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.
Neufund Preps for GREYP Token Sale Upon FMA Approval
FMA Approval in Liechtenstein
In a decision that was long awaited, Neufund has been given more than just the approval to host an upcoming GREYP token sale. The tokenization platform was given the greenlight to host all such offerings, moving forward. This authorization came on behalf of the Financial Market Authority (FMA) in Liechtenstein.
This decision will have huge ramifications for Neufund, as they immediately become one of the few, if not the only, entity that is able to offer such flexibility. This will primarily be seen through their ability to open token sales to a broader range of investors, as minimum purchases can be as low as €10.
Neufund indicates that with the approval of the FMA, they have various token events in the pipeline, spanning various countries. They specifically note India, Croatia, Germany, and Belgium as a few of these.
Go for Launch
GREYP is a smart-mobility company, which strives to develop not only next-gen hardware, but to develop the infrastructure surrounding a ride sharing e-bike platform, enabled through IoT.
With regards to GREYP, in particular, the sale will see Neufund sell and issue digital securities on behalf of the former, which imbue various rights upon their holders. This includes, not only equity within GREYP, but, both, voting rights and dividend rights.
For the finer details on what the tokens entail, check out the Neufund listing page HERE.
Upon announcing this development, representatives from, each, the government and Neufund, took the time to comment.
Adrian Hasler, Prime Minister of Liechtenstein, stated,
“I am pleased that Neufund has decided on Liechtenstein. This shows that Liechtenstein, with its open attitude towards new technologies, is perceived as an attractive location for innovative business models.”
Zoe Adamovicz, CEO of Neufund, stated,
“Today, Neufund delivers on its promise to democratize access to funding for entrepreneurs globally and enable anyone to access most innovative investment opportunities with ease, in a compliant and secure environment. It’s a big day – not just for Neufund, but business and finance communities at large.”
Speaking with Zoe
Earlier this year, we were fortunate to have completed an exclusive interview with Neufund CEO, Zoe Adamovicz. In this discussion we touch on what separates Neufund from the pack, and the benefits of STO-like events.
Neufund was founded in 2016, and maintains headquarters in Berlin, Germany. Above all, the company works to provide a range of services which facilitate tokenization. Neufund was one of the first companies to successfully complete their very own STO in 2019.
CEO, Zoe Adamovicz, currently oversees company operations.
Based in Croatia, GREYP is a tech company, which is working to usher in the next generation of ‘smart mobility’. While young, GREYP, has the backing of companies such as T-Mobile, Porsche, and others. They also have experience to draw upon, as they are a subsidiary of Rimac Automobiles – manufacturers of high-end electric sports cars.
CEO, Mate Rimac, currently oversees company operations.
Harbor Tokenizes $100 Million in Real Estate Funds on ETH
One of the leading tokenization platforms, Harbor announced this week that they successfully tokenized $100 million in real estate funds. The firm tokenized four major funds with the goal to increase liquidity for investors. The move showcases growing interest by investors towards more liquid alternative investments.
As part of the tokenization, Harbor provides investors with access to an iCAP-branded platform and private marketplace for secondary transfers. Here, investors can trade their securities in full compliance with the SEC. Speaking on the decision, Harbor’s CEO, Josh Stein described the maneuver as the natural evolution.
The tokenized real estate fund includes a mash-up of 17 broker-dealers, a myriad of placement agents, and approximately 1,100 private investors. Importantly, iCAP Equity is the fund’s manager.
iCAP’s CEO, Chris Christenson spoke on the decision in detail in a recent interview. Here he explained why it was important to create the best investment experience possible for his clients. In his words, the best way to accomplish this monumental task was “providing liquidity for them.”
Harbor Tokenizes Funds on Ethereum Blockchain
Harbor chose Ethereum’s ERC-20 standard for the tokenization of the funds. Importantly, the ERC- 20 token standard is the most popular in use today.
More than Issuance
Stein envisions Harbor as more than just an issuance platform. Now, the company seeks to provide businesses with a solid tokenization infrastructure. In this manner, companies can tokenize their existing assets.
Stein explained that the demand for newly issued tokens was far less than previously expected. Interestingly, Harbor noticed that ICO investors were of the speculative nature versus more traditional alternative investments.
Tokenizing Existing Assets
Notably, Harbor discovered that tokenizing the cap tables of existing assets provides a clear benefit to everyone involved – sponsors, placement agents, and investors. They are also more geared towards the traditional investment community.
Harbor Tokenizes Shares to Add Liquidity to the Market
Traditionally, securities investors agree upon a multi-year lockup. Basically, you can’t sell your shares until an agreed-upon date. The problem here is that in many instances, investors need to access those funds for certain reasons prior to the agreed-upon date.
In the traditional system, an investor would have to wait out the years until granted sales access or find an investor willing to take over the waiting period. Harbor’s platform does away with this nonsense and allows investors to trade their tokenized shares as soon as the SEC mandatory one year lockup period ends.
Experience Equals Lessons
Like any true pioneer, hard lessons were part of the learning process. Last year, Harbor attempted to issue tokenized shares in an apartment building. While the concept was solid, discrepancies arose between the mortgage lender. In the end, the deal was scrapped before launch.
Harbor Tokenizes the World
Harbor appears to have the flexibility and forward-thinking needed to adjust to the ever-changing crypto landscape. You can expect to see more major players in the tokenization sector begin to duplicate this strategy in the coming months. For now, Harbor appears to be a step ahead of the curve.
Prometheum Acquires InteliClear Post Trading Systems
The popular security token exchange Prometheum announced the acquisition of the InteliClear clearing system this month. The addition places Prometheum as the front runner to be the first SEC-registered all-inclusive Alternate Trading System (ATS). The news showcases the growing competition in the sector and symbolizes a shift in strategies amongst the top exchanges.
An Industry First
Currently, no ATS has the ability to clear transactions in house. Traditionally, exchanges utilize a third-party clearinghouse to complete trades per the Security Exchange Act (SEA). This process adds time and additional fees to the transaction. Prometheum seeks to speed up the entire process via the InteliClear integration. Now clients can settle transactions in hours versus days.
Discussing the maneuver, Prometheum CEO, Aaron Kaplan called the acquisition a “milestone” for the security token industry. He spoke on why InteliClear’s system is an excellent addition to the company’s portfolio. Finally, he discussed the importance of Prometheum becoming the first end-to-end security token trading solution.
The Prometheum exchange entered the market with the goal to provide users with a complete ecosystem for tokenized securities. The New York-based firm was one of the first SEC approved tokenized securities platforms available to the public. The company originally filed with the SEC back in November 2017.
Today, the platform hosts some of the most notable security tokens ever launched including Lottery. The Lottery STO made headlines after providing investors an opportunity to participate in revenue derived from the company’s gaming platform for charitable fundraising.
Investors now gain access to more value after the InteliClear acquisition. InteliClear provides businesses with a host of helpful pre and post-trade services. The company uses a custom-built transaction engine that enables importation of trades and transactions from multiple sources. These turnkey and custom solutions enable businesses to fulfill their STO ambitions with the least amount of funding necessary.
The InteliClear system supports tokenized equities, options, fixed incomes, mutual funds, money/market products, and of course, tokenized assets. The global network is able to utilize a host of national currencies and can handle real-time, high volume, operations. The platform automatically calculates trade compression, fees, commissions, and billing to simplify the entire process for businesses.
Security Token Sector Gets More Competitive
The security token arena continues to see more competition develop. The recent SEC approval of numerous A+ filings enables platforms such as Prometheum to take its platform to the next level. Today, the number of security token exchanges in operation continues to expand at an impressive rate. Already, the SEC approved Blockstack, the Props Project, and YouNow’s STO platforms this year. After taking over a year to approve some of these projects, the news is welcomed by the cryptocommunity.
Prometheum Leads the Race
Prometheum now has the tools and capabilities to take a strong lead in the developing security token sector. You can expect to hear more from this exchange as it continues on its STO launch course. For now, Prometheum is the only security token exchange to provide such robust functionality in the market.