- There has been debate in the crypto community about what crypto tokens actually represent, in fact, they can be defined by current regulations.
- In TradFi, stocks grant their holders part ownership of the corporation and entitle them to a share of the profits generated by the company’s operations.
- The SOMA token bridges the gap between TradFi and DeFi by granting token holders the rights of an actual security as a financial interest in SOMA.finance in the form of a preferred equity position.
The decentralized nature of crypto tokens has many benefits, but up to this point, the exact nature of many tokens has been fuzzy as projects often fail to properly adhere to the rules that financial institutions and regulators require.
In a bid to help bridge certain aspects of traditional finance (TradFi) into the world of decentralized finance (DeFi), the SOMA token will incorporate several popular features that investors have come to love and be issued in compliance with the rules including providing clarity on what the asset represents.
One of these features is Corporate Ownership, something that is standard when it comes to stocks but is often ignored in the digital asset market.
Corporate Ownership: A TradFi Standard
In traditional finance, a stock – which is also known as equity – is a security that represents part ownership in an instrument of the issuing corporation. A unit of stock is called a share, and each share entitles the holder to a proportion of the corporation’s assets and profits equal to the amount of stock they own times the specific terms of that share.
This is what is known as Corporate Ownership, as stockholders own an interest in the corporation, and, depending on the classification of stock (preferred stock vs. common stock), have additional rights and privileges.
Common stockholders have the right to vote at shareholders' meetings and to receive any dividends paid out by the corporation. Preferred stockholders do not usually have voting rights, but preferred dividends are usually paid out before common stock dividends. Because of this preference, preferred shareholders might receive dividends in years that common stockholders do not.
In the majority of cases, stocks are purchased through brokerage firms which charge fees for facilitating the trade and also maintain custody over the assets on the customer’s behalf.
While stocks bequeath corporate ownership, they do not represent ownership of the corporation's property as corporate property is legally separated from the property of shareholders, which limits the liability of both the corporation and the shareholder.
DeFi: Who Owns What?
In the world of crypto, it’s a little more challenging to define what tokens are, what they represent, and what rights token holders have in relation to the network as a whole.
With Bitcoin, holding 1 BTC means you own 1 BTC’s worth of the total market capitalization attributed to all of the tokens in circulation. It doesn’t, however, grant you ownership of the Bitcoin network or any of the hardware used by miners and node operators that keep the network running.
Bitcoin isn’t considered a corporation by current financial legal standards, so you can’t say Bitcoin is a stock, and the SEC has already stated that it views BTC as a commodity but provided little clarity beyond that. So far, the only thing regulators have really decided is that taxes are owed for any profits gained from trading BTC, and everything else remains murky.
Things get even more complicated the deeper down the token rabbit hole you go as there are all manner of functionalities to various blockchain and token designs, not to mention DeFi platforms with anonymous teams and unclear terms and conditions as to what their token represents.
SOMA Token: Bringing Greater Clarity to DeFi
The truly unique thing about the SOMA token is that it grants token holders the rights of ownership of an actual security interest in SOMA.finance in the form of a preferred equity position.
Being the first legally issued and compliantly structured digital security open to global and US retail investors, the SOMA token stands apart from all other digital assets in the ecosystem by incorporating the clarity offered to holders of traditional stocks.
Having part ownership in the security interest of SOMA.finance means you will receive a share in the profits of the platform. However, even more importantly, as a preferred stockholder of SOMA, you will be entitled to certain payments from SOMA, the company, itself. All of these will be paid out in standardized dividend payments.
Thanks to the fact that SOMA.finance operates as a decentralized exchange, there will never be a third party between you and your tokens as they will remain in your digital wallet from the moment you purchase them until you decide to move them.
The specifics of the terms and conditions for SOMA token holders will be provided prior to the SOMA token launch via SOMA Starter, so keep an eye out for those details to learn more.
Instead of lofty promises and vague roadmaps that many token launches in crypto have become known for, the SOMA token launch will usher in a new era for decentralized finance as the world migrates towards a blockchain-enabled future.
