What is a Simple Agreement for Future Token (SAFT)?
A Simple Agreement for Future Token (SAFT) is an investment contract created to facilitate the sale of tokens to accredited investors prior to being issued on a public blockchain. The agreement allows investors to purchase tokens in advance of their issuance, with the understanding that those tokens will be eventually delivered once the network or protocol has been developed and launched. In this way, SAFT agreements are similar to traditional software development contracts in which customers pay upfront for future access rights configured according to mutually agreed terms.
The primary purpose of SAFTs is twofold: 1) they allow developers and entrepreneurs more efficient access to capital without having to go through the arduous process of creating securities offerings; 2) they provide investors with legal protection by classifying their purchases as investments instead of immediate token purchases. This distinction makes it easier for both parties involved in a transaction since any potential disputes can be resolved based on preexisting contractual agreements rather than relying solely on U.S. securities laws and regulations.
How Does It Work?
A SAFT agreement requires all parties involved—including buyers, sellers, lawyers representing each party—to agree upon certain terms before any money changes hands or token delivery occurs. Typically, these terms would include details about when payment should be made (e.g., up front), how much equity each investor will receive relative to other participants in the deal (i.e., vesting schedule), what types of dividends may be paid out if applicable, etc.. Once these conditions have been established and accepted by all relevant parties, then funds are exchanged between buyer(s) and seller(s). Following this initial exchange, buyers will not receive any actual cryptocurrency until after its launch on a public blockchain platform such as Ethereum or Cardano; at that point they may then redeem their previously-purchased token allocation under predetermined conditions included within their original safeties agreement document(s).
