Excellent investigation TimMarsh, we were also impressed by their presentation of their methodology for creating software, and how quickly they were able to break it down and drill into the development cycles. While still being flexible enough to meet all of our objectives, and not just for creating software. As they described, they are developing products, and that products have many external requirements by the companies, employees, and end users.

Thanks for that information, especially on the amount you'd need for weekly vs. daily rewards. Will staking be able to happen within the DNotes Vault? Or will it be necessary to have our own desktop wallets for that?

Weirdly enough, because of the DNotes Vault, I've never actually owned my own DNotes wallet. I'm not sure what I'll do after the big switch.

The DNotesVault is one of the biggest reasons we need deferred staking. Ideally, those who are part of the network and staking should be as distributed as possible. So the goal with deferred staking is to allow a user to have their staking privileges for those coins deferred to their own desktop wallet, or even on a cloud server, with their actual funds tucked away in cold storage or on the DNotesVault.

Deferred staking is a brilliant idea! I love it! NEM has a similar concept with delegated harvesting. The best part about it is that my coins can be harvesting even with my wallet closed up.

Why Reg. A+ Mini-IPO Title IV Tier 2 verse ICO?

Unfortunately, ICOs are still going on at a fast pace, despite being warned by the SEC that they are securities and cannot be sold legally without being registered or exempt with the SEC.

From my prospective, with out a doubt, there are no known ICO tokens sold that can be correctly characterized as a “utility token”. As SEC Chairman Jay Clayton pointed out recently, “Merely calling a token a “utility” token or structuring it to provide some utility does not prevent the token from being a security. Tokens and offerings that incorporate features and marketing efforts that emphasize the potential for profits based on the entrepreneurial or managerial efforts of others continue to contain the hallmarks of a security under U.S. law.”

What is most troubling is when he added that, “Investors should understand that to date no initial coin offerings have been registered with the SEC.”

The author of the article below raised an interest point, “Regardless, none of this has left token issuers with much in the way of defined guidelines on how to conduct a legally compliant ICO.”

That is correct, unless our law makers change the existing security laws on the book to accommodate the brave emerging decentralized world there are no provisions to conduct ICO efficiently and legally.

I understand that it is very frustrating, as ICOs can be an amazing contributor to capital formation. Granted that being the case, it is still a bad idea to engage in ICOs that are clearly deemed illegal unless registered or exempt with the SEC. This could end badly. I fear that this is the greatest risk confronting our industry.

What is DNotes doing differently? A lot, in almost every respect. But for now, let us focus on an alternative to ICO and do it legally.
For those who are new to our industry, it is helpful to understand that the tokens (coins) sold in ICOs are created or issued by leaderless decentralized entities not controlled by any individual, or group of individuals.

Real world entities in the form of incorporated companies, LLC, LLP, and proprietorship or others forms of ownerships are created with a purported mission of advancing the coins’ projects outlined in their “white papers”. Coins are pre-mined and sold, bring in millions of dollars (in some cases hundreds of millions of dollars). They now belong to the entities mentioned earlier. These entities have full discretion to use the funds, often with no limitation, transparency, or accountability. That should not come as a surprise as the “investors” have been advised that they do not have any ownership or voting rights in the entity that received the funds. It would be less confusing if those entities are registered as “charities” and the investment labeled as “donations”.

I wish that ICOs can be structured and conducted in manners that meet existing security laws, either through registration or exemption. Unfortunately, without significant changes to existing laws, it is simply not possible. To date, the issuers of ICO tokens are exclusively decentralized entities without any central authority. However, the money collected goes to individuals, partnership or incorporated companies purportedly are working on some great ideas presented in a white paper. The investors have no ownership or voting rights in the private entity that received the investment.

Other than consumer or investor protection, the SEC plays a key role to maintain a fair, orderly and efficient market. It is also given the mandate by our law makers to facilitate capital formation. To that extent, our government has an invested interest in capital formation that leads to job and wealth creation. There are distinct options of raising funds by selling securities in support of the token or coin legally as mentioned in the article. In the case of DNotes, we believe that Reg. A+ Mini-IPO Title IV Tier 2 is the ideal option for us. And we have been planning for it for over two years using an incorporated company, DNotes Global, Inc.

To protect consumers the SEC, requires the filing of a registration statement with full disclosure of all relevant information along with two years audited financial statements - subject to on-going reporting as the means of making available all information for investors to make an informed investment decision. We believe that as much as this is burdensome, it is also essential to protect investors.

Enjoy the article below and feel free to ask any questions.
  
ICOs are STILL Not Taking Compliance Seriously in Search for Big Money

The initial coin offering (or ICO) explosion accelerated by Ethereum smart contract technology has resulted in over $3 billion in raised capital in 2017 and garnered the attention of governments worldwide.  The US Securities and Exchange Commission (SEC) has taken note.  In their statement on the DAO, which was an ICO that raised $117 million, the SEC stated that the sale constituted an offering of a security by applying the “Howey Test”.  Since then, the SEC has increased its attention on these sales and last week SEC Chairman Jay Clayton issued a statement urging investors to be cautious and issuers to analyze the offering under applicable securities laws.

Regardless, none of this has left token issuers with much in the way of defined guidelines on how to conduct a legally compliant ICO.  Although the CFTC has stated that it believes most tokens to constitute commodities, the SEC has indicated that they believe token sales generally fit into two categories: utility tokens, and security tokens. However, in Chairman Clayton’s opinion, most, if not all token sales are actually securities offerings.

To date, most token sales have been done without regards to securities laws under the guise that the token is not a security, but rather a utility token, that has a specific use and functionality within the offerers network and ecosystem.  However, although this theoretically does exist, to fall within this category, the token must meet a number of loosely defined characteristics.  The token must have an immediate use within the issuer’s network and cannot be sold with a future utility in mind.  The token should be purchased for the purpose of using that utility and not for speculation.  The value of the utility and its potential for increase in value cannot be the primary motivator and its value should not depend on the work of others to grow.  Many issuers and their counsel are applying the Howey Test, which is a test developed for investment contracts.  But this is not the only way that regulators could analyze these offerings.

Read more: https://www.crowdfundinsider.com/2017/12/126395-icos-still-not-taking-compliance-seriously-search-big-money/

Legalities aside, the thing I like about cryptocurrencies in general and to some extent applicable to ICOs is the much lower entry barrier for those of modest means to invest in something that very well could improve their financial lives in a way that wouldn't be possible otherwise.

If I only have $100 to invest, I can buy an undervalued cryptocurrency and maybe I'll end up sitting on something worth $10,000 or more. Cryptocurrencies basically make investments fungible enough for poor people to participate. $100 too much for you? You can also just invest $10 or $5. Remember in the early days of CryptoMoms when we were encouraging each other to give up your Starbucks Latte and use the money you save to buy DNotes? Well, with DNotes and some other coins, that kind of small investment really could make a big difference.

So when I hear about the SEC cracking down more on ICOs and other things related to cryptocurrency I worry that this door for poor people might get slammed shut. I hope that doesn't happen, and I'm grateful that this door was open for me.

That said, I also believe that people and entities promoting investments need to be honest about what they are promoting. Many ICOs have been shady and those poor people who have little or those middle class people who give up their weekly lattes at the very least deserve to know that what they are putting their money into has every reasonable chance of being successful (though one can never guarantee such things). There should be some protection from charlatans running ICOs that do nothing but scam people out of their money--at least in the form of full disclosure about fundamentals so that an informed investor of any social or economic class can make a good decision.

I just hope that the protection afforded investors does not also make it more difficult or impossible for people to participate. For example, I really hate how so many investments in the US are only available to accredited investors. You can invest in this wonderful promising startup and possibly get rich. Oh wait. You already have to be rich in order to get the chance.

I hope we can maintain the fungibility of cryptocurrencies and ICOs where investors can buy any amount, no amount too small, while still building in some reasonable standards of solid fundamentals that those seeking to raise funds for their ventures have to follow.

At the end of the day, though, the responsibility to spend one's own money wisely has to lie with each one of us, regardless of how much we have. There's only so much regulation can do to save us from our own poor financial choices without becoming overly burdensome. I wonder if it wouldn't be a better use of national resources if more funds weren't put towards the proper financial education of children (and adults) instead of towards trying to overregulate entrepreneurs who want to raise funds in the easiest way possible. If the majority of the population were properly educated on financial matters, wouldn't that in and of itself make it more difficult for the charlatans to raise funds?

 Wiser, I agree with you that “much lower entry barrier for those of modest means to invest in something that very well could improve their financial lives in a way that wouldn't be possible otherwise” is a wonderful thing made possible in our industry. However, that fact remains that it is possible with or without ICOs. For example, once an account is set up, anyone can invest $5 in DNotes - $1 today will buy you 20 DNotes. Of course, once it is discovered and fully valued the potential for appreciation is reduced.

The SEC has a mandate to promote capital formation. It promotes various legal crowdfunding platforms such as CF (crowdfunding) Reg. D - 506 (c), Reg. A+ Mini-IPO and others. I bet if our law makers can figure how to make the sale of ICO legal, SEC will promote it as a tool for capital formation.

Furthermore, it is important for us to understand that the required registration is their means of getting full disclosure and continued reporting information so that the consumers can make informed investment decision.

It is certainly true that the lower entry barrier for investing is true without ICOs. As you said people can buy DNotes or any other cryptocoin directly from an exchange. I've bought into one or two ICOs and for the most part I've learned that the coin tends to lose value as soon as it starts getting traded on exchanges. It may or may not appreciate in value later, but you have time to study it and watch the market to find a good entry point. So if I'm interested in a coin, I often will just wait until its ICO is done and it goes on the exchange and then wait some more. If I still want it, then I'll buy it, but I'll admit a lot of times I sort of forget about it.

Since a lot of exchanges host ICOs, my hope is that increased regulation (or crack down) of ICOs doesn't jeopardize people's ability to acquire ordinary cryptocoins on exchanges.

I appreciate that required registration is how you get full disclosure and continue reporting information. It can also be prohibitively expensive for new entrepreneurs. I can understand why some of those people are excited about the ICO concept. I'd like to see the best of both, where there is proper disclosure and information to help investors make informed decisions but the cost isn't prohibitive for the startup, and the investor can participate with amounts as low as $10 (and not be required to invest some prohibitively high amount), and where people of all means can participate, not just "accredited investors."