Security Tokens and The Blockchain

Security Tokens and The Blockchain

Blockchain technology is one of the fastest-growing digital newcomers in recent history and its very promising model is being extensively researched in many industries across the globe. According to a report on Investopedia, 2021, “will likely signal the rise of one special kind of token, called a security token, which provides one of the most encouraging cases for blockchain technology yet.” (source: Investopedia)

101 of Security Tokens
Blockdata supports the idea of security tokens being a new asset in the world of finance. This means they see security tokens as digital “security” from the financial perspective.

On the other hand, Investopedia offers a different definition for security tokens, where they describe the NFT use case of tokens and how they could represent a real-world asset on a blockchain. For certain they call NFTs a security token. NFTs offer many exciting new use cases for all kinds of industries, as we could tokenize everything and store it on a blockchain.

The main feature of NFTs is their non-fungibility, which makes them digitally unique. The concept described by Blockdata addresses a totally different concept, which is fungible security tokens. Let's dive into their proposition in the following.

Security Token in Financial Terms

“The term "security" refers to a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock; a creditor relationship with a governmental body or a corporation represented by owning that entity's bond; or rights to ownership as represented by an option.”

(source: blockdata)

As DeFi and blockchain are growing rapidly, the crypto space is gaining market share and new investors. As Blockdata predicts in the graph above, there will be a shift of traditional security papers towards blockchain-based security token solutions. This step could result in a much faster, efficient, fair, cheap, and more transparent way of security trading than ever before in human history.

The polymath project offers the following features to the traditional security market:

  • Open Source Transparency
  • Standardized Tokens
  • Modular Development
  • Automated Rulesets
  • End-to-end
  • Purpose built

Many more purpose-built blockchains will arise in the future, as each use case needs specific consideration. This means we arrived in the multichain world. Polymath is adding another exciting product to the DeFi space and offers users trading securities without intermediary fees and increased transparency, which will bring benefits to both, collateral providers to a collateral investor.

Conclusion

This is just the beginning of security tokens. For now, we can see the need for security tokens, but their adoption and use cases are still to be determined. More will be revealed as the token is developed, and we will see how the blockchain and users implement them in the crypto landscape.


About Reef Finance & Reef

Reef Finance is building Reef Chain, a DeFi blockchain built using Substrate Framework. Reef Chain provides high scalability, enabling almost instant low-cost transactions, and supports Solidity and EVM, allowing developers to seamlessly migrate their DApps from Ethereum without any change in the codebase. Our vision is to make DeFi easy for everyone to invest in and build DeFi applications on top of Reef Chain.

Reef Finance has developed a fast, scalable, and EVM-compatible chain for DeFi applications, Reef Chain. Reef Chain is a customized blockchain that allows developers to build DApps or deploy existing projects from Ethereum. Learn about Reef’s recent official news: Website | Twitter | Telegram