A multi-trillion dollar universe of illiquid, privately held assets stands ready to be securitized on the blockchain. Millions in venture capital are riding on the premise. So why haven’t security tokens caught on yet?
Tokens can be divided into two types: utility tokens and security tokens. Most people are more familiar with utility tokens than security tokens because they are much more common. (Ethereum and litecoin are examples of utility tokens.) A security token, on the other hand, represents an ownership stake in an asset, typically a company, and entitles its holder to a share of profits in the asset. Security tokens are much less common.
Janine Yorio is Managing Director, Republic Crypto – Strategic Assets & Initiatives.
Utility tokens are like chips in a casino. They can be used as currency within the casino for playing games and tipping dealers, and converted back to fiat/cash when it’s time to cash out. Holders of a casino’s chips do not own a stake in the casino, nor are they entitled to any of the casino’s winnings or profits.
Security tokens, on the other hand, are like owning stock in the casino, shares in the company itself. When the house wins, you win. Security token holders own something that might pay off through profits or distributions. Utility tokens are used in an ecosystem. Security tokens give you