Initial Coin Offerings (ICOs) expanded during the last year at very fast rates. Some of them have been labelled as utilities in order to avoid being regulated, although in some cases utility exists. The first utility token was Bitcoin, allowing users to have access to its network.
In the future, there will be new tokens available, including new securities that will be removing middlemen exchanges using blockchain-based systems. It might be possible to tokenize stocks, bonds and investment contracts to tokens, among many other things such as equity, dividends, voting rights and more.
According to an article released by Crypto Dizrupt, the global financial system has improved after incorporating the latest technologies. Using tokenized private securities, assets can be traded on secondary markets without traditional private securities. This means that it might be possible to see a future in which the security token market can exceed the US public equities space.
Security tokens can be divided into millions of pieces, something similar to Bitcoin, that can be divided into Satoshis. That means that traditional assets will now not have minimum investment requirements. Why not create a world in which users can pay for things using part of their stocks?
Implementing blockchain technology would allow investors from all over the world to have a portfolio made of several companies just because these stocks will be tokenized on the blockchain. Some of the global companies could just account a few cents in an investors’ portfolio.
Banks and other brokerage firms can be removed from the process. Implementing peer-to-peer networks it is possible to eliminate middleman in the stock purchasing process. There are several decentralized exchanges that are becoming scalable and more user-friendly than never before. This lowers down the entry barriers for new investors and allows new participants to join the financial system.
Tokenizing assets it is also possible to increase liquidity in the market. Some securities can be sold at a higher or lower price depending on the available liquidity in the market. When a security is tokenized, it is easier to trade in secondary markets. As there are no middlemen in this process, exchanges will try to improve their services by tokenizing their services and remain competitive. This will have a positive impact on liquidity.
One of the most popular blockchain networks working in this space is Ethereum (ETH) that was able to offer different solutions for tokenized securities. According to CryptoDizrupt, the demand for Ether could grow since it will be used to power these assets and transacting them.
There are different exchanges and platforms that are working on this issue to meet the demand of the market. In the future, we could see new p¡platforms start to release similar systems and offer better opportunities to investors.