Smart securities
A smart security (also known as a tokenized security, or a security token offering (STO)[1]) is a blockchain-based digital interest that represents an ownership claim in an underlying asset which may include real estate, private placements, equities, debt, derivatives, and other instruments of value. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. Synonyms include digital security (DSO), security token (STO), tokenized asset (TAO), asset-backed token (ABT). Note: at the moment, the terms above are used interchangeably. We[who?] propose the industry coalesce around Smart Securities because it accurately reflects the programmability of these new financial instruments.
Definition of a security token by Bloomberg [2]
"It’s a virtual unit of currency, much like Bitcoin and its competitors. But where Bitcoin’s often-volatile value is entirely dependent on the price people are willing to pay for it at any given moment, security tokens are often promoted as being tied to actual assets, such as equity in companies, real estate or debt. Holders can even receive dividends. (They’re also sometimes called "digital securities,” in part to avoid the controversies that have grown up around ICOs and other crypto tokens.)"
Definition of a security token offering by Forbes [3]
"A security, whether a blockchain-based token or not, is fundamentally an investment contract recognized by law, typically for either the preservation of capital or an expectation of return. For there to be a security contract, there must be an active counterparty, such as a company issuing a stock. When people discuss security tokens, they are often referring to traditional securities like stocks and bonds but tokenized on a blockchain for more liquidity and transparency. However, a pre-functional utility token sold to investors with the expectation of return is likely security."
Smart Security Stack[edit]
Investor rights, transfer restrictions, dividend payments, company obligations, and more can be programmed directly into the smart contract.
1. Financial Rights Tokens may represent the total value of equity and/or debt of the underlying asset and a claim on asset appreciation, dividends, or cash flow.
2. Ownership Rights Tokens are treated like any other asset class and holders can sell/transfer ownership at their discretion. Tokens may also include specific investor obligations such as holding periods or voting rights.
3. Utilization Rights Tokens may include a new set of utilization rights that include incentives from the assets they invest in. These incentives may come in the form of discounted rates or preferential access to use the asset.
Notes[edit]
- ↑ "When Will We See The Emergence Of Digital Securities?". Forbes. 20 February 2019.
- ↑ "Security Tokens Are the New Crypto – But You Probably Can't Afford Them". Bloomberg News. 11 February 2019.
- ↑ Chester, Jonathan. "Will Security Token Offerings Be The Future Of Raising Money?". Forbes.
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