Select the token type and subtype, define its yield and holder rights, set supply and price against the asset's valuation, then record those parameters on-chain so the STV3 smart contract enforces the legal terms automatically.
Token economics and smart contract configuration are where the strategy set in earlier phases becomes an enforceable on-chain instrument. Token economics defines how the token works — its type, yield, rights, supply, and price — so that it supports the offering’s goals and matches investor expectations. Smart contract configuration then binds those choices to code, so the token behaves exactly as documented, enforces compliance at the transfer layer, and reduces operational and legal risk without intermediaries.
In this phase you select the token type (equity, debt, revenue-sharing, hybrid), define its yield and the rights granted to holders, set supply and pricing against the asset’s valuation, and record the resulting parameters on-chain. The discipline that matters throughout: the token, the offering documents, and the smart contract must all say the same thing. Where those diverge, you create enforcement risk. This page is educational reference, not legal advice — confirm each structural decision with qualified securities counsel.
On the Stobox suite, tokens are issued and managed through Stobox Compass (live today as Compass Lite), the tokenization layer that follows Intelligence (organize) and Raisable (raise). Compass is non-custodial — issuers and investors hold their own keys, and funds move directly from investor to issuer treasury. Stobox charges software and subscription fees only, never a percentage of the raise or the asset; any success or placement fee is handled by a licensed broker-dealer, never by Stobox.
Structuring Token Issuance Based on the Business Model
Once the tokenization model has been selected, structure the issuance to reflect that model’s financial, legal, and investor parameters. This means selecting the token type — equity, debt, revenue participation, or a hybrid — and ensuring the rights granted to holders are clearly defined and legally enforceable.
Each tokenization model is not just a funding strategy but a legal and financial structure. The tokens must accurately represent the rights promised to investors, comply with jurisdictional regulation, and remain compatible with trading and reporting mechanisms.
Objective
Align the selected tokenization model with a token structure that is compliant, enforceable, and appropriate for the asset type, jurisdiction, and investor class. This includes:
- Selecting the correct token type (Security, Utility, or Hybrid)
- Defining the token subtype (e.g., equity, bond, participation certificate)
- Embedding investor rights (ownership, revenue share, fixed income, governance)
- Ensuring legal compatibility with the chosen jurisdiction and investor profile
Issuer Guidance
Choosing the right token structure is essential to avoid:
- Misclassification under securities laws
- Inability to onboard retail or institutional investors
- Failure to list on regulated exchanges
- Enforcement risk or investor litigation from misrepresented rights
The structure you choose must be reflected consistently across:
- The token smart contract and metadata
- Offering documents and disclosures
- Legal agreements (participation agreements, subscription documents)
- Regulatory filings and licensing applications
Token Structure Framework
The table below maps the business model selected earlier to the corresponding token type, subtype, and core investor rights.
| Business Model | Token Type | Token Subtype | Core Investor Rights |
|---|---|---|---|
| Full Asset Sale Model | Security Token | Equity or Asset-backed Token | Ownership of the asset, voting rights, capital appreciation |
| Business Growth Capital Model | Security Token | Equity Token | Company shares, voting rights, dividends/profit participation |
| Capital Raise for Future Acquisition | Security Token | Convertible or Hybrid Token | Right to future equity or profit, conversion at defined events |
| Development and Value Creation Model | Security Token | Project Equity or Profit-rights Token | Share in future project value or profits, limited control |
| Shared Ownership Model | Security Token | Fractional Ownership Token | Co-ownership rights, share of proceeds upon sale or income |
| Revenue or Profit Sharing Model | Security Token | Revenue/Profit-sharing Token | Right to a share of revenue or profit (no ownership or voting) |
| Loan-Based Fundraising Model | Debt Token | Fixed-income Token | Right to repayment with interest, no ownership or governance |
| Collateralized Lending via DeFi | Utility or Hybrid Token | Collateral-backed Token | Claim on collateral if borrower defaults, interest earnings (if lender) |
Utility & Hybrid Token Considerations
Most STOs are structured as security tokens. In some ecosystems, additional tokens may support platform access and rewards (utility tokens), DAO governance (governance tokens), or a combination of financial rights and ecosystem roles (hybrid tokens).
Important: On Stobox Compass, security tokens are the available issuance option. The utility and hybrid patterns below are provided for educational context only.
| Use Case | Token Type | Token Sub-Type | Purpose |
|---|---|---|---|
| Ecosystem access | Utility Token | Platform Access Token | SaaS access, feature activation, user tiers |
| Governance participation | Utility Token | Voting/Governance Token | DAO decisions, community voting rights |
| Web3 staking + profit share | Hybrid Token | Staking Token | Ownership + APY from platform activities |
| Convertible debt/equity | Hybrid Token | Convertible Token | Starts as debt, converts to equity on trigger |
Warning: Utility tokens must not offer a financial return; if they do, they may be reclassified as securities. Hybrid tokens should be issued with caution and professional legal review.
Issuer Checklist
Before finalizing token issuance:
- Have you selected a token subtype that matches your business model?
- Are investor rights (ownership, yield, control) clearly reflected in the tokens and agreements?
- Does your chosen jurisdiction permit this token type and structure?
- Is the token eligible for secondary-market listing or compliant custody?
- Are there restrictions on offering this token type to certain investor classes?
Example: Participation Certificate Variant
In jurisdictions where direct equity tokenization is restricted (e.g., Switzerland and Germany), issuers may use a participation-certificate structure:
- Legal shares are held by an SPV or nominee (see SPV tokenization)
- Tokens represent economic rights (dividends, exit value)
- Rights are governed by a legally binding participation agreement
This allows fully compliant issuance without amending national shareholder registries.
Select the Type of Token
The token type sets the legal status, investor rights, and regulatory duties of the offering. A token can represent ownership, revenue rights, usage rights, or a mix. Choosing correctly ensures compliance, clear communication, and a properly structured offering.
Select the General Token Category
- Security Tokens. A regulated financial instrument representing an investment contract. Gives investors rights such as ownership, dividends, or repayment, and is subject to securities laws in most jurisdictions. This is the category Stobox Compass issues.
- Direct Ownership Rights Tokens. Represent legal ownership of the asset itself (e.g., real estate, fine art), not just a claim to value. Requires special legal structuring so on-chain rights are enforceable off-chain. Documented here for context; not currently a Compass issuance option.
- Utility Tokens. Grant access to a product or service within an ecosystem but do not represent ownership or investment. Often used in early-stage or platform projects. Not a Compass issuance option.
- Hybrid Tokens. Combine multiple token types (e.g., utility + profit-sharing) and require careful legal structuring to define how rights are split and which regulations apply. Not a Compass issuance option.
Select the Type of Security Token
- Equity (Common Stock) Token. Ownership in a company’s common equity with voting rights and growth potential.
- Preferred Stock Token. Non-voting equity with priority on dividends and liquidation; may offer fixed returns.
- Convertible Equity Token. Starts as a contract and converts into equity upon a future event, such as a funding round.
- Debt Token. Represents a loan; investors are repaid with interest on agreed terms.
- Bond Token. A structured debt instrument with fixed coupon payments and a maturity date.
- Convertible Debt Token. Begins as debt and may convert into equity or other securities on defined conditions.
- Asset-Backed Token. Linked to real-world assets such as real estate or loans; returns come from asset performance.
- Commodity-Backed Token. Backed by physical commodities (e.g., gold, oil); holders have a claim to the commodity’s value.
- Profit-Participation Token. Gives investors a share of profits without equity ownership.
- Revenue-Sharing Token. Provides a percentage of revenue, regardless of profit.
- Fund Unit Token. Represents a share in an investment fund or portfolio; offers exposure to multiple assets.
- Hybrid Token. Combines equity, debt, and/or revenue-sharing; requires a clear definition of rights.
- Sustainability-Linked Token. Returns are tied to environmental, social, or governance (ESG) performance or specific sustainability goals.
- Participation Certificate Token. Rights to profit or revenue without voting or direct ownership; often used in civil-law jurisdictions.
Define the Token Yield Type
The yield type defines how the token generates returns — through profit sharing, interest, staking rewards, or other mechanisms — and sets expectations for both investors and regulators. Yield may be fixed, variable, or conditional, depending on the business model and token design.
Yield Type Options
- Fixed Yield. A predetermined return that remains constant over a specified period.
- Variable Yield. A return that fluctuates over time, typically based on an underlying benchmark or market conditions.
- No Yield. An asset that does not generate income, interest, or dividends; investors benefit from capital appreciation only.
Token Yield Value (Interest)
The token yield value expresses the interest earned or expected from holding the token over a period, usually stated as a percentage return. Selecting the right yield type aligns the token structure with your business model and investor expectations, and ensures payout mechanisms can be executed legally and technically in line with the promises made during the offering.
Explaining Token Yields — Yield Models in Tokenized Assets
Yield modeling defines how investors earn returns from a tokenized offering. It is one of the most important design elements in a Security Token Offering and must align with the asset’s cash flow or appreciation potential, the tokenization model, the token type and smart contract logic, and jurisdictional investor expectations and regulatory restrictions.
Objective
Define how your token generates value for investors — through income, appreciation, or a hybrid — and match it to the appropriate token type and tokenization model. This ensures clear investor expectations, legal and financial alignment, secondary-market compatibility, and scalable token design.
Yield Model Categories
| Yield Model | Definition | Use Case | Investor Profile |
|---|---|---|---|
| Fixed Yield | Fixed % annual return, regardless of performance | Rental-backed bonds, tokenized debt | Institutional, fixed-income, conservative |
| Variable Yield | Performance-based returns tied to profit or revenue | Hotel tokens, tokenized business shares | Retail + growth investors |
| Growth-Oriented Yield | No interim yield; investors benefit from eventual asset sale or company exit | Startup equity, VC-like tokenization | Long-term holders, venture capital |
| Hybrid Yield | Mix of fixed payments + upside from asset appreciation | Real estate tokens with income and capital gains | Real estate, mixed-income portfolios |
| Deferred Yield | Returns start only after a milestone (e.g., production or project delivery) | Mining projects, infrastructure funding | Medium-risk investors |
| Decentralized Yield | Yield from DeFi lending, staking, or algorithmic protocols | Tokenized commodities, crypto-native reserves | DeFi-native, high-risk traders |
Cross-Mapping: Yield Model ↔ Tokenization Model ↔ Token Type
| Yield Model | Compatible Tokenization Models | Recommended Token Types |
|---|---|---|
| Fixed Yield | Structured Debt Issuance, Asset Acquisition, Commodity Tokenization | Bond Token, Revenue Token, Preferred Stock Token |
| Variable Yield | Business Equity Sale, Asset Enhancement, Revenue-Sharing | Revenue Token, Profit-Sharing Token |
| Growth-Oriented Yield | Equity Security Token Model, Distressed Asset Recovery | Equity Token, Convertible Token |
| Hybrid Yield | Asset Enhancement & Yield, Real Estate-Based Offerings | Revenue + Profit Token Combo, Hybrid Securities |
| Deferred Yield | Asset Development, Infrastructure & Energy Projects | Revenue-Sharing Token, Convertible Token |
| Decentralized Yield | DeFi Liquidity Mining, DAO Infrastructure, Tokenized Reserve Assets | Staking Token, DeFi-Native Token, Hybrid Token |
Examples by Model
| Model | Example |
|---|---|
| Fixed Yield | Tokenized real estate fund pays 6% interest per year |
| Variable Yield | Tokenized hotel shares distribute 30% of net profits to holders |
| Growth-Oriented | Startup token pays nothing during growth phase but exits at 5x post-acquisition |
| Hybrid Yield | Real estate token pays 4% income + 20% gain on sale |
| Deferred Yield | Mining token begins payout 3 years after production starts |
| DeFi Yield | Tokenized oil reserves yield 8% from DeFi lending platforms |
Regulatory & Compliance Considerations in Yield Models
Every yield model carries regulatory implications based on how returns are generated and distributed. Whether fixed, variable, growth-based, or decentralized, the yield structure determines how the token is legally classified (debt, equity, or investment contract) and what disclosures and licenses are required for compliant issuance. Classify your yield structure under the appropriate framework to ensure legal compliance, proper investor disclosures, and compatibility with your token model and jurisdiction.
- Fixed Yield (Debt Token). Regulated as a debt instrument; typically subject to bond or note registration; most suited to institutional or accredited investors.
- Variable Yield (Revenue or Profit Share). Treated as an equity-like security or investment contract; triggers full securities-law obligations including disclosure of business performance metrics and risk.
- Growth-Oriented Yield (Capital Appreciation Only). Still securities despite having no income; common for startup equity, SPV shares, or tokenized private equity. Requires disclosure of exit strategies, conversion terms (if any), and investor risk warnings.
- Hybrid Yield (Fixed + Performance). Must define priority of payment (fixed first, profit later); requires blended structuring, often with multiple token classes (e.g., equity + preference rights).
- Deferred Yield. Distributions begin only after a predefined milestone — project completion, start of production, achievement of profitability, regulatory approval, or a liquidity event. Common in real estate development, mining or resource projects, and startup profit-deferral rounds. Delayed distributions require clear milestone logic in the contract.
- DeFi-Based Yield. Classification is jurisdiction-dependent; may be viewed as a managed investment product, a derivative (if algorithmically adjusting), or a lending operation (if capital is pooled). High risk of regulatory reclassification.
Best Practices for Compliance
| Action | Why It Matters |
|---|---|
| Classify your yield model properly | Determines applicable licensing, registration, and investor rules |
| Align smart contract logic with disclosures | Legal and technical consistency ensures enforceability and investor protection |
| Select compatible jurisdictions | Avoids launching yield-bearing tokens in hostile regulatory environments |
| Choose the right investor class | Some yield structures are eligible only for professional or accredited investors |
| Prepare legal opinions or a prospectus | Required for equity and debt tokens in most regulated jurisdictions |
Your yield model is effectively your legal classification: it dictates whether the token is treated as equity, debt, or a structured investment, and determines the compliance path for issuance and trading. Ensure the yield type matches your token and business model, that all rights are disclosed in legal documents and on-chain metadata, and that the structure complies with securities law in every investor jurisdiction. Confirm the classification with qualified securities counsel.
Explaining Token Rights
Token rights are the substance of what the investor actually buys. They must be expressed identically in the legal documents and in the on-chain metadata that the smart contract enforces.
Token Economic Rights
Rights related to receiving income, profits, or redemptions.
- Conversion to Equity. Convertible into equity shares under specific conditions (e.g., milestone, maturity).
- Dividends. Share of the issuer’s net profits, distributed periodically.
- Fixed Income Payments. Recurring, fixed-rate interest-like payments.
- Profit Sharing. Share of net profits, often tied to audited financial results.
- Redemption at Face Value. Right to redeem the token at a fixed nominal value at maturity.
- Redemption at NAV. Redeem based on the token’s underlying net asset value.
- Revenue Sharing. Share of gross revenue, typically before costs.
- Interest Payments. Periodic returns at a fixed or variable rate, typically linked to the amount invested or lent.
- Token Buyback Rights. The issuer’s promise or option to repurchase tokens at a set price or under certain conditions.
- Staking/Yield Generation. Earnings for locking or staking tokens, often as a reward for supporting network operations or liquidity.
- Capital Appreciation Entitlement. Right to benefit from an increase in the token’s value over time, reflecting growth of the underlying asset or project.
Token Capital Rights
Rights related to exit events and asset protection.
- Exit Participation. Share of proceeds if the issuing company is sold, merged, or liquidated.
- Liquidation Preference. Priority claim over other equity holders during a liquidation event.
- Liquidation Proceeds. Right to a portion of the company or SPV assets upon liquidation.
- Pari Passu Treatment. All holders of the same class are treated equally in rights and payments.
- Senior Debt Priority. Priority over others in repayment on issuer default or liquidation.
- Subordinated Debt Position. Places holders lower in the repayment hierarchy, paid after senior debts are settled.
Token Administrative Rights
Blockchain-native or regulatory support features.
- Claim to Underlying Asset. Enforces rights to physical or real-world assets (e.g., gold, real estate).
- Delegated Voting. Ability to assign voting rights to a third-party proxy.
- Lock-Up Period. Period during which tokens cannot be transferred, enforced at the transfer layer.
- Transferability. Whether the token can be freely transferred or traded, subject to compliance rules.
Token Governance Rights
The ability to influence key decisions of a project or company, such as voting on proposals, protocol changes, or strategic actions.
- Proposal Submission Rights. Holders can formally submit proposals for consideration by the issuing entity.
- Information Access Rights. Holders receive key financial or operational updates about the project or issuer.
Voting Rights Configuration
When configuring the token, you decide whether to grant holders voting rights (yes or no). If you do, you also specify the voting type — on-chain (votes cast and tallied through the smart contract) or off-chain (votes conducted through traditional governance and recorded separately). If no voting rights are granted, this configuration does not apply.
Defining Token Supply and Pricing Strategy
The number of tokens issued and the price per token together determine the offering’s valuation, fundraising capacity, investor onboarding experience, and alignment with market expectations. Define both deliberately.
Objective
Ensure token supply, price per token, and fundraising goal align with total asset value, investor expectations, and the issuer’s strategic intent. This includes:
- Setting a logical, intuitive token price (e.g., $0.10 or $1.00)
- Calculating total token supply based on valuation
- Aligning with the percentage of ownership offered
- Defining issuance mechanics (pre-minted vs. dynamic minting)
Token Supply Strategy — Key Inputs
- Total asset/project valuation (e.g., $10M real estate or funding round)
- Percentage of the value being tokenized (e.g., 60% of project equity)
- Target price per token (e.g., $0.10, $1, or 1 sqft per token)
- Issuance structure (mint all upfront or mint-on-demand)
Common Token Supply Models
| Token Pricing Model | Token Price | Example Calculation |
|---|---|---|
| Standardized Low-Value | $0.10 per token | $10M fundraising → 100M tokens issued |
| 1-to-1 Dollar Model | $1.00 per token | $10M fundraising → 10M tokens issued |
| Asset-Backed Model | 1 token = 1 unit of asset | 50,000 sqft → 50,000 tokens (1 token = 1 sqft or 1g gold) |
Select a pricing model that balances clarity for investors with technical feasibility for the token standard and applicable jurisdiction.
Fundraising Target Determination
The total number of tokens should reflect your funding needs and capital structure strategy. Consider:
| Factor | Impact |
|---|---|
| Total Asset Cost / Value | The baseline for maximum capital raised |
| Ownership Percentage Sold | Determines how much of the asset is fractionalized via tokens |
| Operational Capital Needed | Include development or business runway if raising working capital |
| Issuer Retained Ownership | Balance between dilution and capital injection |
For example, a $20M real estate project tokenizing 60% equity at $1 per token = 12M tokens issued = a $12M fundraising target.
Issuance Mechanics: Pre-Mint vs. Dynamic Minting
| Mechanism | Description |
|---|---|
| Pre-Minted Supply | Full token supply is minted at once and distributed based on purchases |
| Mint-on-Investment | Tokens are created dynamically as investors commit capital (e.g., Reg A+, Reg D) |
Pre-minting suits fixed-asset fractionalization (e.g., real estate); dynamic minting works well for rolling raises or revenue-based models.
Best Practices Summary
- Keep token pricing intuitive ($0.10 or $1.00) for investor accessibility
- Align token supply with your asset value and fundraising goal
- Choose a supply model based on transparency, investor comprehension, and automation
- Use clear economic logic: total tokens × price = capital raised
- Document your supply and pricing logic in the whitepaper, metadata, and investor disclosures
Data-Rich Tokens
A Data-Rich Token is a security token that carries real-time asset data, letting investors track performance, financial health, and operational metrics directly from the token itself.
What Is a Data-Rich Token?
Unlike traditional securities, Data-Rich Tokens update and display live information such as:
- Asset valuation changes based on market conditions
- Rental income distribution and operational revenue updates
- Debt repayment tracking for bond tokens
- Commodity reserve levels for commodity-backed tokens
- Liquidity and staking metrics for DeFi-based models
This is powered by the Stobox Oracle — the mechanism that writes verified real-time data from on-chain and off-chain sources into the token’s metadata, so investors can read key financial and operational data directly from the token. Stobox’s team can help integrate and verify the data sources that feed the oracle.
Use Cases for Data-Rich Tokens
| Use Case | How Real-Time Data Is Integrated |
|---|---|
| Real Estate Tokenization | Property valuation updates, rental income tracking, occupancy-rate reports |
| Revenue-Sharing Tokens | Live financial statements, automated dividend distributions |
| Debt Tokenization (Bonds/Loans) | On-chain tracking of interest payments and repayment schedules |
| Commodity & Resource Tokens | Proof of Reserves (PoR) integration for oil, gold, or other stored commodities |
| Carbon Credit Tokens | Real-time emission offsets and certification tracking |
Define Token Parameters
These configuration fields define the technical and economic structure of your token. They are stored on-chain and form the foundation of your smart contract.
Important: Once deployed, most of these parameters cannot be changed. Verify everything carefully before submission.
Token Parameters You Set
- Token Total Supply. The total number of tokens created and available, including those not yet distributed. Entered by the issuer.
- Token Initial Supply. The number of tokens minted and made available at launch. Entered by the issuer.
- Token Price. The token’s initial price, typically set in fiat or stablecoins (e.g., USD, USDC). Common choices are $0.01, $0.10, or $1.00, or a custom value.
- Token Name. The full name of the token (e.g., “Acme Property Token”). Entered by the issuer.
- Token Symbol. A short ticker for the token (e.g., “ACME”). Confirm the symbol is not already in use before submitting.
- Token Decimals. How divisible the token is — commonly 0, 6, or 18 decimal places.
- Token Image. The token logo or brand graphic, uploaded as a PNG, JPG, or SVG.
Parameters Set by the Platform
- Token Standard: ERC-20. The base technical standard governing token operations. Set by the platform as the system default.
- Token Protocol: STV3. Stobox’s programmable security-token architecture, built on the Diamond Standard (EIP-2535). It is upgradeable and enforces compliance at the transfer layer, so eligibility and transfer restrictions are checked on every movement of the token. Gene Deyev is a co-author of the STV3 protocol. STV3 also aligns with ERC-7943 (uRWA), the open standard for compliant real-world-asset issuance that Stobox backs. Set by the platform as the system default.
- Token Network. The blockchain network where the token is deployed. Stobox issues security tokens primarily on Base (the primary settlement layer), with Arbitrum and Canton also supported; Compass Lite raises run on Arbitrum One today. Because Base is OP-stack and portable, no single chain is a hard point of failure. Deployed contracts are viewable on the relevant explorer (Basescan for Base, Arbiscan for Arbitrum).
Important Notes
- Most parameters are immutable, so data is permanently recorded in the deployed smart contract.
- Always align the token’s technical parameters with your business model, jurisdiction, and rights logic before submission.
What You Carry Into the Next Phase
You now have a fully specified token — type, subtype, yield, rights, supply, price, and on-chain parameters — that says exactly what your offering promises and enforces it at the transfer layer. In the next phase you build the issuing framework around it: the offering structure, investor eligibility and DID-based onboarding, and the compliance rules the STV3 contract will apply to every transfer.