be able to reuse the tokens for reservation over and over again and continue to get the price outlined in the PDV. We also wanted to allow the option for consumers to purchase the equipment with cash/crypto while getting the near cost price.
As we thought about this, this reservation fee that is paid as part of the purchase price of the product is still for a consumptive purpose. In reality, we were allowing the customer to re-purchase the NODE tokens used for the reservation fee for the price that the tokens will be purchased during the public sale. So when we looked at it closely, this reservation utility is actually a re-purchase of the tokens in cash/crypto and thus still passes this requirement of the bill.
Section a(iii) outlines how the token is sold and consists of two requirements.
Section a(iii(A)) This is satisfied by being very deliberate in how the developer sells the token that will be used on the platform for consumption. This token is like an arcade token and is traded for goods or services much like currency. It is important that the token is not marketed as a financial investment. Financial investment may have some sort of dividend or other sharing of profit. We have even had to strip down the token to bare elements in order to make sure that this aspect is fulfilled. If there is a component to the token model that can be seen as profit-sharing then it needs to be stripped. In its final state, the NODE token is unearned revenue or right to property and not an investment.
Section a(iii(B)) gives a few options which makes this part of Enrolled Act №27 somewhat flexible in how the developer is allowed to approach this. Most token sales are looking to use the funds to develop a system or product that which will be purchased later with the token.
NODE Haven has chosen to fulfill this requirement through a combination of the both of the following sub-sections.
NODE Haven is currently designing power supplies to be used to power mining equipment that we hope will be available for purchase with NODE tokens on the NODE Haven website at the end of the public sale. This will fulfill the consumptive purchase requirement of Act №27 outlined in Section a(iii(B(II))).
In the event that the of The NODE token does not have a consumptive purpose at the end of the public sale all tokens will paused using the following function of the ERC20 token contract outlined in the conclusion of a recent audit that was completed by TRILL80.
As of 4/20/2018, today, NODE Haven LLC is a registered business in the state of Wyoming and has filed the neccesary Notice of Intent to the Wyoming Secretary State’s Office. NODE Haven is, to the best of our knowledge, the first token to have filed a letter of intent making it the first Utility Token in the United States that is legislatively defined. We believe that compliance is paramount and that only by coming into the light will have the best chance of fulfilling our mission to provide everyone access to advanced technologies.
We are here to help others make the move to Wyoming and for us there is no added risk. In the current climate we didn’t see any other way that the NODE utility token could legally be traded in the United States without the Wyoming Act №27.
Please also take into consideration that we are following Rule 506c of Regulation D that requires United States citizens to be “accredited investors.” Verification will be done through a third-party verifyinvestor.com. Our AML/KYC partner is identitymind.com. We will always comply with SEC regulations even while being defined legislatively by Wyoming as a Utility Token. Thanks again to everyone that put in the work to make the bill a reality.