Where to Invest Today: Security Tokens

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Where to Invest Today: Security Tokens

In a rush to provide blockchains with real scalability, developers behind platforms like Ethereum, EOS, Zilliqa, Cardano, Tron, and others have put dApp development on the back burner. With their focus zeroed in on the critical infrastructure that will make blockchain scale for tomorrowʼs users, todayʼs users are left feeling like there is little to hope for from both use case and financial investment perspectives.

In a report released yesterday, Longhash shed light on just how little Ethereum dApps are being used. In total, 90% of Ethereum dApps see zero usage from day to day while the 10% that do receive usage get very little of it.

Considering these dismal figures, investing in utility token-based dApps like Augur, Status, and others of their ilk may appear misguided to the average investor, and for good reason. Without a concrete and borderline faith-based belief in the future success of these dApps and platforms, it would prove nearly impossible to invest precious funds blindly.

Despite the poor performance thus far of these first generation dApps and platforms, blockchain still holds an unthinkable amount of promise both financially and technologically. Given that, as an investor, itʼs critical that you ignore the noise of partisan crypto politics and look to where innovation is happening now. Ethereum and other smart contract platforms will have their day in the future, but while they BUIDL, there are other sources for intelligent investing that are available now or soon.

Security Tokens

Youʼve undoubtedly heard about them by now – security tokens, security tokens, security tokens. On crypto Twitter, the mere mention of security tokens is bordering meme-status and yet so few understand what they are, how massive their potential is, and where to invest in them.

Understanding the security token model is most easily done by contrasting them to utility tokens. Utility tokens are pieces of blockchain network infrastructure that are necessary for the function of the system they are a part of. Think of them like arcade game tokens. The arcade game will work and run smoothly only after you deposit the correct token.

Security tokens, on the other hand, represent nothing more than rights to the financial returns generated by a third party. In this sense, security tokens work a lot like mutual funds and ETFs in the traditional financial world.

Similar but distinct from security tokens are equity tokens. Whereas security tokens donʼt confer ownership rights over the funds underlying assets (the ones that generate revenue), equity tokens do. Equity tokens might represent a real estate portfolio wherein each equity token is directly correlated to a piece of actual real estate. The tokens themselves accumulate value as the physical real estate does as well.

For investors, there is another glaring and key difference between utility tokens and security/equity tokens: Security/equity tokens comply with most international securities standards (the SEC included).

Ready Today

Security and equity tokens arenʼt a far-flung concept that will take years to develop. As tokenized representations of wealth-generating assets on the blockchain, theyʼre ready to go today.

There are several security token platforms already up and running such as Polymath, Smartlands, Harbor, Swarm Fund, and tZERO. The last name on that list, tZERO, is notable in that itʼs parent company is Overstock.com, an e-commerce giant with $1.7 billion in revenue in 2017. tZERO is the worldʼs first security token trading platform and, as of two weeks ago, is live and operational.

Seeking out security token offerings is similar to the process used for ICOs. Check out an STO list like STO Scope, then find the offerings that
appeal to your risk appetite.

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