Security Tokens Series: Security Tokens Types

This is the second article in the five-part Security Tokens Series where we analyze the key characteristics of security tokens and how they will impact the future of digital assets.

Equity tokens

Equity tokens refer to the value of the shares deployed by a company on the blockchain. They represent ownership of an asset, for example, a debt or company stock. An equity token is comparable to a traditional capital stock, and the only notable difference is the method of recording the asset. Indeed, ownership is recorded on the blockchain for an equity token while in the case of a traditional stock, ownership is stored in a database and can be accompanied by written and ratified proof. Equity tokens are very beneficial for the blockchain world and help to boost the ecosystem. They allow investors to stay in compliance with regulations and laws related to securities while investing in early startups through a new fundraising model.

Commodity asset tokens

This type of token represents the ownership of real estate or a type of commodity. The commodity can be energy, metals, meat, or agriculturally oriented. It can also be related to bulk commodities such as gold, silver, or oil. Commodity exchanges are often concerned with the complexity of transactions, the difficulties in tracking goods, and the problem of fraud. The blockchain with its transparency, security, and decentralization properties, goes very well with this sector. We have heard a lot lately about the stable coin linked to a currency, but the commodity coin is just as exciting for the crypto world.

Debt tokens

Debt tokens refers to tokens that represent a debt or cash-generating vehicle. Also called a tokenized liability, this token can be about a right to repayment, interest, or other rights, including potentially a right to obtain equity interests in the issuer. Risk & Dividend are the factors that determine the price of the token. The debt is stored on the blockchain through a simple ledger format or a self-executing smart contract. First, the general adoption will allow more projects to be financed with debt, such as Steem, which allows those who own their cryptocurrency to receive 10% interest. Also, it will give new opportunities to a larger scope of investors and will bring massive liquidity to the tokenized market.

Art-tokenization

Among average investors, few invest or are interested in artistic goods. This inaccessibility is due to the importance of entry barriers, but also to the lack of modernity of the art industry. First of all, the auction sale of works of art is cruelly lacking in accessibility for these investors. In addition to using the gavel and paddle method, auctions have limited space and require the physical presence of investors. Moreover, it is difficult for a single person to have the time and knowledge to judge the economic potential of a work of art or a new artist. The tokenization of a work of art separates it into a multitude of tokens that the owner can exchange, trade, hold and sell depending on the market value variation like any other investment. In addition, the traceability and transparency provided by blockchain technology will make it possible to solve a major problem in the industry; the security of the authenticity of the artwork.

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