The Rise of Security Tokens
In our last article, we introduced new readers to the differences between security tokens and utility tokens. We also made the case for why security tokens are poised to eclipse the market capitalization of utility tokens by a hefty margin.
The security token market is taking shaping at full speed and can be quite hard to follow. In recent weeks, however, one thing has become clear: as a cryptocurrency investor, you canʼt afford to ignore this trend.
Here are a few reasons why we think security tokens will be the next big thing in crypto.
1. Wall Street Goes Crypto
The headlines propping up crypto markets throughout the 2018 bear market have revolved around one major theme: major financial institution involvement in cryptocurrency markets. While itʼs certainly great news, the way retail investors have interpreted it has been off-key.
Wall Streetʼs increasing involvement in crypto doesnʼt equate to a rise in the value of utility tokens. Hereʼs a shortlist of recent articles highlighting Wall Streeters quitting their day jobs and going headlong into crypto:
- Why I Left Goldman Sachs and Wall Street for Crypto Glory
- Move Over Crypto-enthusiasts, Wall Street Will Take It From Here
- Institutional Investors and Fintech: Will Wall Street Go Head-First Into Crypto?
The takeaway from these articles is essentially that while major financial institution involvement in crypto is exponentially increasing, it isnʼt because they want to buy into cryptoʼs existing systems. Instead, they find the underlying technology, blockchain, as being infinitely useful in the tokenization of assets. Now, why would they want to do that…
2. A Tokenized Economy Is Highly Liquid and Unlocks Trillions of Dollars
Consider the following chart:
Credit: Harbor Whitepaper
Private securities have low liquidity but high cost-effectiveness, whereas public securities are liquid but not as cost effective. Tokenized assets, on the other hand, give investors the best of both worlds by using blockchain infrastructure. Remember, whatʼs ultimately at stake here is the fact that blockchains are highly secure, extremely fast (once they can effectively scale), and far cheaper to move than traditional assets.
The public and private assets that can (and most likely will) be tokenized are valued in the hundreds of trillions of dollars. Itʼs a number that makes the head spin and is almost impossible to rationally calculate. When considering the costs associated with managing those assets, the move to tokenizing them will equate to freeing up trillions of dollars as well.
3. Security Token Platforms Are Here
So, with ample financial incentive for major players to ride the security token wave, the major question left is whether or not the applicable security token infrastructure is being built — and to that, the answer is a resounding yes.
The amount of development and innovation taking place in the security token space reflects the exponential rise in interest from Wall Street itself.
Polymath, Harbor, Swarm, and Dusk Network are all leading the charge to create efficient and capable platforms for security token trading, custody, creation, and compliance.
Going forward, the marketshare of security tokens will very likely eclipse that of utility tokens. Retail investors can get ahold of this trend by utilizing cryptocurrency funds like MultiToken that are built to embrace and harness the rise of security tokens.
Much like traditional ETFs, MultiTokens offer exposure to a range of cryptocurrency security tokens held within a highly secure and automatically rebalanced basket.
Stay ahead of the developments within this fast-moving space by following the MultiToken Twitter and Telegram.
