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Overview

1st operates through a streamlined commodity forward structure using Token Delivery Commitments (TDCs). This framework creates legally enforceable forward contracts while maintaining operational simplicity and regulatory compliance. The Token Delivery Commitment is a commodity forward contract that requires mandatory physical delivery of digital tokens.

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What We Tokenize

1st tokenizes contractual delivery rights, not underlying investments. What Gets Tokenized (✅):
  • Contractual delivery obligations created by the TDC
  • Legal enforcement rights against the VC
  • Proportional claims to future token delivery
  • Forward contract positions with mandatory physical settlement
What Does NOT Get Tokenized (❌):
  • The underlying SAFT or investment allocation
  • Ownership stakes in the original project
  • The VC’s business or investment decisions
  • Any securities or investment contracts
The Key Distinction: When a VC signs a Token Delivery Commitment, they create a new legal asset - the “delivery right.” MirrorTokens represent fractional ownership of these delivery rights, not the original investment.

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How It Works

VC Fund → Signs TDC → References → Smart Contract Address
                                         ↓
1st → Deploys → Smart Contract System
                                         ↓
                        Mints → MirrorTokens → Represents → Forward Contract Rights
                                         ↓
                        Delivers Tokens → MirrorToken Holders ← Enforceable by
                                         ↓
                                    Withdraw

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Step-by-Step Process

1. VC Signs Token Delivery Commitment
  • Creates binding legal obligation to deliver specific tokens
  • Specifies delivery schedule, quantities, and smart contract address
  • No counterparty signature required - unilateral commitment
2. 1st Deploys Infrastructure
  • Deploys immutable smart contracts for token settlement
  • Mints MirrorTokens representing fractional forward positions
  • Publishes documentation linking MirrorTokens to TDC
3. Market Trading Begins
  • MirrorTokens trade on decentralized exchanges
  • Each MirrorToken represents proportional rights under the TDC
  • Market pricing reflects forward contract value and delivery expectations
4. Physical Delivery Process
  • VC delivers tokens directly to smart contract address per TDC schedule
  • Smart contract automatically updates available balances
  • MirrorToken holders can withdraw proportional token amounts
5. Enforcement Mechanism
  • If VC fails to deliver, MirrorToken holders can sue for specific performance
  • Direct legal relationship between VC and MirrorToken holders
  • 1st has no liability for delivery performance
Commodity Forward Classification Token Delivery Commitments qualify as commodity forward contracts under CFTC regulations, providing clear regulatory treatment and avoiding SEC securities jurisdiction. Essential Elements Present:
  • Physical Settlement Mandate: Only actual token delivery satisfies commitment
  • Commodity Subject Matter: Digital tokens established as commodities under law
  • Forward Contract Terms: Future delivery at predetermined schedule and quantities
  • No Cash Settlement: Cannot be satisfied with cash payments or offsets

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Regulatory Benefits

CFTC Jurisdiction (Not SEC):
  • Commodity forwards fall under CFTC authority, not SEC securities regulation
  • Physical settlement provides exemptions from complex swap dealer rules
  • Established legal framework with decades of precedent
Securities Law Avoidance:
  • Forward contracts for commodity delivery are not securities
  • No investment contract characteristics under Howey test
  • Direct commodity delivery rights, not profit expectations from enterprise

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Enforceability Structure

Direct Legal Relationships:
  • VC has binding delivery obligation under contract law
  • MirrorToken holders have direct enforcement rights against VC
  • No intermediary dependencies or third-party performance requirements
Specific Performance Available:
  • MirrorToken holders can seek court orders requiring actual token delivery
  • Monetary damages inadequate for commodity delivery failures
  • Standard commodity forward remedies apply

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MirrorToken Mechanics

Token Rights and Characteristics MirrorTokens represent fractional interests in the underlying Token Delivery Commitment. They are NOT utility tokens or investment securities, but rather tokenized positions in commodity forward contracts. Core Properties:
  • Proportional Delivery Rights: Each MirrorToken represents fixed fraction of total delivery commitment
  • Direct Enforcement Rights: MirrorToken holders can legally enforce TDC against VC
  • Transferable Positions: Forward contract rights can be traded on secondary markets
  • Physical Settlement Only: Rights satisfied only through actual token delivery
Not Included:
  • No voting rights in any protocol or organization
  • No dividend, yield, or profit-sharing entitlements
  • No management or governance participation
  • No dependency on 1st performance

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Settlement Mechanics

Withdrawal Process:
  • MirrorToken holder calls withdrawal function on smart contract
  • Contract calculates proportional entitlement based on delivered tokens
  • Proportional token amount transferred automatically to holder
  • MirrorToken remains valid - no burning required for withdrawal
Proportional Distribution:
  • Available tokens distributed proportionally among all MirrorToken holders
  • If 100,000 tokens delivered and 1,000,000 MirrorTokens outstanding, each MirrorToken can claim 0.1 tokens
  • Withdrawal calculations performed automatically by smart contract
  • No human intervention or discretionary allocation decisions

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Implementation Guide

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For Venture Capital Funds

Pre-Signing Requirements:
  • Verify legal ownership of tokens subject to delivery commitment
  • Confirm SAFT or allocation agreement permits transfer/delivery
  • Obtain legal review of TDC terms and enforceability
  • Ensure adequate capitalization for delivery obligations
Execution Process:
  • Complete TDC template with specific terms and delivery schedule
  • Execute document with proper corporate authorization
  • Coordinate with the 1st Team for smart contract deployment
  • Monitor delivery schedule and maintain token availability
VCs should treat TDCs as binding forward contracts with real delivery obligations. Failure to deliver exposes VCs to specific performance lawsuits and cover damages from MirrorToken holders. Ongoing Obligations:
  • Deliver tokens according to committed schedule
  • Maintain clear title to tokens pending delivery
  • Coordinate with smart contract system for delivery confirmation
  • Respond to any enforcement actions promptly

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For MirrorToken Holders

Understanding Your Rights:
  • MirrorTokens provide contractual rights to token delivery, not ownership of underlying business
  • Rights enforceable directly against VC through legal system
  • No dependency on 1st for delivery performance
  • Proportional sharing of delivered tokens with other MirrorToken holders
Risk Considerations:
  • Delivery Risk: VC may fail to deliver tokens as committed
  • Smart Contract Risk: Technical bugs could affect withdrawal functionality
  • Market Risk: MirrorToken values may fluctuate based on delivery expectations and underlying token performance
  • Legal Risk: Enforcement may require legal action against defaulting VCs
Withdrawal Process:
  • Monitor smart contract for delivered token balances
  • Call withdrawal functions when tokens become available
  • Verify proportional entitlement calculations
  • No time limits on withdrawal - tokens remain available until claimed

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Smart Contract Integration

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Contract Architecture

Immutable Settlement System:
  • Smart contracts deployed with predetermined logic for token settlement
  • No administrative functions or upgrade mechanisms
  • Automatic proportional distribution based on MirrorToken ownership
  • Direct integration with Token Delivery Commitment terms
Security Features:
  • All source code publicly auditable and verified
  • Multi-signature deployment procedures for additional security
  • Formal verification of critical mathematical functions
  • Bug bounty programs and comprehensive testing

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Technical Specifications

Supported Standards:
  • ERC-20 compliant MirrorTokens for maximum compatibility
  • Standard Ethereum/compatible blockchain integration
  • Support for tokens with various decimal precision standards
  • Gas-optimized withdrawal and distribution functions
Integration Requirements:
  • Smart contract addresses must be specified in TDC documentation
  • MirrorToken contracts reference specific TDC commitments
  • Delivery confirmation through blockchain transaction verification
  • Merkle tree systems for efficient balance tracking and verification

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Governance and Management

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The 1st Role

1st serves purely as technical infrastructure provider with no ongoing management role in forward contract performance or MirrorToken holder relationships. Limited Responsibilities:
  • Deploy and maintain smart contract infrastructure
  • Mint MirrorTokens representing TDC forward positions
  • Publish documentation linking MirrorTokens to underlying TDCs
  • Provide technical support for smart contract interfaces
Explicitly Not Responsible For:
  • VC delivery performance or compliance with TDCs
  • MirrorToken pricing or market-making activities
  • Dispute resolution between VCs and MirrorToken holders
  • Investment advice or forward contract recommendations

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Dispute Resolution

Primary Enforcement:
  • MirrorToken holders enforce TDCs directly against VCs through legal system
  • Specific performance lawsuits for delivery failures
  • Cover damages for replacement token purchases
  • Standard commercial contract remedies available
1st Non-Involvement:
  • No mediation or dispute resolution role
  • No liability for VC delivery failures
  • No obligation to MirrorToken holders beyond technical infrastructure
  • Pure service provider relationship with all parties

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Risk Disclosures

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Primary Risks

Delivery Risk: VCs may fail to deliver committed tokens according to schedule. This is the primary risk for MirrorToken holders and must be evaluated based on each VC’s creditworthiness and track record. VC Counterparty Risk:
  • VCs may become insolvent or unable to deliver tokens
  • Legal enforcement may be time-consuming and expensive
  • Recovery may be limited to VC assets and insurance coverage
  • Due diligence on VC financial strength recommended
Smart Contract Risk:
  • Technical bugs could affect withdrawal or distribution functionality
  • Blockchain network issues may impact token delivery or withdrawal
  • Smart contract immutability means bugs cannot be easily corrected
  • Comprehensive auditing and testing mitigate but do not eliminate technical risks
Market Risk:
  • MirrorToken values may fluctuate based on underlying token performance and delivery expectations
  • Secondary market liquidity may be limited for some MirrorToken positions
  • Time decay and delivery probability affect forward contract pricing
  • No guarantee MirrorToken values will correlate perfectly with underlying token values

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Regulatory Risk

Classification Changes:
  • Regulatory interpretation of tokenized forwards may evolve
  • Changes in commodity forward treatment could affect legal status
  • International regulatory developments may impact cross-border trading
  • Legal opinions reflect current law and interpretation
Compliance Requirements:
  • Large MirrorToken holders may face reporting or registration requirements
  • Tax treatment of forward positions may be complex
  • Anti-money laundering and know-your-customer rules may apply to large transactions
  • Consult qualified legal and tax professionals for specific situations

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Conclusion

The Token Delivery Commitment framework provides a legally robust and operationally efficient structure for creating liquid markets in illiquid token allocations. By utilizing established commodity forward principles with modern blockchain technology, the system delivers:
  • Clear Legal Framework: Commodity forward classification with established precedent
  • Operational Simplicity: Streamlined documentation and automated settlement
  • Direct Relationships: No unnecessary intermediaries or complex arrangements
  • Regulatory Compliance: CFTC commodity treatment avoiding SEC securities issues
The framework represents a significant advancement in DeFi infrastructure by bridging traditional commodity trading principles with tokenized digital assets, creating new opportunities for both institutional and retail market participants.
This documentation describes the legal and technical framework for Token Delivery Commitments. It is provided for informational purposes only and does not constitute legal, investment, or tax advice. Prospective participants should consult qualified professionals before engaging with the protocol.