Categorizing crypto markets isn’t easy. Just like any new asset class, there are a lot of unknowns. We don’t know how regulatory bodies will regulate most tokens, for example, and we don’t know if cryptoassets will ever be declared as securities.
Despite these unknowns, efforts have been made to categorize security tokens and develop a market taxonomy. The latest effort comes from Jesus Rodriguez at Strategic Coin. Rodriguez, a blogger and angel investor specializing in AI and blockchain technologies, explains how we could categorize security tokens.
Security tokens may be regulated and legal at some point in the future. Rodriguez attempts to classify security tokens into different categories. The latest article complements a previous article from Strategic Coin that categorized cryptoassets in general. This latest taxonomy focuses specifically on security tokens.
“Every week, I receive requests to review 2–3 projects in the security token space and I find that most of them have intellectual merits and proper technical rigor,”
explains Rodriguez before categorizing security tokens.
“The intrinsic complexity of security tokens is translating into a very large and complex ecosystem.”
It’s not only the technology that makes the ecosystem complex; it’s also the nature of the value behind security tokens.
With that in mind, let’s take a look at how Jesus Rodriguez created a market taxonomy for security tokens.
Market Taxonomy For Security Tokens
Here’s how Rodriguez would classify today’s market of security tokens, based on the categories and prominent groups of tokens we’re seeing:
- Asset Tokenization Platforms: This category includes technologies that enable the creation and issuance of security tokens. in other words, many of the security token categories listed below will be released or created through asset tokenization platforms.
- Token Standards: These are the standards by which security tokens need to abide. These are the main protocols that are becoming standard for security tokens.
- Liquidity Providers: This group includes platforms that are enabling liquidity for security tokens. They allow security tokens to be easily traded and transferable.
- Exchanges: This category lists the first wave of crypto exchanges that are supporting security tokens.
- Foundational Protocols: Rodriguez describes this as “a generic category that includes protocols that are common across many security token products.”
- Derivatives: This group includes the nascent area of crypto-derivatives protocols likely to impact the security tokens market in the future.
- Stable Coins: Stable coins are special coins designed to stabilize markets regardless of whether crypto prices are falling or rising. They hold their value relative to a peg – like the USD or the EUR.
- Tokenized Funds: We’re starting to see tokenized venture funds, where traditional venture funds will split shares into tokens, and then sell those tokens to investors.
- Crowdfunding STO Marketplaces: This group includes platforms facilitating security token offerings (STO) for private companies. These are marketplaces where companies can sell their own regulated, legal security tokens – similar to how today’s stock exchanges work.
- Advisory Firms: A growing number of advisory firms are entering the security token space. These are companies that advise others on how to launch, manage, and achieve regulation for their security tokens.
- Industry Specific Asset Backed Tokens: This group consists of vertical categories specific to different industries. As security tokens become more popular, we’re going to see asset-backed tokens specific to various industries.
“There are other categories that have been steadily gaining traction in the security token markets but I think the previous list represents a good starting point,”
explains Rodriguez to summarize his post.
However, he emphasizes that the list is not complete, and that there is still plenty of room to grow and plenty of categories to add.