What Are Security Token Offerings And How Are They Beneficial?

Long gone are the days when you had to take the time out of your busy schedule and meet with your broker to carry out an investment transaction. The introduction of security tokens, also known as digital securities, has revolutionized the way people invest in various capital markets around the world.

Wondering what these security tokens are? What are their benefits? Get the answers below -

What are exactly are security token offerings?

Security Token Offerings, in layman terms, are the marginalized forms of a financial asset. They can be purchased by you digitally without having to maintain a complicated paper trail for the same. Security tokens are based on blockchain technology. This helps them to provide investors and regulatory authorities with enough redundancy of the data that ensures that transaction details cannot be manipulated, lost, or deleted. Security tokens are generally used to invest in bonds, stocks, funds, and a plethora of other financial instruments. These were initially only introduced in the public markets. However, with their increasing acceptance, they have now become a part of the private markets too.

How have security token offerings changed the way we invest for the better?

There are a lot of benefits of investing in financial assets through security tokens over choosing to acquire the investment traditionally on paper. Here are a few advantages of security token offerings -

• It offers transactional transparency

The traditional form of investing required a bulk of paperwork to maintain records, due to which, it was quite hard to audit them. However, with the help of security tokens, anyone who has access to the blockchain can view the records with just a few clicks. This results in increased transparency and as a consequence, increases the trustworthiness of the system.

• It democratizes the capital markets

Before security tokens were introduced, integration of real estate into your investment portfolio meant using up huge amounts of capital. It also meant 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.

• It lowers the transaction cost

Security Token Offerings avert the need for investing in any costly infrastructure that is required to maintain records. As all the required processes of maintaining the records are automatically carried out online, the need for an intermediary agency to do the same is removed. This brings down the cost of transactions for all parties involved, i.e., brokers, issuers, and even the investors.

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