What is security tokens?
One of the most important and exciting new developments with blockchain technology is security tokens, units for exchanging value which is backed by external, tradeable assets.
The difference between a security token and a utility token
This underscores the key difference between a security token and a utility token: the security token is backed by a value external to the platform, and it is regulated by the government as security accordingly. Buying a security token is buying equity in the company, which is why these tokens are also called equity tokens.
Companies making innovative use of security tokens
With this in mind, here are 5 companies making innovative use of security tokens.
Blockchain Capital may be the very first company to offer security tokens. Originally launched in 2013, Blockchain Capital made an initial coin offering (ICO) in April of 2017, raising $10 million.
Buying BCAP tokens grants a holder a portion of all profits earned by the firm, which deducts a management fee of 2.5%, based on assets managed, and a 25% performance fee based on returns.
Securitize is a blockchain platform for tokenizing assets and producing security tokens. The assets in question may be real assets of any sort: funds, a company, etc.
Securitize has a digital securities (DS) protocol that makes use of tokens. The company manages the whole process, from login to capital received.
Polymath is the company that is branding itself as Ethereum, but for security tokens. The company has a token standard, the ST-20, and native smart contracts. They also have industry partnerships that are expected to provide them with the liquidity they will need to launch the security tokens.
The Polymath native token, the POLY, can be used as an economic unit for any transaction taking place on the Polymath blockchain.
The 22X Fund is a tokenized fund created by a number of entrepreneurs who wanted to invest in the 22nd batch of startups featured on 500 Startups. The 22X Fund has 2.5% to 10% equity in these new startups.
Investors in the 22X Fund can trade the tokens at an increased price to make a profit, but they can also receive the proceeds of liquidity events.
Slice is bringing the blockchain and security tokens to the real estate market. More specifically, Slice allows international investors to invest in U.S. real estate, with minimum investments starting at $10,000.
Slice plays the role of underwriting, issuing, and serving as a placement agent for the real estate properties, with investors purchasing shares that translate to fractional ownership. Investors will receive dividends in the form of security tokens every quarter. The platform is expected to launch soon.
With so many innovative companies working on security token applications, the future of this type of token is one to watch.