Even for those that are not big on the blockchain, they’ve undoubtedly heard of bitcoin, ethereum, and other popular cryptocurrencies. Underlining their enormous enthusiasm is the concept of decentralization, or in practical terms, providing laymen access to previously exclusive financial markets. It’s the same principle that drives security token offerings and the burgeoning industry of STO platforms.
To understand security token offerings and the broader concept of asset tokenization, we must take a step back and recognize the blockchain economy. Typically, a transaction in a particular blockchain involves the exchange of coins or tokens, which are often tied to a reward for executing certain actions. As the foundation of the blockchain architecture, these coins feature utility within the ecosystem.
From a business standpoint, early variations of asset tokenization – or the issuing of blockchain-based tokens – had tremendous value. Rather than raising funds through equity offerings, entities could instead offer coins. And the idea of the initial coin offering (ICO) was that the coins themselves would rise in value.
That created huge problems, number one being that the coins had no fundamental value. To rectify this dilemma, the blockchain industry created a concept called security token offerings. Here, the tokens (coins) are digital representations of real assets, such as corporate equity or real estate. Essentially, this is the blockchain’s version of stocks, and STO platforms are the exchanges that host these stocks.
Because of its myriad conveniences, STO platforms could revolutionize the businesses that raise capital. Primarily, security token offerings open access to private investing, a previously exclusive club. As well, blockchain tokens can be traded in secondary markets, making them far more flexible than traditional private investing platforms.
Here are five STO platforms that are making huge digital waves.
One of the hottest STO platforms in the blockchain community, Polymath is basically the Coinbase of asset tokenization. What made the latter so popular among cryptocurrency newbies is that it provided an intuitive arena where everyday folks can buy and sell digital assets. That’s the premise behind Polymath, only with asset tokenization as the primary focus.
Simplifying the STO process, Polymath walks business owners through the process of creating and issuing blockchain-based securities. In addition, the platform helps issuing entities manage their tokenization journey. This makes compliance with legal and jurisdictional regulations much easier than going at it alone.
A particularly nifty feature is that Polymath allows you to reserve your token “ticker” name before starting the tokenization process. At time of writing, there are 196 live tokens on Polymath.
Billed as an “open infrastructure for digital securities,” Swarm is one of the most comprehensive STO platforms available. Similar to Polymath, Swarm helps newcomers to asset tokenization get up to speed quickly, providing an intuitive space for “token creation, configuration, fundraising, and issuance.” Additionally, Swarm assists with post-distribution activities, like “token redemption, dividend issuance, asset governance, investor administration, reporting, and communications.”
What makes Swarm stand out from other STO platforms, though, is its Earlybird architecture. Before spending the time and resources into security token offerings, it’s important to know your audience. With Earlybird, the application provides a clear signal of demand before you launch, saving you capital and headaches.
Among the benefits of STO platforms is the facilitation of financial functions that were previously only accessible to exclusive parties. Typically, security token offerings resemble initial public offerings (IPOs), or exchanging equity for capital. With Capexmove, businesses can now issue debt through the blockchain, essentially acting as a bond market.
This is huge for the business world as Capexmove provides substantially increased access to lending markets. In addition, this STO platform issues digital securities known as ERC-20 tokens. These tokens are easily tradable in secondary markets, raising the Capexmove brand profile in the process.
With the blockchain innovation, the specter of disruption began clouding the mainstream banking industry. And STO platforms like Bankex may help actualize the potential of this technology. A U.S.-based company, Bankex operates under the premise that eventually, all assets – whether that be stocks, real estate, agricultural lands, will be tokenized. Thus, Bankex is establishing itself before the mass transition occurs.
What may appeal to newcomers to security token offerings, though, is Bankex’s no-nonsense approach to the blockchain. Here, you’re not going to find fantastical musings of the platform. Instead, Bankex’s management team is led by banking experts, bringing to the organization confidence and credibility.
While the concept of STO platforms may seem incredibly alien to those unfamiliar with the blockchain, it’s actually very simple. Companies want capital and investors want a piece of viable companies, usually in the form of equity. And asset tokenization marries demand with supply in a new, innovative format.
But the problem is, how do you go about connecting that demand with supply? That’s where BlockRules comes into play. Acting as an intermediary of sorts, BlockRules launches and manages its clients’ tokenization. Additionally, the company facilitates the avenue by which investors can buy said security tokens.
This saves time and resources for companies interested in asset tokenization while giving investors a viable alternative beyond traditional “analog” platforms.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long the cryptocurrencies mentioned on this article.