The power of security tokens are often described as increased liquidity, transparency and efficiency. While compelling, these benefits are a mapping of the Tokenized version of the security to the traditional analogue version, but miss the bigger picture.
The true power of Security Tokens lie in how easily they can be used in the Open Financial System currently being built on Ethereum. This combination of Security Tokens and Open Finance unlock financial options that are too expensive or not possible in today’s system.Security Tokens unlock financial options for investors.
This is a two-part series digging deeper into these superpowers, beginning with how individual investors uniquely benefit.Summary Security tokens represent securities on a blockchain, trillions in assets with lower volatility then pure cryptocurrencies As Tokens, they are available to use in smart contracts Their hidden superpower is the financial options unlocked when used with open financial products (often termed as decentralized finance or DeFi protocols) What’s a Security Token?
It’s a representation of a regulated security as a Token on a blockchain. This can be anything from equity in a company to a real estate investment. 2019 has been dubbed the ‘Year of the Security Token’ and momentum has been building with security token exchanges, issuance platforms and investment opportunities emerging.Image credit: technoloader.com
A Security Token is more transparently and efficiently traded among investors unlocking liquidity premium for the asset. In addition, they can efficiently manage regulatory requirements, enabling real-time inspection of transactions and ownership. Huge opportunities that make owning a security token potentially more attractive to an investor than owning the traditional, analogue version of the asset.
Focusing on the token in isolation of the larger blockchain-based financial ecosystem...