Corporate Formation

SCENARIOS

Corporate Formation – Delaware Corporation

A set of entity formation documents defaulted to a Corporation registered in the State of Delaware. The Scenario is established to offer either single- or dual-class stock.
Certificate of Incorporation
Action by Sole Incorporator
Board Consent
Founder Stock Purchase Agreement
Bylaws
FORM DOCUMENTS
PIIA
TAA
Advisor Agreement
Offer Letter
Consultant Agreement
NDA
Legal Dictionary
51% Attack NEW

An event whereby an individual or group of individuals gains control of the majority (i.e., more than 51%) of the computing power on a blockchain network, which allows such controlling majority to manipulate or revise the transaction history on that blockchain.

Address

An alphanumeric Identifier that represents a possible destination to which a crytocurrency may be transferred.

Altcoin

A term used to refer generally to any cryptocurrency other than Bitcoin or Ether.

Bitcoin

The first ever cryptocurrency launched a blockchain network allowing peer-to-peer electronic transfer of tokens.

BitLicense

The business license issued for companies conducting virtual currency activities in New York. Created and provided by the New York State Department of Financial Services (NYSDFS). Generally, anyone engaging in the following activities in New York must operate with a BitLicense: (1) virtual currency transmission; (2) storing, holding, or maintaining custody or control of virtual currency on behalf of others; (3) buying and selling virtual currency as a customer-business; (4)performing exchange services as a customer business; or (5) controlling, administering, or issuing a virtual currency.

Block

A series of individual transactions recorded on a blockchain. Individual transactions are recorded within a 'block', which is added to the chain of blocks when filled. Miners constantly process transactions and add new blocks of transactions to the blockchain.

Block Explorer NEW

An online blockchain browser which displays the contents of individual Bitcoin blocks and transactions and the transaction histories and balances of addresses. Each object is displayed in human-readable form, as a web page, and is given a URL.

Block Reward

A reward of cryptocurrency distributed after the first transaction is recorded in a new block. Miners are compensated based on their efforts in processing transactions needed to start the new block.

Block Size

The size of a single block in a blockchain, which contains a record of transactions on the platform.

Blockchain

A decentralized, public ledger of transactions distributed across many computers such that the records of transactions cannot be retroactively altered without consensus of the network.

Cold Storage

This term refers to keeping digital assets in an offline wallet, or on a device that is not connected to the internet.

Consensus

Agreement among blockchain participants regarding which transactions occurred and in which order, also known as trustless consensus.

Core Developer NEW

A developer that works on layer one blockchain technology such as the protocol itself or on the underlying cryptography or P2P technology of a blockchain.

Cryptocurrency

A digital asset transacted via a decentralized network through the use of cryptography to secure transactions. Cryptocurrency transactions are recorded on a public ledger called a blockchain.

Cryptographic Hash Function

A function that maps input data to a given hash value, but if the input data is unknown, it is deliberately difficult to reconstruct it by knowing the stored hash value.

Dapp

An abbreviated term for decentralized application. The back-end code of a decentralized application runs on a peer-to-peer network as opposed to a centralized server.

Decentralization

A term generally used in crypto-economics to describe the process by which the activities of an organization, such as planning and decision-making, are delegated away from a central, authoritative location or group. Vitalik Buterin, founder of Ethereum, has written on the topic of software decentralization, and states that there are actually three separate axes of centralization/decentralization people may be referring to when using the term. (See here for more information.)

Difficulty

A measurement of how difficult it is for a miner to solve the mathematical puzzle required to process a cryptocurrency block. The difficulty of processing a cryptocurrency block increases as each additional block is processed.

Digital Tokens

Transferable units generated within a distributed network that tracks ownership of the units through the application of blockchain technology.

ERC-20

A type of token standard for Ethereum which ensures the tokens perform in a predictable way. This allows the tokens to be easily exchangeable and enabled to work immediately with decentralized applications that also use the ERC-20 standard. Most tokens released through ICOs are compliant with the ERC-20 standard.

Ether

A type of cryptocurrency that is essentially the fuel for operating the Ethereum platform. Ether is used to pay for transaction fees and computational tasks. In the platform, transaction fees are measured based on the gas limit and gas price and ultimately paid for in Ether. For more information, see the Ethereum Foundation's official definition.

Ethereum

An open source, decentralized platform based on blockchain technology created by Vitalik Buterin in 2013. It runs smart contracts on a custom built blockchain that allows developers to create markets, store registries of debts, and so on. For more information, please visit the Ethereum Foundation website or read their whitepaper.

Faucet NEW

A reward system attached to an app or website that dispenses cryptocurrency to site visitors in exchange for completing a task. Such a reward system is used to drive the adoption of cryptocurrencies by new users.

Fork

The divergence of a blockchain protocol based on a new rule implemented. Typically, a fork is willingly introduced to the network by the project's developers to change the rules used by the software to determine whether transactions are valid.

Gas

A term used in the Ethereum platform that refers to the price you are willing to pay for a transaction. Setting a higher gas price will make miners more incentivized to prioritize and validate that particular transaction ahead of those set with a lower gas price. Gas prices are typically denominated in Gwei.

Governance Rights

The rights held by specified persons in a distributed autonomous organization. Holders of these rights may influence certain decision points in the development of a platform such as basic protocol features, additional major features and vendor selection.

Hard Cap

A predetermined amount of a coin or token that will be created and distributed via an Initial Coin Offering.

Hash Function

A function that takes an input of data (numbers, files, etc.) and outputs a hash, which is usually displayed as a hexadecimal number.

Hash Rate

The number of hash computations that can be performed by a cryptocurrency miner with their computer hardware.

HODL

A slang term used in the cryptocurrency to mean holding cryptocurrency, typically in a downtrend, as opposed to selling it.

Hot Wallet

A cryptocurrency wallet that is connected to the internet.

Howey Test

Stemming from the U.S. Supreme Court's decision in SEC v. Howey, this is the SEC's traditional framework for determining whether a transaction is an investment contract. Under the Howey Test, a transaction is an investment contract if: (1) it is an investment of money; (2) there is an expectation of profits from the investment; (3) the investment of money is in a common enterprise; (4) any profit comes from the efforts of a promoter or third party.

Initial Coin Offering (ICO)

A token sale, similar to an Initial Public Offering, by which the creators of a token offer it for sale to the general public. Generally, a company uses the funds for developement and expansion of the project. In contrast to an IPO, the purchaser of the token does not receive equity in the company but rather a specified number of tokens which may be used on the platform created for the token.

Ledger Nano

A cold storage wallet.

Maximum Supply

The approximate maximum number of coins or tokens that will ever exist for a cryptocurrency.

Mining

"This term refers to the solving of complex math problems by computers in exchange for a reward, often a very small amount of the token. 'Bitcoin mining', for example, is the process of adding transaction records to Bitcoin's public ledger of past transactions called the bitcoin blockchain. The miners confirm and record transactions on the bitcoin blockchain, which is immutable and freely accessible. In sum, the owners of ""nodes"" willingly contribute their computing resources to store and validate transactions to collect the transaction fees in consideration of a reward earned in the underlying cryptocurrency."

Mining Rig

A computer specially designed for mining a cryptocurrency, often comprised of graphics cards (GPUs) that "mine" cryptocurrencies.

Node

A node is any active electronic device on a blockchain network that is connected to the internet and has an IP address. The role of a node is to support the network by maintaining a copy of a blockchain and, in some cases, to process transactions. Each cryptocurrency has its own nodes, maintaining the transaction records of that particular token.

PoS

An algorithm that rewards participants that solve difficult cryptographic puzzles to achieve distributed consensus. Unlike proof of work or 'PoW', a person can validate transactions and create new blocks based on their individual wealth (i.e. stake) such as the total number of coins owned. One of the key advantages that PoS has over PoW is lower energy consumption.

PoW

An algorithm that rewards the first person that solves a computational problem (i.e. mining) to achieve distributed consensus. Miners compete to solve difficult cryptographic puzzles in order to add the next block on the blockchain. It prevents spam and cyber attacks such as DDoS as it requires work (i.e. processing time) from the service requester.

Pre-mine NEW

Occurs when a developer or team of developer create a cryptocurrency and allocate coins to a particular wallet address prior to releasing the coin or source code to the public. This sometimes viewed as an unscrupulous practice but in some circumstances may be justified to develop core features.

Pre-Sale

A sale of tokens that takes place before an initial coin offering or 'ICO' is made available to the general public. This is a first-come-first-serve sale that may or may not have purchase restrictions set by the founders of the project.

Proof of Burn NEW

An alternative distributed consensus method compared to Proof of Work or Proof of Stake. With Proof of Burn, a developer sends coins to a verifiable, unspendable address such that coins are "burned." These "burned" coins can never be spent in the future, and if they are, it indicates a serious error in the underlying code of the protocol.

Reg A

Under the U.S. Securities Act, Regulation A or 'Reg A' is an exemption from SEC registration for public offerings. Reg A has two offering tiers: Tier 1, for offerings of up to $20 million in a 12-month period; and Tier 2, for offerings of up to $50 million in a 12-month period.

Reg D

Under the U.S. Securities Act, Regulation D or 'Reg D' provides a number of exemptions from the SEC registration requirements, allowing some companies to offer and sell their securities without having to register the offering with the SEC. Rule 504 of Regulation D provides an exemption from the registration requirements of the federal securities laws for some companies when they offer and sell up to $5,000,000 of their securities in any 12-month period. Rule 506 of Regulation D provides two distinct exemptions from registration for companies when they offer and sell securities, which allows companies to raise an unlimited amount of money.

Reg S

This SEC regulation is applicable when a security offering is executed in a country other than the United States. Therefore, the offering is not subject to the registration requirement under Section 5 of the 1993 Act. This regulation was adopted to facilitate two capital-raising scenarios: (i) a U.S. company that issues securities only to foreigners; and (ii) a U.S. investor who enters a foreign market to buy foreign securities.

SAFT

A "Simple Agreement for Future Tokens," substantially modeled after and containing very similar attributes as the "Simple Agreement for Future Equity" (SAFE) from the Y-Combinator.

Satoshi

The smallest unit of the Bitcoin cryptocurrency or 0.00000001 BTC.

Satoshi Nakamoto

The pseudymn for the anonymous person who is famed for the creation of Bitcoin.

Security Token

A token that derives its value from an external, tradable asset, such as equity in a company. If a token qualifies as a security under the SEC's traditional framework for analyzing potential securities, sale of the token becomes subject to federal securities regulations.

SHA256 NEW

SHA refers to Secure Hash Algorithm, and the term refers to a cryptographic hash function used to encrypt data. It is the bitcoin hashing algorithm. By using sha256, text or data is digested into an alphanumerical string of code, which is often compared to a digital signature for a data set. Regardless of how much information is hashed, the length of the alphanumerical string of code remains the same.

Smart Contract

Applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. An automated mechanism involving two or more parties where digital assets are put in and redistributed at a later time based on some pre-set formula and triggering event. The contract can run as programmed without any downtime, censorship, fraud or third party interference. For more information, see Vitalik Buterin's terminology guide.

Soft Cap

The minimum amount that an initial coin offering (ICO) must raise. This is essentially the artificial floor for the fundraising goals set by the founders. If the ICO is unable to raise that amount, it may be cancelled and the collected funds must be returned to all participants in the ICO.

Soft Fork NEW

A modification to the software protocol on a blockchain, which restricts the ruleset such that prior blocks are considered invalid, but—unlike a hard fork—future blocks will continue to work on the blockchain.

Solidity

A contract-oriented language for implementing smart contracts.

Stable Coin

A cryptocurrency pegged to a stable asset such as Fiat currency or gold. Tether, for example, is a cryptocurrency pegged to the U.S. dollar.

Trustless System

A peer-to-peer system of transacting data between individuals without the need for a centralized third party to verify the transaction.

Utility Token

Tokens or app coins that represent a right to participate in a company’s product or service. The defining characteristic of utility tokens is that they are not designed as investments under the SEC's Howey Test and, if properly structured, may be exempted from federal laws governing securities.

Vitalik Buterin

The founder of Ethereum.

Whale

A slang term used to describe a person holding a very large amount of any one crypto asset.

White Paper

An informational document that generally informs readers on the philosophy, objectives and technology of a project or initiative. Whitepapers are often provided before the launch of a new coin or token and a topic of scrutiny by U.S. regulatory bodies. Typically, white papers that include promises or projections of future gain are a red flag for U.S. regulatory authorities such as the SEC.

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