The blockchain technology is evolving very fast and unleashing new products very often. From standard decentralized platforms such as Bitcoin and Litecoin, things jumped to smart standard tokens, contracts, and now it is the eve of securities tokens.
The token niche has grown so fast that there are over 500 ERC-20 based tokens. It is a trillion dollar opportunity that you also need to take advantage of. However, you need the right security token offering platform.
Security token issuance platforms provide issuers with a better opportunity to reach more potential investors and reach their value target faster. They are defining the direction that the Blockchain niche will take and helping to make Blockchain legal orientation distinct.
The security tokens are also aimed at entrenching credibility, improving traditional finance, providing better exposure to free markets, and promoting easy liquidation. In this post, we interrogate the best Security Token Offering issuance platforms to establish their procedures, features, and effectiveness.
What Are Security Tokens?
While the common type of digital assets that people are used to such as Bitcoin or Ethereum are crafted to be independent for use even outside the native environment, securities tokens represent an asset.
Indeed, securities tokens can be designed to represent anything, including real estate, fiat currencies, bonds, and even shares. The most important thing about securities tokens is that they gain value from their three interdependent core tenets:
- Role such as a right, toll, earnings, and currency.
- Purpose underscores economic creation, bootstrapping engagement, ‘frictionless’ experience, and distribution benefits.
- Features include voting, product access, work rewards, and profit sharing.
Categorizing the tokens as securities implies that they are subject to the securities regulations. In the US, the regulations include Regulation D that allows specific offering to avoid getting registered by SEC.
Security Tokens And Venture Capital Democratization
For many years, private equity was seen as a preserve of top venture capital firms as well as investors with millions of dollars. Lower level investors had to be pooled together or left out by venture capital firms.
The advent of Blockchain and cryptographic solutions changed everything by eliminating the middleman. It created a new way of operations by decentralizing governance and ensuring that any person can invest in and enjoy good returns in a decentralized manner.
Now, the niche has moved to the next step that involves allowing all businesses to issue tokens easily and trade them in the markets. No matter the size of your business, it is now possible to raise funds for business development through security tokens.
Even with the initial tokens’ issuance model referred to as ICOs, the process of generating and issuing tokens remained complex and only a few could execute the complex process. Many saw the process as too complex and perhaps ‘undoable’ even by standard computing experts.
The new STO creation platforms are created to help simplify and democratize the process of token generation. So simplified are the processes that it will take you a very short amount of time to get the tokens ready and trading in the markets. Here is a comprehensive evaluation of the top token offering platforms in the market today.
This is a Blockchain-based platform created by Trevor Leverkor with the primary goal of helping to link traditional financial securities with the fast-growing Blockchain technology. The good thing with Polymath is that users are guided throughout the tokenization process.
Issuers are assisted with creating, issuing, and fundraising so that the procedure is completed seamlessly. Indeed, the platform even provides users with a demo version they can follow to practice and perfect their skills of tokenization.
The design of Polymath is based on the premise that asset-backed securities are fast racing towards the Blockchain technology and a stampede might be unavoidable. Therefore, traditional securities are expected to start looking for ways to hook to Blockchains.
The main target of Polymath is reaching key assets, including venture capital, derivatives, debentures, and private equity to bridge them to the Blockchain platform. The simplified process of tokenizing these assets ensures that issuers can come up with their own tokens and issue them without worrying about complex coding and legal procedures.
The platform is made of four layers, which define compliance and the generation of the tokens:
- Protocol Layer
- Application Layer
- Legal Layer
- Exchange Layer
Polymath simplified asset tokenization has become an irresistible attraction to both corporate and other platforms targeting to offer the same services. The development team’s emphasis on legal compliance has demonstrated that crypto tokens can be created, issued, and traded within the law.
This infrastructure is a major security token offering platform powered by Blockchain technology using the SRC20 protocol. The protocol is a cryptographic standard for security tokens to help businesses and projects tokenize their assets such as agriculture, real estates, and crypto hedge funds.
The Swarm platform is designing a clear market infrastructure based on the blockchain technology to facilitate deployment of traditional capital into the crypto markets. Though SRC20 protocol closely resembles ERC2O, there are some remarkable differences:
- SRC20 tokens are an extension of ERC-20 tokens.
- The SRC20 tokens feature additional properties that clearly outline the assets, location, purpose, transfer restrictions, and legal rights.
After their successful ICO was held in October 2017, the Swarm development team is now embarking on the next project of integrating artificial intelligence into the system. It is expected to be the next frontier that will redefine the blockchain industry and its operations.
This is one of the latest Blockchains offering end-to-end support for people targeting to tokenize their assets. The platform provides high flexibility and an impressive back-end to help manage potential investors when issuing a token.
The platform has won a good reputation in the community for providing unique features and tokenization within the existing legal framework. This is why a lot of companies and even exchanges such as SharesPost and Blocktrade have entered into a partnership with Securitize.
Perhaps the most notable aspect of Securitize is the ability to integrate third-party apps that operate on the Ethereum blockchain. This implies that individual companies will be empowered to build their clients, select the preferred interfaces, and even work with third-party developers.
The commitment of the Securitize development team to enhance the platform’s security has redefined how funds and capital for investors as well as assets are managed. The approach has increased the chances of Securitize becoming one of the best STO issuance platforms in the market.
This is a decentralized compliance protocol designed to operate as a global standard for issuing and trading crypto-securities on blockchains. The platform was created by Bob Remeika, Arisa Amano, and David Sacks with the goal of redefining the way crypto securities are issued and traded.
They came up with the idea when trying to raise funds via an ICO but got a lot of compliance and technical challenges. Upon digging deeper, the founding team established that most of the companies wanted to tokenize their assets but got held back by regulations and the involved technical requirements.
Harbor operates by simplifying the tokenization process to make the compliance process transparent and easy. This is achieved by forming a regulated token referred to as R-Token. The R-Token is a standard ERC-2O token but has additional codes to help with checking on-chain “whitelist” or regulator service.
The whitelist can also be used for additional roles, including setting the complete requirements for AML, KYC, investor accreditation, and even certifying some assets. For example, a real estate sale under the Foreign Investment in Real Property Tax Act (FIRPTA) requires withholding tax when the investors involved are foreigners.
The main process used by R-token involves the following four steps:
- The investor places an order of the preferred R-token.
- The R-token follows the Regulator Service that ensures all the legal requirements are met.
- For the investors who do not meet the legal requirements, the token returns an error and the transfer does not materialize.
- If the investor meets all the requirements, the transfer is completed and confirmed.
The R-token is available on the Blockchain as an open source protocol. The long-term goal is to publish smart contracts for R-tokens and the regulator service to standardize how tokenized securities are issued and exchanged. Here are other features of R-token:
- It is ERC-20 compatible.
- Transfers only take place between whitelisted individuals (compliant individuals).
- Its flexible framework allows the enforcement of the securities regulations such as KYC and AML.
- The regulation compliance is implemented in all trading platforms at the token level.
The primary aim for Harbor, which is to help companies issue compliant tokens, is expected to be a game changer in the blockchain niche. The industry has appreciated that non-regulation can attract very hash regulation. But with verified protocols, such as R-token, every company out there can issue tokens, follow the existing laws, and raise the expected funds at ease.
Securrency is a security token creation and offering platform that started in 2015 by experts who wanted to see the Blockchain grow at a faster rate. They target providing a secure and reliable platform for token issuance and securities trading.
Unlike its competitors such as Harbor and Swarm, Securrency is part currency, part exchange, part bond, and part exchange traded fund share. It provides users with the opportunity to instantly transfer any form of assets such as tokens, fiat currencies, and exchange listed securities.
Their website captures four core components that help businesses easily convert their assets to tokens and trade them with ease.
Streamlined token issuance
The Securrency is a simplified drag-and-drop platform that allows issuers to promptly construct their offering from the start to the end. This implies that even people without a technical background about the Blockchain can follow the simplified procedures to create top-notch security tokens.
API and abstraction layer
The Securrency platform is intended to operate as a ledger-agnostic security token designing and offering platform. This means that users are allowed to plug into Securrency’s InfinXChange to get access to a global network of markets. The abstraction layer makes it possible to extend the applications of the exchange and trade without involving centralized exchanges.
Global identity wallet proofing
The designers of Seccurrency took advantage of their extensive knowledge of global financial markets to ensure that the target clients can reach a larger market across the globe. The RegTex engine makes it possible to run a Know Your Customer (KYC) strategy in more than 150 countries across the globe.
The wallet proofing technology also runs Anti-Money Laundering (AML) on cryptocurrency wallets and fiats as well as other customized verification. This design is helping to change the approach of even the top administrations in countries that were previously skeptical about Blockchain applications.
Highly enhanced liquidity model
Even with the simplified tokenization process, a lot of people still find it an uphill task to complete the process. Securrency has automated the process to help users convert the assets faster regardless of the asset type.
The automated process targets to make the process faster especially for businesses that want to fund-raise urgently. Whether it is a huge growth opportunity that has opened up or wants investors to join in helping the project to grow, the automated model will help you complete tokenization faster.
The Final Take
The Blockchain niche is evolving at a very fast rate and shows no sign of slowing down. The security tokens offering platforms have accelerated the Blockchain growth by making it easy, fast, and legal to create and issue tokens.
People no longer need to look at Ethereum and wonder about the magic that was used. Yes, the process was complex but times have changed so much. Now, you only need to identify the best STO issuance platforms and the tokens will be ready for trading in no time.
The platforms have covered the legal background and all the technicalities that many people fear when the term ‘digital token’ is mentioned. Now, it is your turn to jump into the rich token world by tokenizing your assets.