Why security tokens shine brighter in the crypto space?

There is a buzz that security tokens stand out in crypto space and they are more preferred over ICOs, let’s understand the nitty-gritty of the same. As it is, by now, popular that blockchain technology has introduced a new monetary exchange in the form of cryptocurrencies.




However, many business owners are unsure about these cryptocurrencies as how these currencies are going to affect their various operations and revenues. These cryptocurrencies can have many dual impacts either positive or negative. However, the real cause will be determined by the fact whether we are accepting these cryptocurrencies or not.



Briefing on crypto space

According to the present scenario, major companies like Microsoft, Amazon and many other top industries have started accepting payments in the form of Bitcoin. Thus, this has led to the encouragement of the small and medium business owners so that they can also do the same. However, it is quite necessary to understand the impact of both positive and negative possibilities on the business.


Well, as compared to the conventional payment method via credit cards, wire transfers,other cryptocurrencies like Bitcoin provides quicker and less expensive ways to accept the payment by the customers. These transactions that are occurring provides more power to retailers as compared to the consumers. No alteration can be made in the transactions that are done through these cryptocurrencies. Hence, each and every transaction is final.



Impact of crypto technology on tech consumers

With this technology, the consumer will lose the right to bargain, retailers benefits by gaining control over their return policies. Also, this technology will prevent any type of fraud that can occur through fake credit cards.



Whenever we do a digital payment it charges some amount of processing fee, this occurs due to the presence of an intermediary that is present for the regulation of the payment and takes the charge. Well, this can be avoided in the case of cryptocurrencies as there is no intermediary. It is decentralized so there is no charge for the transactions.


Thus, this helps in saving unnecessary expenditures and transaction fees. One can earn even by exchanging the bitcoins with the local currency which will be a buy and sell policy. The exchange will buy cryptocurrency at selling price from you and will then sell it to some other at buy price. You can estimate your earnings by taking out the difference between the buy price and the sell price.


Security tokens

Talking about  Security token, it is a new concept that has been introduced to the people. So, what is a security token? 

When a token is subjected to federal security regulations and can derive its value from an external tradable asset, it is referred to as the security token. They are different from the other tokens as they provide the holder the right of ownership. The holder gets several benefits such as profit sharing, equity etc. Also it offers several other advantages due to which it helps in attracting a lot of investors. They also help in increasing the market efficiency and decrease the issuance fees and fractionalization of bigger assets.



Types of Security tokens

There are various types of security tokens such as-

  • Equity token
  • Debt token
  • Utility token
  • Asset-based token


Equity token

A security token that is backed by a company stock or capital is referred to as the equity token.


Debt token

So as to attract the debt investors these security tokens are issues by the companies with payback promise.


Utility token

With the help of these tokens’, start-ups or the corporations or the developers of the blockchain projects can raise funds.


Asset- Based tokens

These are the tokens linked with tangible or non- tangible object of the specific value and are built on the blockchain platform.



Intrinsic value of security tokens

These security tokens stand out as this token provides various benefits compared to the utility tokens such as profit sharing, dividends, voting rights, etc. They represent a legal right to ownership of the intrinsic value of the issuing company. They lower the risk and provides significantly greater value to the holder.


Transparency of security tokens

These security tokens provide complete visibility. And, the investors are able to get complete information about the issuer with the help of STOs. There are 3 security goals-

  • Healthy capital information
  • Insulating investors and guarding them against frauds
  • To maintain fairness in the market providing proper compliance control.


Regulatory compliance

Due to an increase in efficiency and clear thresholds for transparency, STOs with regulatory requirements, are quite more attractive for the investors. Also, there is an enhanced level of indemnity for parties involved in transactions making these security tokens more favourable.


Recovery feature

Losing access to wallets that have virtual assets can cause a lot of damage. This causes a major problem in the investment arena. But, security tokens can solve that problem now. Because properly constructed STOs provide the ability to reissue tokens to shareholders.


Parting thoughts

Undoubtedly, these security tokens are gaining more and more popularity in crypto space due to their credibility. Their several beneficial features over ICO and other related things are taking over the crypto world.



About the Author

Sonal Mehta – I am a Content Lead at SoluLab, a leading Blockchain Development Company, started by ex-vice president of Goldman Sachs and ex-principal software architect of Citrix. SoluLab Inc provides full spectrum, 360-degree services to enterprises, startups and entrepreneurs helping turn their dreams into awesome software products.


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