Code and text that may not match
Many blockchain arrangements pair a smart contract that executes automatically with a written agreement that describes the deal in words. A blockchain agreement should say which one controls when they differ and who can upgrade or pause the code. It should also say how a bug or an exploit will be handled, and who bears the loss. Governing law and forum clauses matter more than usual, because participants are often spread across countries and some may be pseudonymous. Arbitration is common, though enforcing an award against a party you cannot identify is a practical problem. The agreement should also cover what happens if a network or token stops functioning or splits through a fork.
Regulatory questions that shape the terms
Whether a particular token is a security, a commodity, or something else has been the subject of shifting positions at the SEC and CFTC, new legislation, and litigation, so the current state should be checked for each deal. Pre-launch token financing documents have drawn particular scrutiny. In New York, the Department of Financial Services requires a BitLicense or a limited purpose trust charter for many virtual currency business activities involving New York or its residents. Anti-money laundering and sanctions obligations can apply as well, including screening of counterparties and wallet addresses. Contracts usually allocate who is responsible for compliance and what happens if a regulator objects.
Development, services, and ownership
When you pay a team to write code, ownership of that code should be addressed expressly, along with the open-source components it uses, since some open-source licenses require derivative code to be shared on the same terms. Milestones tied to deployment, review by an independent security auditor, and responsibility for vulnerabilities found later are frequent negotiation points. Token allocations to developers or advisers raise tax and securities questions that should be settled before tokens are issued. We start by understanding how the project works technically, which jurisdictions are involved, and what each party expects to hold at the end. The first review usually identifies the terms that need rewriting before anything is deployed.
