Clear DefinitionsDigital Equity
1 min read
Pronunciation
[di-ji-tl ek-wi-tee]
Analogy
Like owning shares of a company, but instead of paper certificates you hold digital tokens in your wallet that automatically distribute dividends.
Definition
An ownership stake in a company or project represented by tokens on a blockchain, conferring rights such as dividends, voting, or profit share. Digital equity instruments mirror traditional shares but with enhanced liquidity and programmability.
Key Points Intro
Digital equity brings corporate ownership rights onto programmable ledgers.
Key Points
Governance rights: Token holders vote on proposals.
Dividend distribution: Automated via smart contract payouts.
Transferability: Peer‑to‑peer trading without intermediaries.
Compliance: Embedded KYC/AML and transfer restrictions.
Example
A startup issues digital equity tokens on a regulated blockchain; token holders receive quarterly profit distributions and vote on strategic decisions.
Technical Deep Dive
Equity tokens implement an ERC‑1400 security token standard with partitioned balances, `issueByPartition()`, and `redeem()` functions. Compliance hooks check KYC status before transfers.
Security Warning
Incorrect compliance logic can allow unauthorized transfers or freeze legitimate trades.
Caveat
Secondary market liquidity may be limited by regulatory restrictions.
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