The Growing World of Security Token Protocols
Security tokens are one of the fastest growing sectors in the cryptomarket. These tokens allow companies to remain government compliant and utilize blockchain technology to enable more secure business transactions. As the security token market expands, more security token protocols become available to the public.
The Right Token for the Job
Security tokens contain regulatory protocol directly within their coding. This self-contained script is perfect for use in tokenization scenarios. When a token represents ownership rights to a piece of property, revenue sharing, security or other regulated item, security tokens are the only option.
Security token adoption increased significantly in the last few months. Currently, Security tokens make up around 6.54 percent of the total crypto market according to a recent study provided by Hashgard. Service tokens account for the largest percentage of the market at 49.05 percent, followed by utility tokens (25.3%), and hybrid tokens (12.47%). Another report published by ICORating showed that STO growth climbed 1.66 percent during Q3 2018. At the same time, utility token issuance decreased by 10 percent.
Security token protocols come in a lot of different styles nowadays and depending on the functionality of the security token in question, certain protocols are better suited to handle the tasks. Consequently, this need for function-specific security tokens ushered in a wave of new security token protocols.
Polymath‘s ST-20 protocol was one of the first security token standards to enter the market. The token features integrated KYC (Know Your Customer) and AML (Anti-MoneyLaundering) mechanisms. Polymath users can issue customized security tokens directly through the platform using the simplistic interface. What makes the ST-20 unique is that the token is issued on Polymaths custom built blockchain.
The token is hugely popular as Polymath is one of the largest security token launch platforms available to the public. The company was the first firm to launch a global security token conference. As an early entry to the security token race, Polymath wanted to take all the regulatory shortcomings of the ERC-20 protocol and give companies a more secure alternative. The firm succeeded in creating a widely used security token standard.
SFT (Secured Financial Transaction Protocol)
The SFT protocol entered the market on November 28, 2018. This security token protocol uses Solidity. Solidity is a programming language used by Ethereum developers. SFT tokens live on the Ethereum blockchain.
This protocol features many of the robust and modular features found in the popular ERC-20 protocol such as easy smart contract programming.SFT tokens enable the tokenization of debt and equity-based securities.
German-based Hyperlink Capital entered the market on July 1, 2018. The development team created the SFT protocol for their digital securities platform which is intended to expand adoption of blockchain-based capital markets. The company has a history of activity in the blockchain space. Recently, Hyperlink Capital’s focus is on tokenized securities.
News of the ERC-1450 protocol entered the market in November 2018 via a medium post by StartEngineFounder Howard Marks. This protocol was developed for creating digital stock certificates. The company behind the protocol, StartEngine Secure, seeks to offer entrepreneurs democratized access to funding.
StartEngine Secure entered the blockchain sector in2012 shortly after the signing into law of the Jumpstart Our Business StartupsAct which was an effort to provide access to more capital for startups. The platform features full transparency and a registered transfer agent updates ownership details in accordance with securities laws. The data is published via the Ethereum blockchain.
CAT-20 / CAT – 721
The CAT-20 and CAT-721 protocols are the world’s first multi-ledger security tokens. These tokens can be transferred across blockchains including Ethereum, Ripple, EoS, GoChain, and Stellar. Tokens issued on CAT-20 and CAT-721 protocols support Securrency‘s full suite of token issuance tools.
Washington-based Securrency entered the market in2015. The Securrency platform features an automated source of funds verification system and an easy to learn user interface. Additionally, the company behind the protocol, Securrency, employs a Service and Rules engine which maintains compliance across secondary market trading.
The DS protocol is an open-source development infrastructure designed around the needs of the security token industry. TheDS Protocol is open-source and designed to support third-party applications. Tokens issued on this protocol reside on the Ethereum blockchain.
Securitize issued the DS Protocol on Jun 5th, 2018 via a press release. DS includes integrated compliance and registry services. Also, token holders receive regular updates about relevant events via their tokens. The DSProtocol focuses on creating more liquidity within the security token arena.
The R-token standard entered the market on February 6th, 2018. R-tokens are ERC-20 tokens with built-in regulatory smart contracts. The regulatory services of these tokens configure to meet the needs of the issuer. The R-token standard features integrated KYC, AML, and taxation services.
Harbor developed the R-token protocol for use within their popular token issuance platform. In April 2018 Harbor successfully raised $28 million to further development into their tokenized securities platform.
The SRC20 protocol allows users to tokenize any item. The protocol is a cryptographic standard with integrated governance. Users can tokenize securities, buildings, farms, businesses, hedge funds, and even ownership in development projects. The flexibility of the SRC20 token is its strong point.
SRC20 operates on the SWARM platform. The SWARM platform incentivizes users for their positive contributions. The platform learns from your fundraising campaigns and uses the data to facilitate a more user-friendly experience every time you start a new campaign.
The tZERO protocol integrates the benefits of blockchain technology into the existing market systems. ThetZERO platform will one day facilitate both the issuances and easy trading of security tokens. The developers seek to create the first national securities exchange specifically designed for security tokens.
tZERO is the direct result of a strategic partnership with BOX Digital Markets. Earlier in the year tZERO filed an SEC form D. Form D is required by companies that seek to issue securities. IF the form is approved, tZERO would be the first SEC regulated security token issuance/trading platform in the cryptospace.
More Security Token Protocols on the Horizon
The Security token sector is just heating up and you can expect many more entries into the market as the year wraps up. Companies want the benefits of blockchain technology and security tokens provide these features without worry. It will be interesting to see how each of these protocols fair in the coming months as the market’s competition increases.
TokenSoft Launches Major Wallet Upgrade
This week, the SEC-regulated security token issuance platform, TokenSoft introduced a major upgrade. The new functionality comes in the form of a self-managed wallet for traders. The revamped system promises to be an easy-to-use interface coupled with advanced safety measures. Notably, the upgrade falls in line with TokenSoft’s recent expansions in the market.
Importantly, the new wallet features a less technical user interface. As such, users can easily maintain and manage investments directly from the wallet portal. Additionally, the new wallet integrates a host of regulatory-compliant safety measures, most similar in nature to Ethereum’s ERC-1404 protocol. Also, the wallet includes benefits for issuers as well. For example, there is built-in reporting to simplify auditing systems. Additionally, users receive automated dividend distributions, which also reduces transaction costs.
ITokenSoft added some important security updates to their wallet as well. For accounts that hold over $1 billion in investments, a new Multi-signature system is available. The system utilizes a key mannequin to provide the highest level of protection for your digital assets. Multi-signature wallets provide more protection than traditional wallets. Mainly because there are multiple keys required to complete a transaction.
Discussing the upgrade, TokenSoft CEO, Mason Borda described the excitement surrounding the project. He explained how the new wallet pairs a “safety package” with a simplified UX. This simplification of the STO process is sure to benefit the firm’s 100,000 registered traders.
Additionally, Jordan Davis, Director of Enterprise, described the effect of the upgrade within the financial markets. He stated that these new features apply pressure on traditional financial institutions to reply with a similar product. In turn, all investors benefit because of the new administration instruments. Davis envisions a day where you can easily choose what providers have access to your account, as easy as you choose Netflix shows to watch.
Last Wallet Upgrade
TokenSoft’s last major wallet upgrade came in January 2019. At that time, the firm announced the launch of its Knox Wallet. Impressively, the Knox Wallet was one of the first mobile, cold-storage solutions for securing digital securities.
TokenSoft entered the market in 2017 with the goal to simplify the issuance and management of digital securities on the blockchain, at scale, and within compliance. The San Francisco-based firm currently offers a full suite of security token and tokenization services. Since its inception, the company continued to gain popularity. Today, TokenSoft is one of the most recognizable names in the market.
In December, the firm’s subsidiary, DTAC LLC registered with the SEC as a Transfer Agent. Importantly, the firm also partnered with Ex- Israeli military cybersecurity firm – HUB Security this month. HUB now provides TokenSoft advanced end-to-end encryption protection on USB and Bluetooth devices.
TokenSoft Gains Momentum
TokenSoft continues to make headlines across the sector for its innovative approach to the market. The firm consistently advances its functionality and positioning. You can expect this latest upgrade to further cement TokenSoft as an industry leader.
TokenSoft Partners with Ex-Military Cyber Firm Hub Security
This week, the token issuance platform, TokenSoft made major upgrades to the security of its systems via a partnership with Israel’s ex-military cyber firm Hub Security. The maneuver gives Tokensoft access to some of the most advanced security features in the world. As such, the partnership bolsters the firm’s market positioning in a major way.
Discussing the new partnership, Mason Borda, TokenSoft’s CEO explained his firm’s dedication to customer security as a key priority. Additionally, he spoke on how the current state of the market lacks access to institutional-grade technology solutions for security tokens. Borda stated that his firm was “delighted” to partner with such a reputable security service provider.
Consequently, Tokensoft now offers users top-tier, military-grade protection for their tokens, keys, and assets. The integration gives Tokensoft the most advanced key management solution available in the market today.
Specifically, clients of TokenSoft’s transfer agent, DTAC are now privy to military-grade cybersecurity tactics. These security upgrades include FIPS140-2 Level 4 protection. On top of this protection, TokenSoft now offers a combination of hardware and software solutions to keep your tokens safe. These features include a multi-signature vault, a hardware firewall, and access control. Notably, the platform also integrates a neural network learning system designed to anticipate cyberattacks
Hub Security’s miniHSM solution provides governments, militaries, and companies end-to-end encrypted USB and wireless Bluetooth connectivity. This strategy creates a cryptographic environment for the whole lifecycle of digital assets. Developers believe this approach will help curb attacks from organized crime and hackers in the future.
Additionally, TokenSoft now gains access to Hub’s management solution. This suite of products includes Hub Security’s HSM device and independent OS for the encryption, management, and distribution of keys.
Speaking on the development, Eyal Moshe CEO of Hub Security touted the reasoning behind an end-to-end approach to the development and delivery of hardware and software components. He described why this strategy provides the highest level of security throughout the entire product lifecycle. Interestingly, he pointed out that the Covid-19 pandemic prevents people from “operating the on-premise security systems that controls large amounts of assets.”
Tokensoft entered the market in 2017 with the goal to simplify the processes involved for companies seeking to issue and manage digital securities on the blockchain, at scale, and within compliance. Recently, the firm acquired a stake in an SEC-regulated firm in a move that allows the company to operate as a registered broker-dealer in the US.
Hub Security entered the market on Nov 1, 2017. The firm offers hardware security solutions for regulation, privacy, fintech, cloud, and blockchain systems. Specifically, the company specializes in blockchain, cybersecurity, financial services, FinTech, information technology, and privacy products.
TokenSoft – Security First
TokenSoft is now ready to continue on its path towards tokenizing the global markets. This company made the right move when it decided to beef up its security via Hub. Now, the platform can offer its users the highest level of protection available. This added protection is critical when you consider the number of attacks these platforms continue to encounter. Hopefully, the new security measures will prove effective at protecting users tokens in the future.
Blockpulse – Lemonway Receive Registration from ACPR Banque de France
This week, the French tokenization startup Blockpulse received registration from the ACPR Bank of France. The regulatory approval allows Blockpulse to move forward with its tokenization platform. Importantly, the registration makes Blockpulse the first STO platform to achieve registration from French financial regulators. Now, French investors have access to all the benefits provided by tokenized securities
As a registered STO platform, Blockpulse gains significant rights in the marketplace. For one, the registration with ACPR Banque de France allows them to add functionalities concerning the Euro. Specifically, the registration allows Blockpulse to manage euro payments for financial instruments, transfers, and token issuances.
In a recent interview, Blockpulse COO Marien Irzykiewicz spoke on his firm’s achievements. He described how the company registered at ACPR Banque de France with its partner, Lemonway, to bring the concept to reality. Importantly, Lemonway is a leading European digital payment solution provider for investment platforms.
The partnership allows the firm to simplify its business systems, For example, the strategy provides the firm the ability to manage both cash and securities flows on the same blockchain. Additionally, the company plans to automatize critical actions through the use of smart contracts. These actions could include payment disbursements, investor verifications, and token issuances.
Blockpulse entered the market in 2018 with the goal to create an all-in-one box of tools to better serve the STO community. Today, this privately owned company focuses on solutions to raise funds, associate employees and manage investors. Notably, French companies can manage their fundraising in a manner that was previously not possible using the platform. As such, the platform allows companies to create legal documentation, electronic signatures, online payments, cap tables and registry of share movements directly.
For its part, Lemonway provides Blockpulse with top-tier KYC / LCBFT services. Recently, Blockpulse developers described the partnership as a success. They explained that the partnership brings more liquid management to the market. Also, it ensures that Blockport meets all the EU’s stringent securities regulations.
At this time, Blockpulse is only available to French residents. The company’s CEO stated that the firm intends to “expand in the European Union through Benelux and Spain” in the coming months. For now, investors outside of France can participate in sales, but only meeting pending regulatory restrictions.
French Pivot to Blockchain
As of last year, French regulators began an open policy towards STO integration. Notably, in September 2019, the French Central Bank Governor, Villeroy de Galhau, stated that the bank was observing tokenized securities with “great interests.” Earlier in the same year, Societe Generale, the third-largest bank in the country, issued a €100 million tokenized bond. This latest registration demonstrates that regulators are ready to push blockchain integration to new heights.
Feel the Blockpulse
Blockpulse receiving registration from the ACPR Banque de France is a huge step forward for the entire EU market. The French STO sector could use this momentum to catch up to its EU counterparts in the coming months. As it stands today, the company has the positioning to become the premier STO platform in the country.