Security Token Technology is Taking of like a Space-X Rocketship
Initial coin offerings (ICO’s) in 2017 and 2018 saw a surge of unprecedented proportions we have not seen since the rise of cryptocurrency in 2012. Just like any technology, a new and improved model inevitably comes out that replaces the older, outdated model. We are seeing the same trend now in the crypto world. The new and improved ICO? Security Token Offerings.
There’s no way sugar coat this, but ICO’s are on the decline. In August of 2018, cryptocurrency and blockchain startups raised a mere $326 million. This might sound like a lot of money, which in reality it is but it is the smallest amount raised since May of last year.
The main problem starts with investors not really understanding what type of token the ICO they are investing in is being used for, plus there are a lot of scams out there (but we will table that discussion for another time). There are two types of tokens: Utility Tokens and Security Tokens.
- Utility tokens are a digital token of cryptocurrency that are issued in order to purchase a good or service offered by the issuer and as a method of fundraising for the start-up.
- Security Tokens are more of an asset and can be used to represent ownership in a company, house, car or any other tangible asset you can think of.
So back to the decline of ICO’s: Do Not Be Afraid! The fact that ICO’s are down this year is not a bad thing by any stretch of the imagination, nor a sign of a faltering crypto market as many had predicted. In fact, it shows the opposite outlook; a very positive one. Just like any technology, people make improvements to make it better and more efficient. Cryptocurrency is no different, people much smarter than myself figured out that tokenizing a physical asset and combining it with blockchain technology opens up a massive new crypto wormhole with endless blockchain applications. Security tokens give us a glimpse of the future, and the future and looks glorious.
(The above chart shows the dramatic increase in security token registrations over the past year-SEC)
The above chart shows the dramatic increase in security token registrations from mid-2017 to mid- 2018. We must look into the past to see the future, this valuable insight into the past shows the future trend and direction of the security token market. The trend is not happening by sheer happenstance, security tokens give investors something tangible to invest in, like real estate as an example.
Real Estate Marketplace, RealtyReturns.io saw this security token trend coming early and harnessed the concept; creating Returns Tokens which represent fractionalized ownership in income-producing real estate properties. Investors can purchase a Returns Token which represents their partial ownership in a specific property and earn passive income from the property. RealtyReturns have essentially tokenized the entire real estate market by integrating security tokens with blockchain smart contracts and cryptocurrency. This provides all the upside of traditional real estate investing (security, stability and income generation abilities) while solving cross-border investing problems, providing a shelter from the volitility of the crypto markets and creating real estate investment liquidity through a growing number of security token exchanges.
RealtyReturns is launching their ICO on October 23rd to raise money for business operations, expanding the team, building out their real estate marketplace and growing the future of real estate investing by; providing fractionalized real estate ownership opportunities in the United States to investors across the world.
An unexpected outcome real estate tokenization provides is liquidity. Real estate is a historically illiquid asset class and has pushed potential investors away from real estate and into traditional investment markets for decades. Now, if a real estate investor wants liquidity, they are easily able to sell their Returns Token on a security token exchange and there is no impact on the other investors. As early security token pioneer and Desico CEO so eloquently put it; “Tokenized securities are bridging the gap between traditional financial markets and crypto markets because they are aligned with everyone’s interests.” These interests are clearly evident in RealtyReturns utilization of security tokens because the seller can simply list their Token on a rapidly growing number of security token exchanges, like OpenFinance and Polymath to name a few.
A recent Forbes article, Institutional Investors Bet on Crypto Market with Tokenized Securities highlights the movement from traditional utility tokens into securitized, asset backed tokens and how that will impact the crypto market moving forward. “2017 was the year of the utility token, 2018 was the year of realizing the mistake of the utility token, and 2019 will be the year for tokenized securities. STOs are the new ICOs.” -Rachael Wolfson, Forbes Crypto & Blockchain Expert Contributor. As we move into 2019, we will see just how big of an impact security token marketplace startups like RealtyReturns will have on the crypto markets but more importantly, the impact on other markets like the 217 Trillion dollar real estate market. A market that has remained unchanged for decades.
Rexford is a serial entrepreneur, real estate investor and public speaker. Rexford previously co-founded DreamFunded with, San Francisco’s first registered equity crowdfunding platform; helping raise money for promising startups. His latest venture, security token real estate marketplace RealtyReturns is preparing for its’ upcoming ICO on October 23rd. He is an experienced real estate investor and developer; working alongside his father Robert E. Hibbs to manage the Hibbs Family Office.
Sources: Forbes, NewsBTC, SEC, Bitcoin News