Interviews
Aaron Kaplan, CEO of Prometheum – Interview Series
Prior to Prometheum you were the Founder of EquityArcade, a platform that enabled consumers to buy shares in video game startups. Can you let us know how your experience at EquityArcade transitioned over to Prometheum?
EquityArcade was a Reg CF equity crowdfunding platform that allowed consumers (investors) to invest in the future revenue generated from indie game funded on the platform. Reg CF is part of the JOBS Act, which also contains the Reg A+ crowdfunding rules. Prometheum uses Reg A+ as a means to allow the general public to invest in blockchain securities. All JOBS Act regulations relate to online equity crowdfunding. As a result, we have been able to leverage many of the experiences and lessons from EquityArcade in building Prometheum’s Reg A+ offering platform.
Prometheum enables companies to raise capital by offering their own Smart Security Tokens (SSTs). Can you share with us how SSTs differentiate themselves from other industry standards such as STOs (Security Token Offerings) or DSOs (Digital Security Offerings)?
SSTs, STOs and DSOs are all different protocols that are attempting to solve the same problem. Until there’s complete regulatory clarity around certain critical components – including custody – of the blockchain securities ecosystem, it’s not possible to conclude which protocol provides the best foundation.
What’s the process for a company to launch an SST?
An issuer looking to issue a SST will submit an application for an offering to Prometheum. At that point, the issuer will submit all relevant documents that will allow Prometheum to conduct the requisite due diligence in order to determine whether the company is qualified to issue an SST. Upon passing the due diligence process, the issuer will complete the Reg A+ offering circular and submit that document to the SEC for qualification. Once qualified by the SEC, the offering will be listed on Prometheum’s offering platform and begin their capital formation activities. When the stated amount of capital is raised, there will be a closing and distribution of the SST into the investors’ Prometheum brokerage account. Upon distribution of an SST, Prometheum’s issuance platform coordinates the multi-signature, multi-stage process that is used to place investors’ SSTs in either their Master or Personal Wallet. Once the distribution occurs, Prometheum will list the SST on our retail based (i.e. open to all investors) Alternative Trading System (ATS), and secondary market trading will begin in the issuer’s SST.
What type of fees should companies expect from launching an SST and hosting it on your platform?
Our goal is to allow companies to raise up to $50m in the most efficient way possible: faster, less expensive, and easier than any other legal capital raising method. In terms of direct fees, we plan on charging issuers a small percentage of the total amount they raise (1-3% dependent on the total raised). Once a token has been distributed and is trading on the ATS, companies are charged a quarterly membership fee of $2,500 for maintaining their order book.
Indirect fees not charged by Prometheum can vary and are related to legal and prep for the creation of the Reg A documents, accounting, auditing, marketing, and other possible professional services.
SST will be Reg A+ issued. For investors who are not familiar with this legislation and what does it mean? Could you explain the benefits?
Regulation A+ allows issuers to raise up to $50 million from the general public annually, and such securities, when issued, are freely tradeable on a secondary market. Reg A+ is really the perfect regulation for issuing blockchain securities as it meets the spirit that was initially conceived by the crypto community- it allows the general public to invest, and the asset is freely tradeable upon distribution but in a regulated manner (unlike many historical token investments).
Tokens that are created on your platform will then be tradeable on a custom ATS (Alternative Trading System). Could you elaborate on how your ATS will operate?
On the surface, the ATS operates just like a traditional equities electronic market. Every token has as order book representing supply and demand for that token – bids (what buyers are willing to pay, and the number of tokens they want) and asks (offers to sell, or what sellers are willing to sell for, and the number of tokens they want to sell). This order book is managed by the matching engine which uses an algorithm to arrange the bids and asks into a price, upon the price quote the engine then utilizes time priority, and ultimately “matches” buyers and sellers when they meet at the same price. There is an online trading platform, similar to Etrade or Schwabb, which allows traders and investors to see the order book, look at charts, enter orders and see their account status and previous transactions. Through the use of omnibus accounts, other broker-dealers will be able to offer their customers access to SSTs. Our ATS intends to operate 2 sessions everyday, both 11 ½ hours long with two 30 minute breaks for settlement. When there is an executed trade, meaning an order between a buyer and seller is matched, the trade is written to the blockchain, as well as recorded to a database to ensure compliance with traditional record keeping.
Are SST tokens launched on your platform tradeable on regular security token trading exchanges such as OpenFinance and tZERO?
SSTs are compatible with Prometheum’s ATS and work as both securities and utility tokens in the Prometheum ecosystem. It may be possible for SST issuers to create a bridge to other exchanges or blockchains by building smart contracts on the Prometheum Utility Blockchain. As the equivalent of a national market system for digital assets develops it will likely be necessary for digital assets to have the ability to trade across security token exchanges and alternative trading systems.
What are Ember (MBR) tokens and what role do they play in this project?
The Ember SST fuels all SST transactions and allows holders to provide services at the protocol and application layers. Prometheum’s Ember token has both profit-making utility (work/access) and proprietary payment currency features. Ember provides the fuel for the Prometheum blockchain Network and demonstrates the versatility and value provided by a modern approach to using securities to transfer value in a decentralized, blockchain based environment. Ember is the first SST issued on the Prometheum Blockchain and sets the legal and technical precedent for further SSTs.
It seems like you are building everything from scratch, why not use an existing blockchain?
The Prometheum blockchain is required in order to ensure that regulatory requirements are met while also providing a viable method for the use of blockchain securities as utility tokens. This includes direct interaction with distributed applications as well as processes for moving blockchain securities in and out of brokerage accounts when a user wishes to trade them on the Prometheum ATS.
Is there anything else that you would like to tell us about Prometheum?
Prometheum is creating the market infrastructure needed for digital assets to go mainstream. When the SEC essentially declared that tokens were securities in the 2017 DAO report, such infrastructure didn’t exist, which meant that there were no compliant facilities for the issuance, trading, clearing, settlement and custody of token securities. Prometheum sought to fill that void and is creating the infrastructure that will allow the general public to invest and trade in digital assets, while also providing mechanisms for clearance, settlement and custody after trades are made. The Prometheum Network is meant to allow the general public to participate, which is required in order for digital assets to go from a new asset class to a mainstream asset class.
