The blockchain is one of the fastest-growing digital platforms in recent times. Its decentralized system started a revolution that is significantly impacting other economic markets globally. Where did the popularity of this digital technology arise? The introduction of cryptocurrency, which is now more than a decade old, spiked growth in the interest of the blockchain.
What Are Cryptocurrencies?
Bitcoin was the first cryptocurrency, introduced in 2009. Individuals viewed it as another type of currency when it was initially launched. When people heard of crypto, they automatically thought of Bitcoin. They still do to a certain extent; however, this term has grown significantly over recent years. Overall, people view cryptocurrency as an investment option for long-term growth.
The jump from crypto to tokens started with the introduction and growth of initial coin offerings, ICOs. This launch resulted in the release of thousands of various forms of cryptocurrencies, such as Ethereum. The coins generated from ICOs are commonly referred to as tokens. Are these tokens still the best cryptocurrency investment when considering the crash in 2018?
What Are Security Tokens?
A security token offering is an invitation for a specific type of underlying asset share that is currently growing. Many people are excited about this as it appears to be extremely promising for the development of blockchain technology as one of the safest low crypto-investment options. Essentially, these security tokens are liquid and digital contracts for a fraction of any asset with an existing value. What is an asset with value? This can be anything you own, such as a motor vehicle, real estate, or corporate stock.
The use of these tokens usually indicates that investors can expect a preserved ownership stake on their respective blockchain ledger. Simply put, these coins demonstrate the value of specific assets. These digital contracts can shake up existing and current financial economies by encouraging the utilization of newer and hybrid-focused blockchain models.
What Are the Advantages of Security Tokens?
The idea of grading fractional ownership of real or tangible assets in a security token automatically provides more structure to this system, which means investors can create expectations of their ownership stake preservation on ledgers in the blockchain.
A crypto capital security token helps to create a natural bridge between the blockchain and the traditional financial sector; hence, both can benefit in proportion to one another. How you may ask? The assets are divided between tokens that currently exist in their traditional markets.
This connection or balance is crucial as businesses raising capital could overcome institutional finance alongside the accountability and various costs involved due to the lack of regulation regarding utility tokens. When considering the perpetually volatile crypto economy and its unpredictable movement between 2018 and 2020, launching an ICO and expecting conditions to achieve enough stability to operate a company has become riskier.
To try to combat this, many projects and companies began cashing out as soon as possible to avoid becoming insolvent. This method does not help the already weak argument that ICO users are classified as "investors" in small and growing organizations and opens doors to unique and new ideas.
How to Invest in Security Tokens
Do you want to know how to get a security token? You have to first consider the type of token you want; three of the heavy-hitting assets include Swarm, Polymath, and Blockchain Capital.
Swarm does not have a strong price; however, there is a great deal of buzz surrounding this network because of its market cap.
Polymath is a security token offering platform that released its own coin known as a POLY. This network also helps and teaches companies how to create a security token. This brand created an image for itself for assisting firms who want to enter this market.
Blockchain Capital is one of the first organizations to create a formal security token offering platform. They have performed quite well as they created a market cap of approximately $27 million in December 2019.
If you want to know how to invest in security tokens, you first need a regulated exchange to buy and sell on. Various platforms have launched; however, one must ensure that these comply with the legal trading requirements.
The Future of Security Tokens and Cryptocurrencies
There was a stage where the term cryptocurrency was only used to describe Bitcoin or alternative fiat money options. Over the years, this category continued to expand to represent any form of payment or investment transferable via the decentralized blockchain.
This financial market has experienced rapid and volatile growth like no other; therefore, the question is: How much more can this grow? What does the future of securities trading and cryptocurrencies look like? Is there even a future?
With such a volatile and risky nature, it is extremely challenging to predict the future of the blockchain; however, one thing is certain, more and more people want a piece of what this market has to offer.
Once Bitcoin became a more common and understood concept, the market began heading towards utility. A utility token is a term used during the ICO process, where blockchain investors use coins sold during the ICO to pay. Alternatively, they may also earn if they offer any other relevant input.
Golem is an example of this, as it allows users to lend their computer's power to a network that cumulatively employs it to operate a remote super PC. These individuals can earn a GNT, golem network token when they connect to the system. Individuals can also buy these coins via exchanges. Many platforms operate similarly.
Attaching a value to these types of coins can be an ambiguous task because the market implies that the underlying organization’s potential and real market as well as value proposition make the token more valuable. However, this does not occur often as these specific projects continue to gain new users and partners. When observing the market as a whole, these tokens still show movement in relation to Bitcoin.
This is where security tokens come into play regarding the future. These coins help to establish a balance between these versatile and volatile contracts. Various blockchain projects currently have networks that undercut the previous ICO model directly by creating token equity rights for pre-IPO organizations, due to security tokens. How much further can this expand in the future?
Clearing the Cryptocurrency Storm
Around the start of 2018, the cryptocurrency market crashed, resulting from its rapid rise before this. The recovery process throughout 2020 resulted in events that wiped the complete landscape of the blockchain clean. A few systems that had real value and repute remained, which meant this platform was now being used for necessary purposes rather than a quick money-making scheme.
As a result, organizations that want to raise capital are no longer trying to get involved in institutional models but are trying to gravitate towards ones that already accommodate the required regulations. The security token could be the answer everyone is searching for due to its real-use nature and ability to determine a precise value of specific assets.
The Final Verdict
Essentially, the endgame of security tokens is to merge the crypto economy and traditional finance markets to correlate the benefits of both. Various other systems are also in place to work towards a similar idea. Unfortunately, the outcome of this cannot be predicted due to the uncertain nature of the decentralized blockchain system.
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