Security Tokens Allow Investors to Seamlessly Trade Shares in Real Estate, Hedge Funds, Private Equity Funds: Report

The team at Security Token Market (STM) has released a report titled, State of Security Tokens 2022 — Industry Overview.

Peter Gaffney, the Head of Research from Security Token Advisors, notes that the “high-level” lifecycle of a security token includes the following:

  • Asset Selection
  • Offering Structuring
  • Token Development
  • Primary Token Issuance
  • Secondary Token Trading

Gaffney explains in the extensive report that once a security token reaches that final stage — Secondary Trading — it can “technically exist on the secondary markets for as long as it is in good standing, much like public company shares continue to trade on the Nasdaq or NYSE.”

He adds that security tokens can be “structured in numerous ways to present exit opportunities even once trading.” He points out that security tokens are simply “the wrappers that automate an investment.”

Gaffney also mentioned that the flexibility of smart contracts “means the structure of a security token can take on several forms including: Equity, Debt, Revenue Share, Profit Share, or a blended hybrid approach.” He further explained that the additional utility can also be “baked into security token smart contracts to offer loyalty rewards, perks, or access for token holders.”

He also noted that security tokens are “most commonly developed on blockchains that support smart contracts.” As of the time of writing, the most “prominent” blockchain in this designation is Ethereum (ETH), although the shift towards “a more cost-effective and scalable model has begun within the tokenization vertical,” Gaffney revealed while noting that other promising smart contract blockchains include: Avalanche (AVAX), Algorand (ALGO), Polymath/Polymesh (POLYX), Tezos (XTZ), Provenance (HASH), Ravencoin (RVN), Liquid Network, among others.

The report further noted:

“The same opportunity exists in the security token industry as certain ATS and secondary venues enable this investing, trading, and Dollar-Cost Averaging. This effectively allows investors to buy, sell, or trade shares in all of the aforementioned examples including Real Estate, Hedge Funds and Private Equity Funds, Startups, and typically illiquid Alternative Investments.”

You may check out the complete report here.

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