Bridging Conventional Assets With Security Tokens

Maheen Hernandez By Maheen Hernandez October 24, 2018 Off

The cryptocurrency realm is filled with topics related to asset tokenization and security tokens. Increasing numbers of real estate companies are trying to position themselves in the market via tokenized assets.

Despite the excitement, there is a great deal of hurdle if one should progress in this field.  There are a lot of factors to be considered before converting a traditional asset in to a digital token on the blockchain.

From a technical point of view it is not hard to establish security tokens using the blockchain technology.  Several companies have already done it.

For instance, On Ethereum, standard interfaces like “ERC-20, ERC-721, and ERC-1155” have been established.

Polymath’s ST-20 is an extension of ERC-20.  The general purpose is to increase asset flexibility.

The definition for security token has been provided by Taylor Pearson as ““Tokenized securities are securities with an electronic wrapper round them.”  This was a simple breakdown of the asset type.

Securities are interchangeable.  Being compatible with ERC-20 at a technical level, this technology does not really account for the regulatory standards of the features proposed for trading and issuing a security token.

Polymath is therefore building an extended version of ERC-20 standard (ST-20) in order to ensure compliance with regulatory standards so that they can enter the required information as inputs, which will in turn affect the extensibility of the security token.

There are several conventional financial assets on the blockchain.  In the process of transitioning them all there would be a need for some essential functionalities with slight alterations.

Jimmy Songs’ opinion with respect to connecting the physical and digital assets comes with its own set of flaws.  The general process of tokenization involves assets that are currently not interchangeable with other asset types.

May be non-fungible assets can be technically represented using non-fungible standards or technical codes like ERC-721 or ERC-1155.

There can be technical standards that facilitate batch trading of assets, which will eventually be used to represent both fungible and non-fungible asset classes on the same platform.

The Ethereum Token standards have been built considering that they can use them as templates in cases where they will have to bring in other assets on the chain.

ERC-1155 according to Enjin has been proposed as a method for improving the collective efficiency of digital trading, particularly so with crypto collectibles in gaming.

Blockchains are offering many benefits in the form of being a settlement layer that is a decentralized infrastructure in order to transition assets on the blockchain.  Leaseum Partners are offering Security tokens based on blockchain technology; however, there are several technical innovations adding up in the crypto space every day.

Bridging conventional assets with security tokens is; however, seen to be the future in the security tokens industry.