How Security Tokens Will Transform Traditional Finance?

Digital securities are just another name for security tokens. These are digitalized forms of financial securities like stocks, bonds, funds, and other similar assets. They are built on blockchain technology and are highly liquid and provide increased accessibility to the various retail investors that are present in the market today. To give you more clarity, if you bought a stock, for example, in the older days, you would get a physical certificate stating the same. However, with the help of digital securities, buying equities is now paperless and requires fewer steps to buy and sell the different available securities.

How are these digital securities revolutionizing traditional finance?

1. It democratizes the capital markets - Adding real estate to your investment portfolio before digital securities were introduced, meant using up a huge capital and undergoing the tiresome process of acquiring the property physically. This essentially meant that only the rich could access the real estate market. However, with the help of digital securities, it is now possible to invest in real estate by buying the digital and fractionalized portions of such properties through a brokerage or by investing in REITs. The same is applicable to all adjacent industries and financial assets that are available and open to investors.

2. It provides better operational features - The securities market is regulated in the majority of countries. Implementing all the rules and regulations in the physical world is quite a task given the volume of transactions that take place in a day. However, with the help of the blockchain technology that backs these security tokens, all the rules and regulations can be easily applied and even provide the investors with an extended range of functionalities like paying out dividends, voting, and even providing discounts to investors for any availed real-world services.

3. Digital securities provide more security - The blockchain technology that is used to program these digital securities is made up of multiple nodes. Every ledger created for a transaction is stored across all these nodes. This provides the required redundancy in the data to prevent its manipulation and reduces the chances of it being lost to almost impossible.

I hope this answer helps you understand how security tokens are transforming traditional finance.

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