A decade back, crypto currency just revolved around one currency which is known as Bitcoin. But today, there are a ton of other digital currencies solely due to the rise of initial coin offerings. Initial coin offerings or ICO’s provide ICO-generated coins which are commonly known as tokens. The Security Token is one such token that has been on the rise since the start of 2021. Therefore today this blog will discuss all about this significant security token and its potential of being the new craze after Bitcoin in 2021.
What is a Security Token?
A security token or a tokenized IPO is a type of public coin offering in which tokenized digital securities (security tokens) are sold in cryptocurrency exchanges and security token exchanges. They are also defined as digital, liquid contracts for fractions of any asset that already has value, for instance, real estate, car or corporate stock.
Many crypto experts believe that security tokens will be the new craze after Bitcoin in 2021. Let us put light on the potential impacts of security tokens on the Crypto’s world.
Security Token is going to be the new craze after Bitcoin in 2021? Here’s how:
1. Paving new avenues for growth
A decade ago, cryptocurrency was just used to describe a strong alternative for traditional money and its transactions. But today, cryptocurrency is a vast term which encompasses everything pertaining to blockchain; information, mining and transactions. Therefore, security tokens and others like utility and Golem tokens are changing the way the world of crypto currency. These new concepts are shaping the realm of crypto currency and are creating more adaptability in it so that it can embrace every new and potential digital concept. So security token is going to be the new craze after Bitcoin as it is paving new avenues for growth in this regard.
2. Structured Ownership
How is an ownership structured? Here’s how: Security tokens denominate or assign a certain value to the fractional ownership of any real asset or commodity. This idea presents a structured ownership and keeps it secure and preserved on the blockchain ledger. Therefore, providing a means of structured ownership is how security tokens are affecting the crypto’s world and is pretty much the reason for its new hype in 2021.
3. Bridging the gap between Finance and Blockchain
Security tokens are being seen to bridge the gap between traditional finance sector and blockchain. It also benefits both these sectors equally and here is how; the assets that are represented by tokens actually exist in the market and these can be public or private equities or buying property with bitcoin. As a result, there is only the difference of representation which is solely for the crypto’s world. Furthermore, Security tokens also dispense the ease of transactions and stores all the information on blockchain. Due to its characteristic of acting as a moderator between traditional finance and blockchain, security tokens are going to be the new craze after Bitcoin in 2021.
4. The Elephant Marketplace
As discussed in the first point, paving new avenues for the crypto’s growth is the reason why security tokens are so much on the rise today. Taking this thought further, Security tokens and other tokens alike gave birth to the novel Elephant Marketplace. The Elephant marketplace is the first secondary market for pre-IPO equity built on a blockchain. The elephant marketplace brings in some huge sources of liquidity to the existing markets. An example of this can be the tokenization of rights to future shares in startups after their public offering. Furthermore, the elephant market provides transparency in buying and selling of these rights whereas the traditional way of getting hold of equity rights is anti-secure and can take ten years to avail. Therefore, Security tokens are all set to be the new craze after Bitcoin in 2021 because they have innovation that aims to simplify and streamline the traditional complex tasks.
5. Possibility of a Merger
Many crypto enthusiasts and analysts are predicting a merger of traditional financial market and cryptocurrency market. They see it as potentially beneficial and profitable for both the markets. In comparison, Bitcoin only provided an alternative for fiat money and they gave a new way for transactional framework to operate and perform. Security tokens are actually acting in a meaningful way to bring these two markets together for a better cause. Many projects are working on this idea. For instance, Funderbeam has been successful in raising $5.8 million. Other companies like Nasdaq incorporates the blockchain’s framework in the listings of public companies. Furthermore, Causam Exchange sells its own stock through blockchain by a system of Blockchain Instrument for Transferable Equity or BITE.
With so much ideas turning in to practical experiments and forms, a possibility of a merger between traditional finance sector and cryptocurrency seems stark and the security tokens take all the credit in this regard. This point is the extension of the first point which strengthens the point of security token being the new craze after Bitcoins in 2021.
6. The Future Outlook
As cryptocurrency has regained its stance in 2020 after its crash in 2018, the security tokens are helping in a lot of aspects in this regard. Analysts predict that the companies which aim to raise their capital will no longer try to avoid institutional models but will opt for those which are already using regulations in their frameworks. Here, security tokens could help these companies by working on a hybrid model and providing the benefits of blockchain alongside. Therefore, the future of security tokens is bright and the above discussed points provide enough evidence on the prediction of security tokens going to be the new craze after Bitcoin in 2021.