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Security Tokens

The New Wave of Security Tokens

A portion of CNBC’s prime time is dedicated to cryptocurrency discussion. Bakkt has launched regulated Bitcoin futures, and Ethereum futures are on the horizon. Bitcoin ETFs have been launched across various exchanges in Europe. The past two years have been prosperous for the recognition of cryptocurrencies as genuine financial instruments.

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The next frontier is to connect cryptocurrencies with other fundamental securities like stocks, commodities, and bonds. Bitcoin’s existence as a great store of value is proven not just by its recognition by the financial sector, but also by the people engulfed by the world’s most hyper-inflationary currencies. Purchases of Bitcoin skyrocketed in Turkey and Venezuela right when the local currencies underwent severe devaluation. It’s now imperative to extend the utility from store of value to transact, and the most significant form of transactions happen among the trade of various assets across the worlds’ debt and equity exchanges.

Cryptocurrency Exchanges

One form of usage where cryptocurrencies have shown prominent proliferation is trade.

Cryptocurrency exchanges are the few highly successful businesses in the digital asset sector and that is due to the billions of dollars of cryptocurrency trades that take place on any given day. This is a testament to the demand for putting cryptocurrencies to use among the exchange of assets, but this demand has yet to be satiated by cryptocurrency trading pairs against regulated commodities, equities, or bonds.

Lower Fees: Most investors with small portfolios do not have access to Robinhood. Thus, most people to rely on expensive per-trade fees and commissions, which takes a significant toll on anyone who aims to invest with less than $5,000, which happens to be the vast portion of the world.

Security tokens can nullify this issue as transactions can take place on a percentage-fee, as is the case with utility tokens. Thus, instead of a $1,000-trader paying $10 to enter and exit a trade in fixed fees, which is 1% of capital, he or she could pay only 0.075%, a standard benchmark in the sector, which is less than a tenth of the present fee standard cast through fixed fees.

Easier Dividend Distribution: Dividends are delivered through bank transfers at an average expense of approximately $1.8.

Easier Shareholder Voting: While every shareholder gets a vote, traditional vote assimilation methods used for shareholder decisions squeeze out the individualized smallholders . With on-chain smart contract solutions, it becomes incredibly easy for small shareholders to inexpensively cast a vote, thereby empowering the voices of the masses.

Accessibility for All: Presently, access to quality shares and bonds is difficult for those most in need of wealth creation opportunities. On-chain assets have already proven to be accessible by virtually anyone, and bringing quality assets on-chain can deliver proper wealth creation opportunities to all.

Self-Custody via DEX

The assumption to date is that security tokens would take away the key benefits of blockchain technology, primarily self-custody of one’s wealth. However, given the recent success of Binance DEX, and the ongoing pursuit of other competitors to launch their DEX, it’s clear that the market is willing to pivot to decentralized exchanges if they offer sufficient scalability.

The Dawn of Security Tokens

Security tokens have been a mainstay in the 2019 press, but the year’s coming to a close yet no major STO or security token has surfaced. The reasoning for this is the lack of desirable security tokens, namely those with proven intrinsic value—the entire purpose of security tokens is to offer tokenized investment options that are not as volatile as utility tokens or payment coins.


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Crypto Stats

CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin58,309 0.19 % 0.87 % 0.84 %
Ethereum2,074.8 0.09 % 0.38 % 5.29 %
Binance Coin441.80 0.56 % 6.28 % 31.55 %
Tether1.000 0.03 % 0.13 % 0.02 %
Polkadot43.88 0.58 % 0.43 % 36.39 %
Cardano1.210 0.43 % 0.32 % 2.26 %
XRP1.020 0.86 % 4.56 % 78.36 %
Uniswap30.04 0.31 % 1.60 % 4.65 %
Litecoin223.59 0.33 % 0.14 % 10.29 %
Chainlink31.59 0.33 % 1.85 % 4.90 %