Digital Securities are very likely the next logical evolution in our world of digital finance.Simply put, Digital Securities are the legally compliant tokenization of anything that have the future expectation of profit. This includes: real estate, stocks, racehorses, athlete’s contracts, bonds, corporations, or any investments that produces dividends or expected profit.Our current financial system has bred complacency with inefficiency and high fees. Innovation has become stagnant due to regulatory hurdles stifling new technological advances. Digital Securities use new technology AND work in line with regulations, creating the perfect storm of opportunity. Here is how security tokens are set to optimize the financial world.1. Higher LiquidityWhere can you currently trade fractional percentages of real-estate or assets, nearly instantaneously with low fees? Answer: Nowhere! Security tokens will allow all the assets of the world, like real-estate to be micro-owned and traded globally, instantaneously online. Lack of liquidity can account for in surplus of 20% of the cost of the asset. pg 12. That's enough of a reason to switch over right there!! With no liquidity, your $500,000home is now worth only $400,000. If you have ever sold a house, I'm sure you can relate. "Do I keep my house on the market as is another month or should I drop the price another $30,000?". When we are able to subdivide ownership, the minimum investment can be infinitely less, increasing liquidity dramatically. An upcoming example is a platform that allows you to purchase tokens of a home that is then rented on Airbnb, you earn both the rent in dividends and hold the appreciate asset of the token. When you want to sell, it is available to be sold on a global market. A tokenized time-share global economy could be near, but that's a whole other topic.2. Less expensive to launchThe cost to tokenize is drastically cheaper, easier and faster to tokenize than to run an IPO. The cost to run an IPO can cost 10-12% of the total funds raised. Additionally, it takes less than half the time to tokenize than to launch an IPO. 5 year from now, when all the regulatory facets are worked out, it will be a no-brainer for any company to opt-in for tokenization over traditional IPO methods.3. Lower FeesMany fees associated with financial transactions are derived from payments owed to middlemen (bankers, etc). Security Tokens remove the need for most bankers which reduces fees, and smart contracts may one day decrease the reliance on lawyers as well. These smart contracts will reduce the complexity, costs and paperwork with managing securities (collecting signatures, wiring of funds, mailing of distribution checks, collection of W-2s, Sending K-9s, etc).4. Faster deal executionThe more people involved in a deal, the longer it usually takes to execute. When Security Tokens remove middlemen from investment transactions, they enable accelerated timelines for issuers to successfully offer their security. Additionally, immediate trade settlement on the secondary market for Security Tokens will become an attractive advantage for issuers & investors too.5. Free market exposureMost investment transactions today lack exposure to a global investor base. For example, it is hard for investors in Asia to invest in private US companies or real estate. With Security Tokens, asset owners simply market their deals to anyone with an internet connection (within regulatory limits). This free market exposure should lead to a significant change in asset valuations since any asset that is not exposed to a free market is mispriced.6. Larger investor baseWhen asset owners can present deals to anyone with an internet connection, the potential investor base is drastically increased. For example, would you rather show your investment opportunity to only US accredited investors & institutions or every potential investor in the world? Competition is healthy and a long-term net good for financial markets.7. Automated service functionsLawyers are less middlemen and more service providers in most transactions. With Security Tokens, issuers will begin to use smart contracts to automate the service provider function through software. This doesn’t mean that lawyers will disappear, but rather that their role will be more advisory based.”So where are all of the Security Tokens? In 2017, we saw the emergence of Security Tokens.Yet, nearly three years later, there has not been much to show for it. The cost to issue legally compliant Security Tokens has stayed relatively high, and secondary market liquidity has been incredibly underwhelming. It’s the issuance platforms themselves that have put the friction on their own sectors growth. Until now. Preflogic is a digital security issuance platform set to launch in 2020 that:- Issues fully compliant tokens for under $5,000-$20,000- Provides secondary market liquidity- Offers an insurance-backed custody account to keep it easy-to-use and “Grandma Friendly”- Offers financial inclusion retail investors the opportunity to invest in their own equity. Digital securities are an inevitable evolution in todays financial world and to be able to ride the upcoming wave requires the correct positioning. There’s a saying that goes “don’t buy the milk, buy the cow”. Joining a platform that issues securities ensures that no matter which individual projects in the ecosystem succeed or fail, you’ll be on the right side of history.* Photo source https://medium.com/tokenize-xchange/security-token-security-token-offerings-the-comprehensive-guide-9e58b9306a4b
Digital Securities a..
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