GET TO KNOW THE STOKR FRAMEWORK: A UNIQUE ETHEREUM-BASED SMART CONTRACT FOR EUROPEAN SECURITIES TOKEN OFFERING

How STOKR works technically

Introduction

STOKR is a peer-to-peer interface which allows small to medium size companies (ventures) to seek and obtain funding from both professional and retail investors (investors). In return for their investments, investors receive tokens issued on the Ethereum blockchain. In general, tokens are units of account whose ownership is stored on the Ethereum blockchain, and they are transferable on a peer-to-peer basis.

Tokens issued on STOKR’s interface qualify as transferable securities according to European capital market rules, and comply as such with European transparency, disclosure, and investor’s protection requirements. These tokens are issued through the process of Securities Token Offering (STO). STOKR provides a proprietary technology to these ventures to tokenize their distributable future profits. Each token issued on STOKR represents a fixed percentage of the distributable future profits of the ventures. The tokens will be issued using the STOKR Framework: a dedicated open-source framework built on the ERC-20 standard. STOKR doesn’t have any platform token of its own unlike many other platforms. We want to keep the interface simple and accessible for all.

This article highlights the main technical features of the STOKR Framework and how investors will interact with the smart contracts deployed by the ventures.

Why are we using Ethereum?

The Ethereum network is a decentralised computing platform that allows different applications to run on top of it. At the time of writing this article, there are around 8,638 Ethereum nodes operating on a global scale, making the network way more decentralised than any other Distributed Ledger Technology platform out there. In terms of development activities, the Ethereum ecosystem has seen huge interest amongst the developers’ community, which is quite promising for the future roadmap.

There are many successful projects already running on Ethereum, and most of the existing tokenization projects are running on a permissionless Ethereum network. Additionally, the majority of hardware and online wallets have already integrated an Ethereum-based ERC-20 token standard in their wallets. This provides a wider range of choice for investors to choose from various wallets to hold their tokens.

Investor’s interaction with Ethereum-based tokens

To participate in a STOKR-based STO, investors will need an Ethereum address where the tokens they bought are stored. Investors may choose to buy these tokens using Ether, the native cryptocurrency of the Ethereum Network, or send EUR via a SEPA wire transfer. The STOKR platform will support most Ethereum wallets such as Ledger, Metamask, and others. Neither STOKR nor the ventures will ever be in possession of the investor’s private keys that control the tokens. Investors can interact with the smart contracts through the STOKR interface using their own Ethereum address. Investors can see their balance of different tokens and transfer those tokens.

It’s important to note that the existence of the token is not dependent on STOKR. Every interaction with the token could also be done outside of the STOKR interface, using any Ethereum wallet.

STOKR just provides an interface that hosts all the services needed to invest in tokens. Through the investor’s dashboard on the STOKR interface, investors can monitor their tokens, manage their portfolio, and use various investment tools.

STOKR Framework and major components

The STOKR Framework consists of four major parts: the verification of investors, the initial offering, the profit participation, and the token recovery.

1. Investor Verification

To comply with KYC/AML regulations, all investors need to be identifiable by the venture. To invest in tokens offered by the ventures, investors need to provide identification documents. This verification is done by an automated KYC solution, which only takes a few minutes. The Ethereum addresses of verified investors are stored on a whitelist on the Ethereum blockchain in a special smart contract (Whitelist Contract). The Whitelist Contract stores all Ethereum addresses of all verified investors, to ensure that only verified investors can participate in the STOKR-based STO and hold tokens. Once verified, investors can participate in offerings from all the ventures who use the STOKR Framework, unless specifically excluded.

2. Initial Offering

The initial offering of the token will be managed by a special smart contract called the Crowdsale Contract. Investors can transfer Ether during the offering period to the Crowdsale Contract. This will calculate the amount of tokens that the investors will get according to the amount paid. The Crowdsale Contract has a maximum and a minimum amount of tokens to be issued during the offering period. If the minimum funding amount (Softcap) of an STO is not reached, all the investors will be refunded their investment amount and no tokens will be issued. Tokens will only be issued in case the STO reaches the Softcap, and the tokens will not be transferable until the end of the offering period.

3. Profit Participation

Each venture will issue their own tokens. These tokens represent a fixed portion of the distributable future profits of the venture and are managed by the Token Contract. The future profits of the venture will be shared through the Token Contract.

The Token Contract manages token balances and transfers. The Token Contract is complying with the ERC-20 standard. Tokens of initial investors will be locked in the Token Contract during the Offering Period. Transfer of tokens are restricted only to the addresses registered in the Whitelist Contract.

The Token Contract has the profit sharing functionality. The venture’s profits will be distributed to the investors, or subsequent token holders proportionally to their token holdings. The profits will be distributed to the token holders in the form of Ether. Unless otherwise communicated between the investor and the venture, the respective token will represent a right to profit participation throughout the lifetime of the venture.

4. Token Recovery

The Token Contract has an additional functionality that differentiates it from the standard ERC-20 Token Contract. In case investors misplace or forget the private key of their Ethereum address, ventures will be able to trigger a token recovery process to allow the recovery of the respective investor’s tokens. The STOKR Framework provides a multi-signature process, which includes an external, trusted third-party to ensure that only authorised investors can request such recovery, and that the token recovery is not abused by the venture or the investor.

To wrap up

STOKR’s interface just launched on May 1st, 2019. Leading up to this, the STOKR team was working extremely hard to make the interface as simple, smart, and secure as possible. The STOKR Framework is structured for issuing profit sharing rights in ventures, whilst keeping the European Securities Legal Framework in mind. We are committed to promoting community discussions on various STO frameworks and proposed standards. To better understand, try the STOKR Framework yourself by checking out the code base here on GitHub.

We always appreciate feedback, so feel free to contact us at [email protected] for any suggestions or queries.

Did learning about the STOKR framework tickle your fancy? Are you interested in using an STO platform, like STOKR? To invest in innovative companies or raise investments, click here. 

BY LUKAS CREMER