Why Digital Securities will be the next bullrun in the crypto space
As investors, we are always looking for the next big thing to obtain the most significant returns. Digital securities are gaining traction and likely to be the next “big thing” in the crypto space. In this article, we will introduce digital securities, explain why they are unique and discuss a few of the heavy hitters in the Security Token space.
What are Digital Securities?
Digital Securities are pretty easy to explain because they are the securities you already know; stocks, bonds, futures, options, derivatives, etc. but are the digitized upgrade to these. Rather than holding a paper deed or stock certificate, you would possess the digitized version in an e-wallet. Consumers are already used to this; you rarely receive a copy of the stock certificate with a brokerage account but only an accounting ledger item. A digital “token” takes the place of that traditional ledger item and represents the underlying asset’s proof of ownership. Being digital and on the blockchain makes digital securities easy to transfer and account for. Digital Tokens can also easily be traded on a global basis, providing more liquidity to traditional assets that would not generally have this opportunity.
Why they will be a booming business in the near future?
Financial services represent about 15% of the world’s economy; significant portions of this market will inevitably be digitized as security tokens. Unexpectedly security tokens will be pushed by government regulation. The De-fi space has grown incredibly fast, attracting lots of investment, but has also suffered due to its lack of regulation, market governance, and trade enforcement that has prevented its widespread adoption.
Digital Securities are a collection of smart contracts that dictate how they are bought, sold, and traded, only executing when criteria are satisfied in a compliant way that is transparent, immutable, and tracible on the blockchain; if coded correctly, precisely what regulators want.
Graphic courtesy of Area2Invest
Digital securities add several capabilities to the features of legacy securities and general smart contracts:
Liquidity on a global level, with greatly lowered transactional costs, as well as the potential to break security up into fractional ownership. This brings in a vast potential group of buyers to the securities market that was not possible before.
Trustless purchasing on the public and immutable blockchain, neither side of the transaction needs to trust the other.
Elimination of processes (data entry on spreadsheets, paper certificates), middlemen(attorneys, transfer agents, custodians, and accountants), and their human error that make the transfer of assets more difficult
Automated, instantaneous, and novel processes like distributions, stock splits, voting, buy-backs, as well as enhanced user experience possibilities like a digital security that provides the owner their percentage of profit when the revenue is realized.
The Big Players
There are several players in the Security Token Space, here are 3 promising ones:
1. GATE
GATE (https://gatetoken.io/) is a project that’s currently flying under the radar but has huge potential. They raised $27 million during their ICO in 2017 and in 2021 they are finally launching their main net called “Gatenet”.
GATENet is seeking to address high costs and inefficiencies of the current legacy financial market infrastructure (FMI) by creating their Digital FMI, which includes on-chain settlement and registry solutions for assets such as equities, debt securities, funds, and currencies, thus helping issuers, investors and market participants.
Check their explainer video below:
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The company behind Gatenet, GSX, has just announced a new partnership to launch a digital security exchange in Asia. Currently they are already listing structured notes on their digital security exchange in Gibraltar ( GSX.gi) and they are in the final phase of launching a digital security exchange in Labuan, Malaysia. They are also in discovery of a potential security exchange in the United States.
The total supply of GATE is 900 million tokens, 600 million are currently circulating.
Where Can I Buy GATE?
Gate is available on Uniswap and Liquid. Currently trading at $0.085
Conclusion
If you believe in digital securities, GATE, POLY & Tezos should be part of your portfolio.
2. Polymath
This group initially wanted to create security tokens on the Ethereum network, after roundtable discussions with industry insiders, and regulators found a lack of standardization and thus started the erc1400 standard. Then after releasing over 200 tokens under this standard, they realized the lack of specialization of the Ethereum network needed for institutional use and therefore decided to build a purpose-built blockchain optimized for security tokens called Polymesh.
The max supply of POLY is 1 billion. 808,000,000 are currently circulating. 925,000,000 will be circulating by January 31, 2022. The team locked up the final 75m until January 2024.
Where Can I Buy POLY?
Polymath is available on several exchanges. The most important ones are Binance, Uniswap & Sushiswap. Currently trading at $0.20
3. Tezos (XTZ)
Tesos is currently the big market player for STO(security token offerings), having $3billion slated to take place on their network, and this Proof of Stake system, which uses less power than Proof of Work (used by Bitcoin), has attracted the attention of several companies, including automobile makers. They are starting small, focusing on security token tools and compliance, and making corrections to the system before a more significant push. There are three main points that make Tezos very attractive.
- Institutional-grade smart contracts — a formal verification process that allows a simulated transaction prior to the real transaction to ensure smooth execution(needed for transactions that could be in the USD billions range) with high security.
- Secure custody — Formally-verified multi-signature contracts allowing high security smart contract cold-storage deployment and management.
- Upgradeability — Tezos has a mechanism that allows upgrades of features to happen without needing a fork which some protocols require.
Our data shows that 743,862,304 XTZ are in circulation at the time of writing.
Where Can I Buy Tezos?
Tezos (XTZ) is available on exchanges. The most important ones are Binance, Coinbase & Uniswap.
Summary
Digital securities will be game-changers of the financial world. They have been slow to gain traction, but 2021 may be the year that they finally hit. Digital Securities allows for new markets and capabilities at lower costs, complete transparency, and more secure transactions. Though the seeds have already been planted and results are sprouting, it is still hard to predict which protocol will attract the most attention and success; a diversified buying approach may be warranted. Once regulatory and oversite issues have been solved, the digital security pace will gain more acceptance, and investors will pile in; just keep an eye out and make sure to be part of it.
