Configure token returns & payouts
Setting up returns and payouts for your token is a crucial step in defining its value proposition for investors. This guide will help you understand the different options available and how to set them up properly.
Types of Tokens
Issuers can choose between three types of tokens:
Debt Tokens: These are tied to the repayment of a principal amount borrowed, plus interest.
Interest Payout Tokens: These entitle holders to the interest earned from a loan, without direct ownership of the underlying debt.
Setting Up Equity Payout
To define equity payout, enter the following details:
Payout Frequency (in months): How often dividends or profits will be distributed to investors.
Expected Interest: The expected interest rate an investor is likely to receive at the defined frequency. This does not guarantee the interest will be paid out at this percentage. This should be entered as an estimate based on historical data or heuristics, if historical trends are unavailable
Note: Equity payouts must be initiated manually by the issuer at the defined frequency.
To initiate a payout after the token is listed, follow the steps Initiate an equity payout
Setting Up Debt Payouts
To define debt payout, enter the following details:
Interest Rate: The interest rate (p.a) you'll be offering your investors.
Payout Frequency: How often interest payments are made (e.g., monthly, quarterly, annually etc).
If the payout frequency is monthly, additional input like payout day of the month is required.
If the payout frequency is quarterly, additional input like the payout day of the month and the quarter combination (Eg: Feb-May-Aug-Nov, Jan-April-July-Oct etc) are required.
If the payout frequency is halfyearly, additional inputs like the payout day of the month and the half yearly month combination (Eg: Jan-July, Feb- Aug etc).
If the payout frequency is annual, additional input like the payout day of the month and the month are required.
Number of Payouts: The total number of interest payments that will be made. This along with the payout frequency will determine the term duration.
Payout Schedule: A predefined timeline showing the payout schedule of the investment.
Based on the number of payouts and the interest rate, a payout schedule table is generated with interest pre-calculated for a token. Issuer has an option to input the principal payout schedule, based on the principal payout, the interest is calculated. The issuer must ensure that the principal (i.e., the token price) is paid out entirely within the payout schedule.
The interest for the first row assumes the investment is made a full term before the first payout. For example, if the payout schedule shows May 5, 2024, the interest is calculated as if the investment was made on April 5, 2024. If an investor invests on April 20, they will receive only 50% of the calculated interest on May 5, 2024.
Fixed-term Debt: In this type, all investors share the same investment term and must invest before a specified cutoff date. The payout schedule is identical for all investors, providing clarity and consistency.
Rolling-term Debt: This type has no set end date for the token sale. Each investor's term begins when they purchase the token, creating a rolling schedule of payouts. As a result, two investors may have different payout schedules based on their investment dates. This offers more flexibility but can be more complex to manage.
Choose the debt type that best suits your asset and investor needs. Fixed-term is often simpler to manage and understand, while rolling-term can attract investors over a longer period.
To initiate a payout after the token is listed, follow the steps Authorise Debt Payouts
Remember, properly configuring returns and payouts is essential for attracting investors and ensuring smooth operations of your tokenized asset. Always consult with financial and legal advisors to ensure compliance with relevant regulations.
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