Golden
Smart securities

Smart securities

A smart security (also known as a tokenized security or security token) is a blockchain-based digital interest that represents an ownership claim in an underlying asset which may include real estate, private placements, equities, debt, derivatives, and other instruments of value.

The term "smart security" commonly refers to any form of programmable financial instrument, but its legal definition varies by jurisdiction. Synonyms include digital security, security token, tokenized asset, and asset-backed token.



Security tokens are blockchain-based tokens that represent ownership of a traditional security such as real estate, equity, precious metals, futures, bonds, and so on. What differentiates a smart security from a regular security is that smart securities are digital and programmable, enabling new functionality that can improve efficiency, transparency, and other factors within traditional markets while also contributing to their growth and global accessibility.



For example, a tokenized real estate security can be easily divided and sold in multiple pieces, enabling fractional ownership of large properties such as sky-rise apartment complexes or retail spaces in shopping centers. This helps democratize investment opportunities that were previously only available to the wealthy, while also improving liquidity and tansferability in the real estate market.

Smart Security Stack

Investor rights, transfer restrictions, dividend payments, company obligations, and more can be

programmed directly into the smart contracts that are used to manage tokenized securities. Some examples include:

1. Financial Rights: Tokens may represent the total value of equity and/or debt of the underlying asset and a claim on asset appreciation, dividends, or cash flow.

2. Ownership Rights: Tokens are treated like any other asset class and holders can sell/transfer ownership at their discretion. Tokens may also include specific investor obligations such as holding periods or voting rights.

3. Utilization Rights: Tokens may include a new set of utilization rights that include incentives from the assets they invest in. These incentives may come in the form of discounted rates or preferential access to use the asset.

Timeline

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Further reading

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The Rise of Asset-Backed Cryptocurrencies

Daniel Frumkin

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Top Blockchain Projects in the Security Token Space

Jorn van Zwaneburg

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