What is a Security Token? Do you need to invest in it?

Securities are a sought-after instrument of stock trading. It is well known to many investors, but the realities of the times demand change. Issues of ownership and increased liquidity of securities in the era of cryptocurrencies are evolving in new legal and technical contexts.

One of the newest exchange instruments is the Security Token. It is a digital counterpart of physical securities (stocks, bonds), operating on a blockchain and representing a smart contract (like a non-mutually exchangeable token). According to BSTX Strategic Director Jay Fraser, investing in Security Tokens is an investment in the future that everyone should think about.

In this article, we'll tell you how promising Security Tokens really are, where you can buy them, and how you can make money from them.

What is a Security Token?

Security Token is a digital analog of the security, which without any additional documents or guarantees certifies the owner's ownership and allows him to realize his investment interests (the right to sell shares, a percentage of the company's profits, dividends). Legally, a Security Token is a share of ownership of a business or financial instrument. Their digital counterparts differ from physical securities only in form, fully retaining the basic characteristics.

The main feature of Security Tokens is that digital securities are created using blockchain technology like regular cryptocurrency assets, and therefore also have the properties of cryptocurrencies. But not ordinary cryptocurrencies like Bitcoin or Ether, but non-exchangeable tokens (NFTs). Security tokens and NFTs are related by the fact that both types of assets are smart contracts. A smart contract is a code in a blockchain environment that is a self-executing contract between two parties without the involvement of third parties (banks, government agencies).

For a smart contract, the guarantee of anonymity and security is itself, because it is supported by decentralized blockchain technology, whose operation is ensured by the community and has no controlling authority. All blockchain transactions are anonymous but transparent. A smart contract cannot be tampered with, altered, or stolen (unless an attacker gains full access to your digital wallet).

Thus, Security Token exists at the intersection of "security", "cryptocurrency" and "smart contract". It takes the best of all three. With the key advantages of real shares, the Security Token is a much more reliable, secure, and flexible financial instrument because it exists on a blockchain. These tokens are traded just like regular cryptocurrency.

In the next article, we will look at the specifics of Security Token regulation and some other issues on this topic.

Also, if you want to use all available trading tools to increase your capital as soon as possible - follow this link below, or contact us via live chat. Our experts will help you to choose the best strategy for success.