I have seen many posts attempting to clear the concerns about the utility of Modum’s token. Nobody really seems to have clear answers and a lot don’t seem to grasp the idea of dividends. I have talked to the team and have done my own research. I believe with common sense and some research, one can understand the value of Modum’s token. I hope I can give some new information to some of you. I want to add that I am not a legal expert, however, I am swiss and I am quite familiar with the corporate legal system in this country. I want to address the following points that seem to be the most common critics.
MOD is a security:
Modum is not a utility token, it will not be used in modum’s system in any way. More on this later. The MOD is almost certainly considered a security in Switzerland. However, this does not require any sort of license or permit in Switzerland (source: https://blog.froriep.com/en/how-crypto-token-qualify-under-swiss-law-a-comprehensive-framework). Now, according to this article, it is likely that all crypto-tokens are considered securities. Nobody knows in which direction this will go but all crypto-tokens are in the same boat. Therefore, I believe this not to be a valid criticism of modum.
modum tokens are like shares but without regulation:
The swiss law is technology neutral (https://www.finma.ch/en/news/2016/07/20160701-mm-rs-09-01/). This means, that all existing regulation do comprise technological innovations such as cryptocurrencies and ICOs. Modum’s token model is therefore very much likely to be subject to the same laws as any other share. For now, the FINMA is evaluating the topic of ICOs and will define how the law should be interpreted in this regard. (https://www.finma.ch/en/news/2017/09/20170929-mm-ico/). Furthermore, Modum is in contact with FINMA and they also stated that they have hired legal experts, trustees and lawyers to make sure they follow the rules. It will take time to have official assurance but for the time being this is not a valid criticism of Modum’s token model.
The board of directors can simply not pay out any dividend and does not care about the value of the token:
Sure. This is probably the most unfounded criticism out there. When I spend time reading some comments on reddit, I wonder how many of these people actually have any clue of how dividends work but criticize nevertheless. In every stock corporation out there, it is the exact same concept. The BoD decides how much of the profit is paid out! And the amount is only known once the annual report is published, it is as simple as that! Tesla, Apple, Microsoft, Novartis, UBS, all work like the modum model. If your only response to this is: “but huh, there is no regulation” then please read point 2 again. Furthermore, over the next 3 years, 1/3 of the token supply will be distributed to the shareholders (includes the BoD) of modum. Here you have a list of the registered management: https://zh.chregister.ch/cr-portal/auszug/auszug.xhtml?uid=CHE-432.725.569. They will hold these tokens and will therefore have the exact same incentives as we do (increase the value of the token).
MOD token has no value:
The value of the MOD token is directly linked to the success of the company, like shares (see above). This cannot be said about all other utility tokens. Utility tokens get their value from speculating on whether a company will buy and use its tokens. Now, I believe that utility tokens will be a huge barrier to the adoption of blockchain technology. If an established company needs to buy crypto-tokens with a hugely inflated price and volatility in order to use the startup’s solution, they will pass and find something else. Modum is going to be one of the first blockchain use case to be implemented, why? In part because they do not have a utility token! Therefore, think again about utility tokens and consider a security token to be the future of digital shares.
What happens if the company is bought:
The team has addressed this a number of times and it is addressed here: https://www.smithandcrown.com/sale/modum-io-blockchain-based-monitoring-reporting-supply-chain-conditions/ Tokenholders will need to be considered in case of an acquisition. Acquisition happen very often in the “non-crypto” economy and they are lengthy negotiations and eventually both parties agree to a deal. Now, it is exactly the same for modum. They are legally obliged to compensate to tokenholders fairly if they get acquired. How this is going to happen and to what extent? This is subject to the negotiations and as the BoD will own tokens I am very confident that this deal will not screw us over.
Conclusion:
I am amazed at how well the modum model has been thought through. It is not perfect, but it is a first step towards triggering the blockchain revolution everyone is talking about. This blockchain revolution is not happening because people are just after the money and happier to post memes and talk about our solar system then doing some research. This space cannot be taken seriously until this stops. I am hoping for a strong correction to get rid of weak hands and moonboys. Stay classy modum community. This project will thrive.
