Update on Securitize’s Progress and the Path to Adoption of Digital Securities
Securitize was founded in November 2017 after working on the concept of tokenization as part of SPiCE VC a few months prior. Since then, much has changed and we’ve seen exponential growth in the industry. As we approach our two-year anniversary, I’d like to take stock, share an update of where we are as a company, and explain where we think the market is heading.
When we started the project of tokenizing SPiCE VC and subsequently founded Securitize, the market for security tokens barely existed. Only one company, Blockchain Capital, had pioneered the technology and successfully issued a security token. At that time, we envisioned a tokenized VC fund that would provide automation and liquidity to the fund’s LP interests, which traditionally had been illiquid assets. Early on, we were inspired by articles and interviews with people like Stephen McKeon and David Sacks (that went on to fund another company in the space, Harbor) and more recently by the writings of prolific author Jesus Rodriguez.
However, our drive was also based on a hunch that the sector was ripe for development. That development ended up taking some time, as it was not until late 2017 and early 2018 that companies like OpenFinance, tZERO and later Sharespost, announced their intention to launch trading venues for security tokens. It took nearly a year after those announcements for trading to become a reality.
Meanwhile, the market for primary issuances has continued growing in anticipation of a developed and robust secondary market.
Let’s look at some statistics from our customers:
Securitize has signed a total of 43 customers. We just had a record number of signings with 17 new customers coming in Q2 2019 (it was also our record quarterly revenue). Out of our total customers, nine have already issued security tokens on the public Ethereum blockchain, which are listed below with their Etherscan addresses for transparency purposes (we do not advertise the names of customers that have not issued their securities yet) with the total value of the securities reaching close to $200M. All of these securities are digitally represented on the blockchain through tokens issued using our Digital Securities compliance protocol (DS Protocol). We have recently open sourced the interfaces of the protocol and you can learn more about it reading the posts in Medium from Jorge Serna, our VP of product.
As a company, we have grown to a strong team of more than 30 people in two main sites, San Francisco and Tel Aviv and other offices in New York, London and Madrid.
The nine issued securities are held by more than 1,500 investors, with an average of more than 150 investors per project. Out of those, five have been traded on OpenFinance over the past few months and one is now trading on SharesPost. Across both marketplaces, hundreds of trades have already been made.
While liquidity today is limited — due to factors including the nascent state of exchanges, restrictions on trading for US investors, limited numbers of listed tokens and the fact that a very low number of marketplaces have launched — we expect the market to improve dramatically with security tokens using Securitize’s DS Protocol being traded on tZERO as well as the launch of new regulated security token marketplaces across the globe. We believe increased liquidity will lead to an increase in the number of new issuances in the market.
Our customers have been digitizing a variety of securities. We have tokenized LP interests in VCs, hedge funds, real estate, and operating businesses (equity and other instruments) coming from both the blockchain space and other tech businesses. This variety shows the breadth of options available to customers when it comes to issuing digital securities.
Another important part of the ecosystem that was also missing initially was custody services for digital securities. Recently, companies like Coinbase Custody and BitGo have entered the sector, and we have already integrated with them and several others to bring together this necessary piece of the puzzle to make the issuance and management of digital securities a success.
Recently we have seen other companies, like Provenance, conduct successful security token offerings, and Facebook announcing what will surely become the largest security token offering for their new blockchain initiative, Libra.
From a big picture perspective, the security token market is still in its infancy, but it has come a long way since we first started building it in 2017. There are a lot of positive signs that things will continue to improve over the next 12–18 months and we expect adoption rates to increase substantially. At Securitize, we continue growing strongly and remain committed to working with our partners to make the market a success.
Securitize’s technology has been successfully used to create the following digital securities tokens on the Ethereum blockchain:
- SPiCE VC (spice): https://etherscan.io/token/0x0324dd195d0cd53f9f07bee6a48ee7a20bad738f
- 22x Fund (22x): https://etherscan.io/token/0x0073e5e52e2b4fe218d75d994ee2b3c82f9c87ea
- Blockchain Capital (bcap): https://etherscan.io/token/0x1f41e42d0a9e3c0dd3ba15b527342783b43200a9
- Aspencoin : https://etherscan.io/token/0x95e6737ef3d4a65535cdfab02f4de54d904bea0b
- Augmate (mate): https://etherscan.io/token/0x93047ce776e3decdc837598f5a752083ccfedb32
- Science Blockchain (sci2): https://etherscan.io/token/0x682ef9cc637ef56577092b29ae9275a629aae7db
- Lottery.com (LDCC): https://etherscan.io/token/0x82017d0409fb4ea27d4ae799c9e3b9b4f847c837
- Protos (PRTS): https://etherscan.io/token/0x5e17f6f450dcb0bc69b232ea554e224d7e88067a
- Cityblock Capital (NYCQ): https://etherscan.io/token/0xd74bee51abbeff07a89dd90305667c1e17212afa