What is Leondrino?
Leondrino are digital currencies of enterprises which follow the Leondrino standard. Leondrino combine the benefits of money supply control comparable to central banks and the technological advantages of digital currencies based on distributed ledger technology (DLT) while avoiding the disadvantages as much as possible. Leondrino are backed by the obligation of the related enterprise to accept Leondrino of its brand in exchange for products and services of the brand.
Leondrino are designed as stable currencies: The money supply of each branded currency will be based on the unique and fixed token design rules for the initial phase until introduction into public trade and long-term on the monetary policy that is agreed to with the brand and clearly communicated to all participants of the currency area.
The implementation of the token design rules and the long-term currency policy is governed by the binding guidelines for the currency management of the respective Leondrino licensee. For digital enterprise currencies in the advanced life cycle, whose supply is actively managed via the Leondrino algorithm after entering public trade, a monetary board must be determined in accordance with the Leondrino guideline, the composition of which is also regulated by the guideline to ensure a balanced representation of interests.
This board is responsible for long-term strategic currency issues and response to crises and extraordinary events. These measures are intended to create currencies that have accepted volatility and that can be used globally for products under one brand roof.
Leondrino is a standard for digital currencies of enterprises which includes rules regarding its lifecycle, its token design, its governance, legal and tax interpretations. Moreover, Leondrino offers APIs to several services of its platform. Leondrino plans to join at least one of the widely accepted standard setting organisations around tokenisation and currently analyses several initiatives in this field.
Are sovereigns giving up the monetary policy monopoly?
The increased popularity and new technologies for data storage and transmission (including that of digital money) give rise to decentralized infrastructures for payments, money transfers, and money storage with transaction costs close to zero. Cryptocurrencies, such as Bitcoin, are part of these new technologies.
Cryptocurrencies, as digital payment vehicles, apply cryptographic principles to achieve a well distributed, decentral and safe payment ecosystem.
These new technologies lead to an increased acceptance by individuals of non-sovereign currencies, especially also in countries with limited international money flows or high inflation, as South America, for example. To avoid the loss of control over parts of the financial system and to secure employment, some governments have already drafted legislation to enable the issuance of private currencies in their respective country. These new, digital currencies are viewed as a complement to the exiting monetary system. This development both softens the state monopoly for monetary policy and allows a regulation of new currency issuers.
Leondrino Currencies -same as fiat currencies of sovereign central banks- are subject to lifecycle management. The standard lifecycle of a Leondrino Currency includes certain phases and events that are the same for all Leondrino Currencies, but may vary in duration and time depending on the performance of the associated brand.
Brief Overview and Chronology of Standard Leondrino Lifecycle
- Stealth Phase
- Initial Consumer Engagement
- Initial Token Offering (ITO)
- Vision Factor Event
- Early Bird Factor Event
- Momentum Factor Event
- Initial Coin Offering (ICO)
- Seed Circular Economy
- Growth Circular Economy
- Initial Public Leondrino Offering (ILO)
- Post ILO Phase
- Sustainable Circular Economy
The Phases and Events in Detail
The first phase, called Stealth Phase, is used as a market test phase. Early adopters can express their interest in a branded currency of their favorite brands by setting up an account related to the desired brand in their Leondrino Wallet. Tokens of that phase belong to Token Class E and are not covered neither by the brand nor by Leondrino Exchange and the distribution of such tokens is limited per user.
The second phase, called Initial Consumer Engagement Phase, is used to get consumers initially engaged with the brand’s intention of its future branded currency. During that phase, brands distribute a limited number of Leondrino Tokens to its loyal users as an incentive. Leondrino Tokens are only backed by contractual promise of the associated brand for future benefits dependent on loyal behavior of its owners. There are no other securities and trade is still not possible. But with the sales start, the Initial Token Offering (ITO), consumers can buy a limited number of Leondrino Tokens and benefit from special marketing events during the Initial Consumer Engagement Phase where consumers are rewarded for the initial contribution to the success of the brand. Because early contribution does have more value than later contribution, the factor value will decline over time.
The third phase is called Seed Circular Economy. It starts with the Initial Coin Offering (ICO), where Leondrino Tokens switch into Leondrino Coins. This phase is characterized by the fact that restricted trade within Leondrino Exchange’s ecosystem (LEX ecosystem) is now possible. Buying branded coins using national currencies is allowed, but limited in volume per user and volume per transaction. Depending on the owned volume per person, KYC rules will be applied and enforced. Leondrino Coins can be used to purchase initial goods and services of the associated brand based on a restricted catalog of the brand.
The Growth Circular Economy is the fourth phase and differs from the previous phase mainly because the volume limit hold by one owner goes up and trade limits will be reduced. Leondrino Coins are exchangeable for national currencies based on the exchange rate within the LEX ecosystem (internal and accredited external exchanges) but trade is still restricted. Leondrino Coins can be used to purchase a widened offering of goods and services of the associated brand.
With the Initial Public Leondrino Offering (ILO), that is procedurally comparable to a traditional Initial Public Offering (IPO) on a stock exchange, the fifth phase, called Post ILO Phase, starts. This phase is characterized by the fact that the present Leondrino Coins switch into the Leondrino Currency that can now publicly be traded. The money supply of the Leondrino Currency is actively managed by the LEX Algorithm and the monetary board of that specific branded currency following the predefined monetary policy agreed between Leondrino Exchange and the brand. The Leondrino Currency is exchangeable with national currencies based on a market based exchange rate and can be used to purchase all products, goods and services of the associated brand.
During the Post ILO phase, there are still some restriction regarding volume of transactions for big investors (e.g. rules for market makers) and an extra degree of intervention opportunities for Leondrino Exchange than during the next phase. Those rules are necessary to give the management of the currency supply the tools to avoid extreme volatility.
The last phase is the steady state of a public traded Leondrino Currency with an active supply management and is called Sustainable Circular Economy. Now high regulated institutional investors like insurance companies and pension funds can join.
An Exit or a Delisting can happen for the following reasons: If a brand ceases to exist (see also article: What happens if a brand that previously issued Leondrino ceases to exist?) or because of low performance of the currency (valuation and transaction volume) over a defined period of time.
What is an ITO in the context of Leondrino?
An Initial Token Offering (ITO) is the Token Sale start of Leondrino tokens of token class D.
The purchase of such Leondrino tokens is always a bet on the future and is limited in volume per user and transaction; namely at 100.00 Euro per transaction and 1,000.00 Euro per month, and therefore does not fall under a regulation of financial services.
With the start of an ITO, Class D tokens combine the right to purchase certain products or services of the brand company in exchange for the branded tokens or, should that happen, to convert the Class D tokens one-to-one into Class C tokens.
Tokens of the token class D are neither transferable nor tradable and cannot be returned to the issuing brand company in exchange for a payment of national currencies.
What is an ICO in the context of Leondrino?
An Initial Coin Offering (ICO) in the context of Leondrino is the introduction of token class C. It means Leondrino tokens switch from token class D to token class C and from now on are called Leondrino Coins.
During this phase, the token price (price per coin) is determined by the brand company in consultation with Leondrino, and may be raised several times during this phase, based on pre-defined parameters communicated to the buyers, to bring the tokens at an adequate price level in coordination with the development of the degree of use of the coins for purchases of goods and services of the associated brand.
What is an ILO?
An Initial Public Leondrino Offering (ILO) is the start of public trading of a brand’s Leondrino currency. Additional issuances of Leondrino will be called Follow-On Leondrino Offerings (FOLO).
From now on, tokens of token class A (the highest token class in the Leondrino Lifecycle) can be traded publicly as fully tradable currencies at authorized public exchanges.
Token Classes of the Leondrino Lifecycle
All branded Leondrino Currencies are classified with a Token Class within the Leondrino Lifecycle. The token classes range from Token Class E (higly speculative; limited functionality) to Token Class A (low risk; fully public tradable alternative asset).
Here is a brief overview and chronology of the Leondrino Token Classes:
Class E tokens are tokens our Leondrino Wallet users have shown interest in, but the associated brand has not made a decision on whether or not to bring its own digital currency to market.
Now it’s up to you! Select the right brands and create appropriate token accounts by adding the branded token to your Leondrino Wallet! This will give you the chance to get Airdrops (gifted tokens) and strengthen the Trust Ranking of this brand.
The switch of a token into the next higher token class, namely into token class D, takes place as soon as the associated brand company has decided to issue its own brand currency as Leondrino and signed a related contract with one of the Leondrino licensees such as Leondra GmbH.
You cannot buy tokens of token class E. BUT – you can earn them as follows:
- Receive an initial Airdrop for each token you add to your Leondrino Wallet, meaning, open an account. Please note that you can add initially a maximum of 10 tokens to your wallet. This restriction will gradually be lifted, depending on how intensively you use your Leondrino Wallet.
- Invite friends to create a Leondrino Wallet as well and get Bonus Leondrino for each successfully invited friend. You can convert these Bonus Leondrino into tokens of your favorite brands at any time. The more friends you invite, the more Bonus Leondrino you can earn. For each successfully invited friend you will receive 2 bonus Leondrino. For every 5 successfully invited friends you can add another branded token to your Leondrino Wallet.
- Your favorite brand or the desired token is not listed yet?
Then get active and team up with like-minded people and suggest it to us. The more users suggest the same brand to us, the more likely it is that the brand will be listed with their token and the branded currency will become available. As soon as a brand suggested by you is listed with its token in the Leondrino Wallet, you will be informed and you can add this token to your wallet.
Tokens of token class E are neither transferable to other individuals or companies nor tradable. You can not resell them or buy any goods and services of the associated brand.
But you can express your interest in this branded currency and you acquire the right to exchange your token class E tokens one to one into token class D tokens if the brand company decides to issue its own branded currency and the token reaches token class D.
Once a brand company seriously considers issuing its own currency and initiates a market test phase, tokens of token class E will switch into token class D. During this testing phase, you can actively support the brand company in communicating and planning to launch its branded currency and receive further tokens as Airdrops, for example, by taking part in surveys and marketing campaigns.
Tokens of token class D are neither transferable to another individual or company nor tradable, but may be exchanged for Class C tokens if this token class is reached.
Tokens that you purchased during an ITO or earned as an Airdrop cannot be sold, but used exclusively to purchase the goods and services of the associated brand.
Tokens of token class C are eligible for restrictive trade. Restrictive trade means that you have the following trading limits due to regulatory restrictions.
The maximum amount per transaction must not exceed an amount of 250,- Euro and the volume per month is limited to 10 000,- Euro per user.
With the start of the restrictive trade, tokens that you previously purchased during an ITO or ICO can be sold only once to other Leondrino Wallet users by placing a sell order. Please note that you cannot offer your tokens below the ICO token price.
You can purchase tokens of token class C from other users through a buy order, but you can use them exclusively to purchase the goods and services of the associated brand. Reselling of tokens you purchased through a buy order is not supported for token class C tokens. This restriction will be lifted with the subsequent switch to a higher token class.
Class B tokens (like class C tokens) may be exchanged for goods and services of the respective brand company, but with an expanded range of goods and services.
Likewise, this token class can already be used for a restricted trade on the authorized exchanges. This means that you can sell tokens that you have previously purchased during an ITO or ICO or received as an Airdrop, to other Leondrino Wallet users by placing a sell order.
You can buy Token Class B tokens from other users by placing a buy order. Please note that reselling of the tokens purchased in the token class B via a buy order is only possible to a limited extent.
These restrictions are mandated by the responsible regulator and must not be disregarded.
Additionally, token class B tokens include the right to exchange them for tokens of token class A, as long as the token reaches token class A.
Token class A is the highest token class in the Leondrino Lifecycle a digital branded currency can reach .
Tokens of this token class are fully tradable assets that can be publicly traded at all authorized exchanges (see Foreign Exchange Trading) and can be used for purchases of the entire range of products and / or services of the associated brand company as well as in all locations and shops accepting this branded currency as payment method.
Potential temporary restrictions on the tradability of token class A, such as trading slowdown or resizing of the volume per transaction, are only to be expected if trading activity is disrupted by extraordinary events (suspicious activities). Such activities are monitored by the Monetary Board of the respective branded currency and actions are taken only in extreme cases.
In addition to the Leondrino Lifecycle based on Token Classes, the Leondrino standard also contains templates and a rule book for the token design. Those templates and rules can be adjusted in meaningful boundaries based on the business data of the brand, the legal environment of users and the legal environment of the Leondrino licensee. Rule enforcements and monitoring of it are implemented on different layers of the Leondrino platform in order to differentiate between immutable and mutable rules.
1. Basic Settings
Besides definitions of the token name and token symbol, the token design contains the price fixes during the initial rollout phases before the introduction into the public trade (e.g. price for token at end of ITO phase), maximum authorization of token supply and issuance rules which are related to the business data of the underlying brand including its most likely business plan scenarios. Moreover and amongst other key parameters, it contains definitions of limits of token purchases per consumer and per investor related to the different token to ensure the targeted distribution of tokens during the initial rollout and to avoid a concentration of token in only a few hands. In case a brand wants to defer an actively managed elastic supply based on algorithms and potential interference via a monetary board (we call it “active supply management”) to a later stage, it also contains the “passive supply rules”. “Passive supply rules” define the rules of potential volume increase based on simple parameters. They will be implemented as part of a smart contract and are only used for fast growing brands during the growth phase after ILO.
2. Budget Definition and Budget Allocation
Important parts of the token design are the definition of the token budgets and the allocation of the authorized tokens to the token budgets. Based on experience and best practices, the Leondrino standard contains a standard template for the budget structure grouped by budgets for token sales and budgets for special target groups. The first group of budgets are used to raise money, the second group serves the growth and value of the ecosystem, secures early supporters and key employees. This standard includes rule suggestions around usage of the budgets such as vesting, lock-up periods, etc. and supports a compromise between all critical stakeholders of a company.
3. Timing and Discounts
In order to reduce complexity and to speed up decision making of enterprises and investors, the token design standard of Leondrino also contains templates regarding discount schemes for the different rollout phases, definitions around standard airdrops and other standard marketing events.
At Leondrino, we believe that a good governance around currency management can be achieved through a smart combination of organisational and new technological means. Through this combination, the innovation of trust-less protocols and decentralisation as far as scalable and environmental sustainable, can be exploited already today.
The following points influence the level of trust in an enterprise currency and have been considered for the governance architecture of Leondrino:
- Strength of enterprise and its brand
- Monetary policy and its execution
- Monetary board – independence and quality of members and rules of appointment of members
- Independence and volume of reserves for active money supply
- Regulation in legal sphere of operation
- Government efficiency to secure contractual compliance between “private central bank” and enterprise
- Technology, esp. blockchain technology
- How technology is used together with others (especially rule setting in the early phase of consortium building and before reaching a phase of a fully decentralised trustless network)
Besides (i) selection of appropriate legal spheres and partners for Leondrino licensees, (ii) selection of strong brands of enterprises or fast growing companies, (iii) selection of the best possible technology and operations model for the next years, the Leondrino MainContract that is signed with a Leondrino licensee and an enterprise plays a key role to secure highly trusted governance.
- Decisions regarding long-term monetary policy and key products and services of the underlying basket for the later elastic supply management
- Decisions regarding parameters of the token design and lifecycle
- Obligation to accept the branded Leondrino for products and services of the brand
- Statute of Leondrino
The bylaw of Leondrino contains the goal and duties of the responsible Leondrino licensee regarding the management of Leondrino currencies. Moreover, it contains rules regarding the monetary board including how to appoint new members to ensure its independence. Comparable to bylaws of public central banks, it also includes rules regarding reporting, reserve management und instruments that are allowed as market maker in critical circumstances. Following the lifecycle concept of Leondrino, it also contains rules of listings and delistings and the allowance to issue and manage its own bridge and reserve currency.
Technical Specifications and APIs
The initial phase of building the Leondrino platform was driven by our vision and concrete customer projects. Based on feedback of those real customers situations and user interactions, we adapted APIs , e.g. the Leondrino Payment interface or the KYC services interface, and other technical specifications. So far, we have been sharing those specifications with our customers and project partners only. We are entering a phase of maturity of the platform development where we will publish our APIs and other technical specifications step by step. With the current rise of organisations to develop standards around tokenization, we can contribute and cooperate to support a seamless integration of payments and exchange of competing branded currencies.
Legal and Tax Related Issues
Leondrino are divided into 5 Token Classes. Based on the rules and definitions for token classes E, D and C, those token classes do not fall under legislation for financial instruments or the term “virtual money” or “e-money” in most of the legal spheres that have been considered so far. Nevertheless, there are still different interpretations how to handle tokens of those token classes from a legal and tax point of few. Based on customer feedback and discussions with tax lawyers, auditors and tax authorities, Leondrino is working on standard guidelines and accounting examples for Leondrino of different token classes to be used by its customers and acceptance points of Leondrino.
The long-term goal of Leondrino is the full acceptance of Leondrino’s token class A as private money without VAT. Markets with jurisdictions in which the likelihood of such a classification is extremely likely are particularly interesting for the establishment of a Leondrino licensee.