Thoughts about Security Tokens
With all the fraud, loss, boom and bust that has occured over the last years, security tokens are what many look for to bring some real growth to the ecology now that the ICOs are apparently dead.
ICOs cannot be trusted so we are going back to what we always used to gain trust in the past and that is a stamp of approval from the authorities.
Security tokens make it so that a regulated asset can be traded as a cryptocurrency.
In my opinion there is nothing wrong with having a security flow over some blockchain. It may make the transaction and transfer of such assets more secure and efficient.
However I am not sure this is what will create a lot of value and bring lots of business to the space.
Like a Catalog on the Internet
A security token to me is like putting a catalog on the internet. Nothing wrong with it, but does not change the business model and also does not really solve a problem.
A security by definition falls under a security law of a country. As such it must comply with regulations, which is how the trust is ensured and how we avoid fraud. Well we don't avoid it but things can be done when it happened.
Already we can trade securities on regulated markets and making them tokens on a blockchain does not really change much. Because in order to trade them the exchange also has to be compliant etc.
So what really changes? Nothing really when it comes to the cost and effort to create this trust.
The thing is securities are a manual way to gain trust. And all the processes in place take time and are expensive. There are rules in place that need to be followed and thus require controlled processes. Controlled means the ability of humans to overlook and intervene. Thus manual.
The anarchistic way of how blockchains work, without permission other than possession is not something that works for securities because control of who possesses the asset is integral for the regulated way to work. As is the ability to take the asset away, which a blockchain only supports via 2nd layer.
As a result these manual trust layers would have to be built on top of a blockchain. That is not impossible to do. The USDC coin from coinbase is a great example. Hower if you do this than the value and efficiency a blockchain provides is not that useful anymore. It is like a road without speed limit but big speed bumps.
This is why I do not think security tokens will create a huge inflow of capital. Just like shops that put their catalogs on the internet did not have huge business increase because if the internet.
It was business that found new business models the new technology supports and that is what is needed for the blockchains to flourish.
New Business Models and Time
It took a long time for strong internet companies to emerge. Amazon, Google, Facebook, Twitter, Airbnb, Uber etc are all really recent companies even that were not around in the 90is when the internet emerged. They did not just pop up 3-5 years later. Also none of them have a business model that is possible without the internet.
It takes time for leaders to emerge and build new ways to create value that were not possible before. I am sure there are many leaders building new business as we speak but it may take a while for them to a appear.
I will cheer on every successful security token on the blockchain, but i may prefer to invest into traditional securities via my traditional bank interface.
I am looking for crypto assets that look entirely different than a security or the traditional companies we invest in and look to invest into securities all the same.
Just like I still read books and use the internet to learn at the same time. Maybe an ebook is a better version of a book. But it is still a book.