Revenue-Sharing Tokens

Revenue-sharing tokens confer their owners a right to a portion of revenues or fees generated on or by the host platform. This could refer to on-chain transactions—whenever the network performs an action, a small fee is extracted and ultimately distributed to token holders. It could also refer to off-chain transactions, related to a specific initiative or specific product. Such revenues can be distributed on-chain periodically, akin to on-chain dividends, or through a mechanism called buy-and-burn in which the proceeds are used to remove tokens from circulating supply to increase the perceived value of remaining tokens. While some tokens with revenue-sharing functions are thought by legal experts to be classified as securities via regulators, the term revenue-sharing token, unlike security token, is neutral on the legal question of whether the described token will be so classified.

Revenue-sharing tokens are best thought of as exotic investment instruments. This is likely one of the most divisive token designs in the community. They resemble company equity, which give holders rights to a portion of company earnings, but do not currently have a legal infrastructure and set of protections. However, if fees are collected on-chain, this method of collection and distribution can be seamlessly implemented and audited. In addition, there are novel use cases for such a token, such as financing individual projects or initiatives rather than having equity tied to an entire enterprise. Further compartmentalization of initiatives or federalization of organizations into multiple, more narrowly defined, projects could encourage a market for more specific technical projects, which can be supported by any prospective token holder who could serve as both a user and a beneficiary, somewhat like cooperatives.