How Does the SAFT Model Attempt to Satisfy the “Functional Network” Test?
The SAFT model attempts to satisfy the "functional network" test by legally separating the investment contract (the SAFT itself) from the eventual delivery of the utility token. The SAFT is sold as a security to accredited investors under an exemption, raising the capital needed to build the network.
The utility token is only delivered once the network is demonstrably functional and decentralized. The argument is that at the time of delivery, the token is no longer an investment in a common enterprise but a consumable product, thus satisfying the functional network criteria and avoiding security classification for the token itself.
Glossar
Security Classification
Framework ⎊ Security classification, within cryptocurrency, options trading, and financial derivatives, establishes a tiered system for controlling access to sensitive information and systems, directly impacting operational risk and regulatory compliance.
Accredited Investors
Criteria ⎊ Accredited Investors are defined by specific financial thresholds or professional experience metrics established by regulatory bodies to delineate sophisticated market participants.
Functional Network
Definition ⎊ A functional network refers to a blockchain or decentralized system that has achieved operational stability and is actively processing transactions for its intended purpose.
SAFT
Contract ⎊ A binding agreement, common in early-stage crypto fundraising, that grants an investor the right to receive a specified amount of a digital token upon a future qualifying event, such as a token generation event or priced financing round.
Investment Contract
Clause ⎊ The specific terms within an investment contract define the conditions for token vesting and potential clawbacks.
Saft Model
Framework ⎊ The Saft Model, initially developed within the venture capital space, represents a structured approach to token vesting schedules and equity distribution within cryptocurrency projects, particularly those utilizing Initial Coin Offerings (ICOs) or token sales.