The Crypto Mega-trend of 2018: Security Tokens
abenco01what is a Security Token, and how does it differ from the current landscape of Utility Tokens and Currency Coins?
Let's break it down
Currency Coins
are simple and straightforward. They are coin used either as a digital store of value, or as an online peer to peer payment network, like Bitcoin, Litecoin, Dash, and Nano.
Utility Tokens
are tokens that allow you to interact with a platform or app. For example, the token could be used to fuel smart-contracts like on Ethereum, or it could be used to buy computing power like on Golem.
Currently, many Utility Token ICO’s are using around-about methods to sidestep regulation as much as they possibly can. Because of this lack of regulation, retail investors are at a greater risk of fraud. We have already seen close to $1 Billion worth of capital having been frauded from investors, including the $600M scam performed by AriseBank.
Security Tokens
are the legally compliant tokenization of anything that has the future expectation of profit. Security Tokens (ST's) allow for the tokenization of real estate, stocks, bonds, assets, companies, and investments that produce dividends.
In addition to the aforementioned sectors that are already baked into our economy, ST's will open up a staggering amount of new economic investments by tokenizing product creators and service providers. We will be able to tokenizing artists upcoming work, musicians albums, movies, professional services like dentists offices and lawyers firms, and absolutely everything else that drives a revenue in exchange for our share of the future profit in the form of dividends, payouts and token price appreciation.
Very Conservatively, we’re looking at a potential security token market well north of $100T. The global real estate market by itself is worth $217T. The entire utility and payment token market cap is currently less than $0.5T.
Institutional investors & hedge funds have been slow to enter the speculative cryptocurrency space. With the tokenization and optimization of the investments they are already familiar and comfortable with, that will rapidly change. Security tokens are the catalyst to the influx of big money.
So why do we need security tokens?
Currently, the assets that ST's are in the process of tokenizing are either centralized on fee intensive platforms or are illiquid and difficult to physically transfer or subdivide. Security tokens would allow for these trades to be done faster, cheaper, with less paperwork and across a transparent and traceable global decentralized market that operates 24/7.
Higher Liquidity
Where can you currently trade fractional percentages of real-estate or assets near instantaneously with low fees? Answer: Nowhere! Security tokens will allow all the assets of the world, like real-estate to be micro-owned and traded globally, instantaneously online. Lack of liquidity can account for in surplus of 20% of the cost of the asset. pg 12. That's enough of a reason to switch over right there!! With no liquidity, your $500,000home is now worth only $400,000. If you have ever sold a house, I'm sure you can relate. "Do I keep my house on the market as is another month or should I drop the price another $30,000?". When we are able to subdivide ownership, the minimum investment can be infinitely less, increasing liquidity dramatically. An upcoming example is a platform that allows you to purchase tokens of a home that is then rented on Airbnb, you earn both the rent in dividends and hold the appreciate asset of the token. When you want to sell, it is available to be sold on a global market. A tokenized time-share global economy could be near, but that's a whole other topic.
Less expensive to launch
The cost to tokenize is drastically cheaper, easier and faster to tokenize than to run an IPO. The cost to run an IPO can cost 10-12% of the total funds raised. Additionally, it takes less than half the time to tokenize than to launch an IPO. 5 year from now, when all the regulatory facets are worked out, it will be a no-brainer for any company to opt-in for tokenization over traditional IPO methods.
The rest of the answers brought to you by an exerpt by Anthony Pompliano:
“# Lower Fees
Many fees associated with financial transactions are derived from payments owed to middlemen (bankers, etc). Security Tokens remove the need for most bankers which reduces fees, and smart contracts may one day decrease the reliance on lawyers as well. These smart contracts will reduce the complexity, costs and paperwork with managing securities (collecting signatures, wiring of funds, mailing of distribution checks, collection of W-2s, Sending K-9s, etc).
Faster deal execution
The more people involved in a deal, the longer it usually takes to execute. When Security Tokens remove middlemen from investment transactions, they enable accelerated timelines for issuers to successfully offer their security. Additionally, immediate trade settlement on the secondary market for Security Tokens will become an attractive advantage for issuers & investors too.
Free market exposure
Most investment transactions today lack exposure to a global investor base. For example, it is hard for investors in Asia to invest in private US companies or real estate. With Security Tokens, asset owners simply market their deals to anyone with an internet connection (within regulatory limits). This free market exposure should lead to a significant change in asset valuations since any asset that is not exposed to a free market is mispriced.
Larger investor base
When asset owners can present deals to anyone with an internet connection, the potential investor base is drastically increased. For example, would you rather show your investment opportunity to only US accredited investors & institutions or every potential investor in the world? Competition is healthy and a long-term net good for financial markets.
Automated service functions
Lawyers are less middlemen and more service providers in most transactions. With Security Tokens, issuers will begin to use smart contracts to automate the service provider function through software. This doesn’t mean that lawyers will disappear, but rather that their role will be more advisory based.”
Now would be a great time to say I am not a professional financial advisor, and that everything contained herein is for educational purposes only. You are responsible for your own investment decisions.
With that being said, here is how I look at the ways to invest.
There are three aspects currently:
-The platforms
-The tokens
-The Exchanges
Primarily, I would much rather bet on Ethereum and the other platforms like Neo than an individual app for this reason. If the app fails, Ethereum can still be "successful". However, if Ethereum fails, the app must be re-built from scratch.
Let's compare this to the security token sector:
Just as Ethereum is the leader for operating UT's, Polymath and Securitize are two platforms that are clear leaders in the creation, deployment, and operation of security tokens. The difference here is Polymath and Securitze also help launch the tokens on their platform in a turnkey fashion taking them from a-z with KYC, legal, actual token launch and more, giving them even more inherent value .
What is the utility of their token?
In comparison, The utility of the Ethereum token is to fuel dapps, the same goes for the security token platforms, they fuel the ST's. Additionally, the third party team members for Polymath (legal team ect.) are also incentivized using the tokens, increasing the value. Just like 99% of platforms, the more robust and active the ecosystem, the higher the demand for the tokens, the higher the value.
for more information visit the following link:
https://t.me/STSTokenCommunity
https://ststoken.com/STS%20White%20Paper%202018%20v2.0.pdf
https://bitcointalk.org/index.php?topic=4935781.0
Bitcointalk profile link: https://bitcointalk.org/index.php?action=profile;u=1460674