How's it going everyone. It's Austin over here at the Crypto Playhouse!
If, like myself, you were heavily invested in the 2017 crypto space, you probably did very well.
But it's 2018! The SEC is coming, regulations are coming, and the condition of ICOs is going to change alot. So today we're going to take a look at how things are going to be different, and something we've been talking about alot lately: security tokens.
What the Heck Is A Security Token?!?!
Before we jump into security tokens, the first thing we need to address is: what the heck is a security?
According to the SEC (info pulled from investopedia.com), "A security is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position a publicly traded corporation."So, is that really important to us in the crypto space? I'd say under that definition, no. But we have to know that the issue isn't with the security tokens that are out there, because they really aren't out there yet!
The issue is with utility tokens, that at the time of launch truly have no utility. The thing of it is, if there is a new ICO you are launching or investing in, if and when the SEC comes through and they analyze the project... and that ICO is bringing in money to issue tokens but there is no use for the tokens (no live mainnet, no test network, no true reason for the token to exist), the reality is you will be found to be investing in a security. But the thing that a lot of crypto investors don't realize is, that if you as a consumer are invested in a security platform and the SEC determines the platform is a security, NOT a utility token, you as a consumer can be held responsible as well as the company, being penalized and forced to pay fines.
What Are Some Security Tokens To Invest In?
You may be asking yourself, "if utility tokens are at risk and securities are going to be important over the coming years, how do i get my hands on some security tokens?" The reality is that at this point you probably can't! But there is a lot on the horizon! You've likely heard of Polymath before. They're a big name in the crypto space but not too many people seem to know too much about the back-workings of the project. Polymath is currently an ERC-20 based token, and they are building a platform for a new standardized method of launching a security token. Currently we have the ERC-20 format, which is a tokenized asset on the Ethereum blockchain, and they will be adapting it to the "ST-20" which when completed will be a new launching platform for security token projects that want to launch a compliant security ICO or are underfunded or too early in development for a true utility token.
Along with Polymath, we've seen another new project: Securitize. The company is under 50% ownership of SPiCE VC, a Venture capital group that has invested in multiple blockchain projects. Securitize seems to be a similar layout to the Polymath concept, but they take it a step further. They are offering people who are launching ICOs to more effectively hit the market as a security. But Securitize seems to provide a more expansive set of tools, and much more help with the ICO set up itself, much more than simply the ERC-20 "ST-20" smart contract standard provided by polymath.
The Future
But we must remember when dealing with a new market and SEC regulations there are some things to be considered regarding trading these assets. Unlike the traditional exchanges where we can jump in and trade our utility tokens for other cryptos or fiat, mixing that with security tokens just wouldn't be feasible due to regulatory complications of the securities market.
A number of different groups that have been playing around with the idea of a security based trading platform to help address the issue. Currently the tZero project is the biggest of these, is actually owned by Overstock, and has a few crossover advisers from Poly math and vice versa. It will essentially act as a highly liquid security token trading marketplace. This will be! great because one of the biggest issues I have experienced as a crypto trader is that if you aren't trading the absolute top market cap tokens, that liquidity is simply not there.
Why Should We Care?
With security tokens, we will open the space to higher level investors and greater levels of liquidity. Now granted, while you won't have as many average consumers participating in the ICOs themselves or the presale of these security tokens, the ability to purchase and trade them will be much more feasible than trading some of the smaller no name utility tokens floating around out there....And just to be clear, utility tokens are not even close to dead!!! They aren't going anywhere, but these new ICO's that are launching will be facing much more stringent restrictions, and I believe the security token concept will truly be expanded on in 2018 and 2019, becoming a big part of what we see in crypto.
As we move through 2018 there seems to be a relatively small number of groups that are moving forward on this security space. One of those few groups is the "Security Token Partners" headed up by Mario Pazos. He's a major investor in the blockchain space and a driving force in the forward motion of the security revolution in cryptos, we featured an interview with him as our first steemit post over here, if you're interested.
And remember, our CryptoPlayhouse.com website is officially launched (new and improving!), so head over and sign up for the Elite Club! If you are a current ICO or blockchain project looking for aid, we have a "Strategic Partnership" section you should check out as well!
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