Security Tokens – Are They Really Happening?
I love a good western: the gunfights, the train robberies, the drinking and gambling. The name of the film I was watching escapes me – it may have been Tombstone – but I recall a scene where a few burly men were playing cards, and there was a whole stack of goodies on the table. Cash, jewelry, maybe a title deed, and definitely bonds of some sort were causing the game to become somewhat heated. Someone or other got shot, I think.
Now, this got me thinking about crypto – and not in the old cliched ‘Wild West of Crypto’ way either. It got me thinking about security tokens. It’s a natural progression. Cash, jewelry, and house titles have been represented and traded on a blockchain, so it follows that bonds will be, too.
A bond is a specific type of security – a debt security. Unlike stocks, in exchange for which you get specific rights for your investment into a company, a bond acts as a loan to a company. In exchange for your loan, you may receive interest and get repaid in full when the bond matures.
The bonds in the film I was watching were big sheets of official-looking paper – easy to lose, get stolen from you, lose in a house fire (much like a paper wallet). Having these types of assets tokenized makes absolute sense. Not only can you trade between each other without the added expense of a middleman, but you will also have an immutable record of ownership. Several projects have created platforms to create security tokens that meet regulatory requirements such as Polymath and TZero.
Not all blockchains can handle the requirements of handling securities, though, but the technology is definitely there to make it happen. Bytom’s three-layered blockchain has a contract layer specifically for applications such as this, and Medici Ventures recently completed a US$3.6 million security transfer on the Ravencoin blockchain.
Tokenization is definitely happening. Why wouldn’t it be? It’s a perfectly logical step for the industry to take. While we haven’t seen a mass migration towards blockchain-based securities on the level that many predicted at the start of 2018, it doesn’t mean it’s not on its way. The baby steps have already begun, and the stampede could be on its way soon.
Featured Image: DepositPhotos/Gorodenkoff
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