What is an Asset-Backed Token? A Complete Guide to Security Token Assets.
Utility tokens have traditionally been the modus operandi for new blockchain company funding rounds, through the initial coin offering (ICO). But although utility tokens supposedly have value within the platform they operate on, they often lack a unique value proposition and likewise, by definition they do not represent an actual tangible asset. In fact, utility tokens are so far removed from real world assets, that the U.S. Securities and Exchange Commission (SEC) have recently been cracking down on those ICOs which cross the boundaries into the territory of being a security in their efforts to provide fundamental value to holders.
This is one of the main reasons that the value of utility tokens, either during their token sale or once they are trading on third party exchanges, is driven predominately pure speculation, rather than the robustness of their tokenomic model.
However, asset-backed tokens, often offered during a Security Token Offering (STO) carry an actual value, because they are correlated with an external, real-world asset’s value. Asset-backed and security tokens offer secure, rapid and minimal cost trading of traditional assets via blockchain technology, and increase liquidity for traditional securities.
