Token DPA –– Republic's Token Pre-Sale Instrument

As the industry has developed, numerous instruments have been used to pre-sell digital assets to investors. Popular instruments include the SAFT (Simple Agreement for Future Tokens) and the SAFTE (Simple Agreement for Future Tokens or/and Equity) but we don’t use them on Republic. Instead, Republic Crypto created and has successfully used the Token DPA as an alternative. Many instruments currently used are equivalent to IOUs, without clear procedures in the event the project fails or there are delays in development. Additionally, the use of the SAFTE which provides the prospect of future equity if tokens are not delivered may not provide compelling upside if the project fails as equity holders are generally below debt holders in the event of a liquidation.

Use & customize

The Token DPA’s terms can be modified to meet projects’ specific needs, allowing the loan to be paid back in cash or Tokens. For example, you can give your project breathing room by pushing back the date interest accrues. To reward early supporters, you can also ensure investors get preferential pricing on tokens if a token distribution event ever occurs. To make the Token DPA a more flexible instrument, the Token DPA can grant investors (instead of the company) the choice to have all or part of their monies refunded before the loan is paid back. There is no guarantee a company will have the funds to return an investor's principal, purchasing a Token DPA can result in a total loss.

In the event the startup folds due to insolvency, Token DPA holders may not receive tokens or cash back, but as debt holders they would be entitled to any available assets over equity or other-non debtors, during a dissolution of the business, generally.

A Token DPA can have a hard cap on the time period money may be borrowed in and can have built in milestones that provide investors the option to request the return of part or all of their capital if said milestones are not met. There can be no guarantee an issuer will have sufficient funds to pay back a request for a (partial or full) refund on the Token DPA and therefore these provisions may prove not to protect investors. Investors should review each Token DPA for its specific terms and conditions, as it may be different between issuers. Companies can customize the Token DPA to include repurchase rights as well as allow for refinancings. Depending on the terms of a company's Token DPA, investors should be aware that repayment in cash or tokens may result in no return.