2022 could be the year of Security Tokens and STOs.
What are security tokens?
Security tokens are cryptocurrencies, usually based on the
Ethereum blockchain, that represent the dividends of the company that issues
them. In this sense, they follow a different and even stricter regulation than
utilities. Many exchanges are not authorized to list securities and different
regulations must be followed to buy or sell them.
Tokens can be divided into two types: utility tokens and
security tokens. Most people are more familiar with utility tokens than
security tokens because they are much more common. (Ethereum and litecoin are
examples of utility tokens.) A security token, on the other hand, represents an
ownership stake in an asset, typically a company, and entitles its holder to a
share of profits in the asset. Security tokens are much less common.
Advantages of Security Tokens
Digitizing real assets by breaking them into fractional
security tokens is a naturally streamlined idea that gives investors the
satisfaction of a recorded ownership stake on the blockchain ledger.
Security tokens will serve as the uniting bridge between
traditional finance and blockchain-based decentralized finance in a manner that
benefits them both. This is because the tokenized assets already exist in
traditional markets including bigger markets like equities and real estate.
Several blockchain projects are already disrupting previous ICO models by
providing platforms that allow tokenization of equity rights before ICO launch.
LCX STO Launchpad and Compliance Suite are also helping
innovative blockchain projects to conduct a fully compliant and regulated STO.
This is one of the very few exchanges and STO launchpad that has secured 8
registrations under the Liechtenstein blockchain laws.
Ethereum is the blockchain that is most commonly used for the
deployment of security tokens. Many companies use ERC-20 tokens, which are
Ethereum-compatible tokens that can run on the Ethereum blockchain using smart
contracts for execution.
People who own security tokens can profit from the performance of the token. Sometimes, they can also earn profits through dividends in the form of additional tokens and they often get other benefits such as voting power. In this way, security token holders can get many of the same benefits as stocks and other securities. One of the most well-known security tokens is Blockchain Capital (BCap).
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