Tokens Security

  • July 25, 2021

Security tokens are legalized securities that are made available to investors through the provision of digital securities. These tokens give their holders the right to vote, share in the company’s profits, the right to participate in the company, and the right to repurchase shares. Security tokens usually represent the right of ownership, in other words, by having them, you can own shares of a company or a part of a property, etc, which they are registered in a smart contract and you can trade them in Crypto exchanges 

if we consider bitcoin and cash as programmable money, we can consider security tokens as programmable asset ownership, in fact, Security tokens are used for assets that have the characteristics of ownership and the potential to be tokenized. The purpose of these tokens is to integrate traditional financial market frameworks with blockchain features.

It can also be said that all those involved benefits in some way from the change in market infrastructure by the distributed ledger technology favors.

  • Exporters benefit from reduced capital costs and compliance.
  • Investors benefit from improved market depth (expanding investor base) and wider liquidity.
  • Regulators benefit from increased transparency and law enforcement.

Security tokens have progressed rapidly so far, but have been under the supervision of regulatory agencies. After the bubble of Initial coin offerings(ICO), security tokens have become increasingly important in the blockchain ecosystem. In the following, we briefly review the evolution of tokens:

1-ICO:

  • Raising capital through initial coin offering without regulatory oversight.
  • Discuss the nature of the initial public offering of coins and whether they are considered securities (The Securities and Exchange Commission was at the forefront of this debate).
  • Formation of a debate on the sale of tokens that follow the rules (supply of valuable tokens)    And start reviewing the initial supply of coins by regulatory bodies

2-Asset And mutual funds tokenization

  • Move towards tokenization of venture capital funds or private funds with Aim to provide liquidity to limited partners whose capital was blocked for 7 to 10 years.
  • Tokenization of unrealized assets (art and real estate)
  • Start offering blockchain products and their features (trust, compatibility with other systems, and integrity)

3-supply Security Tokens As a mechanism to raise capital

  • Blockchain companies can issue securities by issuing securities instead of issuing functional tokens, they attract capital
  • Utility tokens will still play a key role in distributed networks, and companies will move toward increased distribution.
  • Newton Partners believes that more companies today are looking to raise capital through (selling a stake or borrowing).

4-New trends in Evolution

  • Compatibility with other systems has become one of the key determinants of security tokens success
  • Increasing attention to two-token structures and debt-to-equity tokens, for example, Two Token Waterfall
  • The open financing system allows blockchain individuals and companies to offer products that were only available to large financial institutions and banks in the past.
  • Distributed financing will become a catalyst to accelerate the strengthening of old infrastructure.
  • The paradox is that infrastructure is needed to increase the acceptance of security tokens, But increasing their acceptance can expose small and medium-sized businesses to Forcing more information and following strict rules.

In this article, we looked at the steps involved in creating security tokens, and in the next part, we will talk about the issues they try to solve.

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