Digital assets may be issued by any number of different entities or persons as a way to raise capital or sell products or services. Often, digital assets flow through to asset purchasers from a virtual organization. These organizations are embodied in computer code and executed on a blockchain or using distributed ledger technology. The code (sometimes called the presumptuous, “smart contract”) serves to automate certain functions of the organization, which may include the issuance of certain digital assets or tokens. The DAO, which was a decentralized autonomous organization, is an example of one of these virtual organizations.
If helpful, here are some basic concepts that you should educate yourself on before considering contributing capital to an initial coin offering, token sale or related offering:
- What is an initial coin offering (ICO)?
- What is a blockchain?
- What is a digital asset, coin, or token?
- What is a digital asset trading platform (“exchange”)?
- Things to consider when determining whether to contribute capital to an ICO (or related offering)