When the first ICO was announced in July 2013, it created an ingenious new way to cryptocurrency investment. Initially, it had not been easy to invest or raise capital. However, with Blockchain projects, investors now have many and better investments opportunities than before.
And, unlike traditional shares, security tokens can be purchased and traded instantly, anonymously, and with no/fewer fees.
- 1 What are security tokens?
- 2 Security tokens are liquid
- 3 Security tokens are traditional digitized securities
- 4 Security tokens are trustless
- 5 Value of token
- 6 Advantages of security tokens
- 7 Disadvantages of security tokens
- 8 Security tokens regulation
- 9 Security Token Issuance Platforms
- 10 Conclusion
- 11 Author Bio:
What are security tokens?
Securities refer to tradable financial instruments such as options, bonds, and stocks. A security token is thereby the ownership of security that is attached to a cryptographic token.
If you are considering investing in security tokens, it’s vital to understand precisely how they work. For instance, more than half of the tokens introduced in the market turned out to be scams while others failed to develop after raising funds. This means that anyone who invested in such projects lost their money.
To help you come up with wise and informed decisions when investing in security tokens, here are a few crypto investment strategies to consider.
Security tokens are liquid
Security tokens can be traded in on global security token exchanges and marketplaces which is virtually impossible when it comes to traditional securities. It’s possible to digitalize conventional assets such as real estate by offering asset-backed security tokens. The security tokens will then represent the underlying assets.
These assets will then be listed on global markets, and global investors are eligible to trade, buy, and sell them in a compliant manner. Security tokens, therefore, offer more liquidity since they can be traded in minimal time. They are an opening to cryptocurrency investment strategies.
Security tokens are traditional digitized securities
It’s also worth noting that security tokens are not cryptocurrencies. Instead, they are traditional digitized securities since they replace your traditional securities into a digital version.
In other words, security tokens are cryptographic tokens that share profits, pay dividends, pay interest, and invest in other assets or tokens to generate profits. And unlike cryptocurrencies, security tokens investments are safe since they have low volatility. Additionally, they are more efficient as compared to cryptocurrencies.
Security tokens are trustless
All transactions associated with security tokens are recorded on the trustless Blockchain. This is because the Blockchain network is public, immutable, and tamper-free. Therefore, there is no need for 3rd parties or the transacting parties to trust each other when dealing with security tokens.
If you are considering buying security tokens, then don’t worry yourself about trust issues. Blockchain-enabled systems are not only secure but also efficient.
Value of token
The value of the security token is also an important factor to keep in mind when deciding on whether or not to invest. Don’t blindly follow token developer’s ideas and suggestions over their project.
First, make sure that the token has already made some value in the market before you decide to invest in it. Research thoroughly or consult different investors in order to get a clear idea about the value of various tokens.
Don’t just look at the present value, also analyze its past performance. Make sure that the security token you’ve selected will be profitable.
Advantages of security tokens
Compared to traditional financial assets, security tokens come with many benefits. Here are some advantages of security tokens;
Since security tokens are digitalized assets, they are eligible for trading globally. As long as you comply with the various laws and you have a wallet, you can sell, buy, and trade them anywhere in the world.
Unlike traditional assets, security tokens are based on blockchain which eliminates the need for intermediaries or 3rd parties. This in return cuts down the cost of trading or investing in the tokens.
All transactions related to security tokens are fast since they are automated. Additionally, cryptocurrency investment is non-stop which makes trading of security tokens fast and accessible /available at any time, day or night.
Disadvantages of security tokens
It’s also worth noting that security tokens aren’t without risks. Like any other investment, security tokens have their downsides.
One, security tokens are associated with many limitations and regulations on how they can be exchanged or who can invest in them. This means that security tokens can’t be traded freely like it is with cryptocurrencies.
Second, since security tokens are subject to other trading restrictions and can’t be traded freely, then, it would affect their liquidity.
Security tokens regulation
Unlike cryptocurrencies which lack regulation, security tokens are required to abide by the law of their specific base of operations. Otherwise, they may risk action by government regulators.
Security Token Issuance Platforms
If you want to invest in security tokens, it’s crucial that you know how and where to buy them. Here is a list of popular platforms that issue security tokens;
It’s a Blockchain-based platform that was created to simplify the creation and use of various security tokens. Polymath is classified by the SEC to facilitate the buying and selling of security tokens.
Harbor protocol is based on the Ethereum ERC20 network. It was created to make security assets legally tradable on crypto assets exchanges. In most cases, harbor deals with real estate and have a partnership with Open Finance.
Open Finance has partnered with the harbor to build a security exchange.
T ZERO have partnered with polymath to build a security token exchange.
Cryptocurrency investment is now taken to include security tokens by and large. Trading with the top tokens provides some of the best chances for rewards.
It will increase the likelihood of generating more profit. If you aren’t sure about which security tokens to invest in, try getting some advice from crypto experts. They will help identify the best security tokens for you.
Crypto enthusiasts are confident that the demand and success of security tokens will continue to increase over the years. Therefore, it’s a wise decision to invest your money in security tokens.
Denise Quirk is a Health Advisor who is fascinated by Crypto and Blockchain Revolution. She is a believer in transforming complex information into simple, actionable content. She is keenly interested in finding the value of the crypto world. She consistently writes for Coin Review. You can find her on Linkedin, Twitter, and Facebook.