> ## Documentation Index
> Fetch the complete documentation index at: https://docs.echo.xyz/llms.txt
> Use this file to discover all available pages before exploring further.

# Key Concepts

> Essential concepts for understanding how Sonar works and implementing successful integrations.

## Core Components

Sonar connects three key concepts to enable compliant token sales:

<CardGroup cols={3}>
  <Card title="Entity" icon="building">
    **The compliance identity** an individual or organization that completes KYC/KYB verification and receives eligibility to participate in sales.
  </Card>

  <Card title="Purchase Permit" icon="shield-check">
    **The authorization permit** signed proof that a wallet can purchase on behalf of an eligible, verified entity.
  </Card>
</CardGroup>

## How It Works

Sonar bridges compliance verification and onchain execution through **purchase permits**, signed proofs that a verified entity that passes all eligibility check as defined by the sale.

### The Purchase Flow

1. **Entity Verification**: Users complete KYC/KYB and receive verified entity status
2. **Purchase Authorization**: Sonar generates signed permits for eligible purchases
3. **Onchain Execution**: Your smart contract validates permits and executes purchases

Purchase permits are short-lived (10 minutes), sale-specific, and tied to both the entity and wallet address for maximum security.

## Offchain Mechanism Architecture

A critical aspect of Sonar's design is that **pricing and settlement logic runs offchain** in Sonar's backend, not in the smart contract.

The smart contract serves as an **escrow and record-keeping mechanism**:

* Records committed funds and bid data
* Validates purchase permits
* Stores final allocations
* Processes refunds and proceeds

This separation provides flexibility to change pricing and settlement strategies without modifying contracts, while maintaining the security of on-chain fund custody.

## Terminology

Understanding the terminology used throughout the documentation:

| Term           | Definition                                                                                |
| -------------- | ----------------------------------------------------------------------------------------- |
| **Commitment** | Funds pledged by a participant during the sale. General term for any sale type.           |
| **Bid**        | A commitment that includes a price (used in auctions). Contains both amount and price.    |
| **Allocation** | The portion of a participant's commitment that is accepted after settlement.              |
| **Refund**     | The portion of a participant's commitment that is returned (commitment minus allocation). |

## Compliance & Security

Sonar handles the complex compliance requirements automatically:

* **KYC/KYB Verification**: Entities complete identity verification appropriate for their jurisdiction
* **Risk Screening**: All wallet addresses are screened against sanctions lists and high-risk activity
* **Purchase Limits**: Flexible purchase limits for different entity types
* **Continuous Monitoring**: Compliance checking throughout the sale process

## Sale Lifecycle

Token sales progress through five distinct phases:

1. **Setup** - Configure sale parameters, deploy contracts, integrate frontend
2. **Commitment Phase** - Users commit funds, Sonar issues purchase permits
3. **Cancellation Phase** (optional) - Cooling-off period for regulatory compliance
4. **Settlement Phase** - Compute final allocations and record on-chain
5. **Distribution** - Deliver tokens and process refunds

<Card title="Sale Lifecycle Details" href="/sonar/planning/sale-lifecycle" icon="arrows-spin">
  See the complete end-to-end sale process with timing and responsibilities
</Card>