Blogger and crypto enthusiast Evie Harrison shares her vision of the hype around security tokens explaining their nature, basic features and current trends.
Cryptocurrencies. Initial Coin Offerings. Security tokens. These are just some of the words that have been flying around this year. If you haven’t heard of them, chances are that you haven’t delved into the blockchain ecosystem yet.
Don’t worry. You are not the only one. Many have recently discovered it, thanks to the hype created by those who have used, and benefited from the technology.
Do you wish to understand the hype behind security tokens? Well, to do so, you must first understand what it is. Brace yourselves. You are now entering the world of cryptocurrencies and blockchain!
What are Tokens and ICOs?
It is impossible to get to the bottom of the hype surrounding security tokens without knowing what tokens are. Tokens are different from cryptocurrencies. Cryptocurrencies are digital currencies that can be utilized regardless of the platform. For instance, one can use Bitcoin for various transaction purposes. However, when it comes to tokens, it is dependent on the platform. For instance, an AutoCoin can only be used on The AutoBlock. This is because a token is delivered by the company, which they give to their investors during an ICO.
For those of you who have experience in dealing with stocks, understanding ICO won’t be hard. Just like stocks have an Initial Public Offering, tokens have initial coin offering. The developer of the said token issues a given number of tokens. The number is limited to ensure that the tokens have a value and hence a demand. These tokens are then sold to customers for a price. The price can either be fixed or dynamic. The more distributed the tokens are, the more successful an ICO is.
Security Tokens Explained
Equities, shares, digital, security tokens encompass these three elements. A security token is a digital asset that developers offer to customers as a future investment. It works on the principle that the value of the investment would increase in the future.
If a token successfully qualifies as being dubbed as a security token, then it has to comply with the various laws and regulations of the State. Why? For the same reason, IPOs are heavily regulated. That is because they can increase the fortune of consumers in the long run.
Is there a downside? While there is a lot of hype among users of blockchain for security tokens, not everything that is being said is positive. Actually, many companies that are delivering ICOs are trying to find ways to not be classified as a security token.
Why So?
It’s simple. Being classified as a security token comes with a lot of restrictions and regulations. And most of us hate compliance more than anything. These regulations can severely limit the security token regarding who can invest in them and how they can be exchanged. You would think that this is only a drawback for creators. After all, regulations make the asset safer to use, right? This is true. But, it also means that the liquidity of these assets is low, which is a bummer.
Why Should We Care About Security Tokens?
Now, let’s address the hype that surrounds security tokens. Why should we care or invest in this relatively new technology? Why are people excited about it? Here is why security tokens have been taking the blockchain market by storm.
They are Credible
Don’t get us wrong, ICOs are great. And so are cryptocurrencies. But, no one can deny that the lack of regulation surrounding them can be scary. There is no real sense of accountability when it comes to most ICOs. What makes security tokens different? Well, it is regulated. This means it is much more credible than other ICOs and tokens.
Low-cost Transactions
Let’s face it. All of us would be much happier if we are able to reduce our expenditure without reducing our consumption. For instance, when you want a car, you would want to get rid of the middlemen fee, right? This is what security tokens like an AutoCoin delivered by the AutoBlock provide. In this specific case, you get to purchase automobiles via a safe transaction that is devoid of bank costs. This is the case with all security tokens. They eliminate the need for a bank or a middleman. This, in turn, means that you don’t have to bear the cost of transaction and paperwork! So, you end up getting what you want for a lower price.
Fast Transactions
We live in a fast-paced world. Most consumers would prefer if everything in their life complemented this pace. This includes transaction time as well. Security tokens are able to offer this to its users. How so? Well, it is due to the same reason as a low transaction cost. The lack of middlemen! The fewer people that are in the system, the faster the process will be.
The Sheer Exposure
When you think of securities and stocks, the market you deal with is limited. But, when it comes to security tokens, the world is your oyster. Your customers can be based anywhere in the world. Similarly, you can carry transactions from all parts of the world as well. This, in turn, leads to a lot of investors investing in security tokens. This makes it a lucrative platform for developers.
Final Verdict: Is the Hype Justified?
When you consider the various benefits attached to security tokens, it is easy to understand why they’re gaining popularity. Whether or not it is worth the hype depends on whether it will stay in the long run. Till now, the trends and the potential it has indicates that security tokens will continue to grow. They have a potential of getting into the mainstream markets as well. How long will this process take? Only time can tell. The fact that it is already establishing itself in the automobile industry does show promise.
Let’s see how this technology will evolve. It will be interesting to see if security tokens can truly take the place of equities.
Evie Harrison is a blogger by choice. She loves to discover the world around her, sharing her discoveries, experiences and expressing herself through her blogs. Placing strong research interest on the emerging techs, Evie shares deep insights into cryptocurrencies and blockchain technology.