INTRODUCTION

Hello everyone in the academy, hope we are all doing well today. It is my pleasure to participate in today’s homework task posted by Prof @pelon53 on Tokens_Part1. I will want to dive into this task effective immediately to help me attend to all parts as requested.

Tokens from its simplified meaning basically mean an alternative or representation of another means of exchange which may be digital/virtual, physical or abstract. They are also seen as alternative to coins or coin-like objects void of any shape, color or size except for its purpose of incentivizing, rewards, payment or exchanges for other services. Having said this, unlike the universally accepted legal tender (Currency), tokens are limited to its offering to the public, hence are not issued most a times by government but by private organizations.

Since the advent of Initial Coin Offering (ICO), companies continue to roll out coin-like offerings which are given as tokens to its investors who enjoy the totality of its value. Most of the confidence and trust ensured in this process when an asset is tokenized in its digital form before investor’s cash in is the security Token.

Question 1: What is security Token? And explain an example.

Just like we discussed that tokens are usually seen from companies who decide to give its investors digital tokens during her ICO, security token also in same line are digital assets which value are gotten from the existence of other tradable assets. Security token are one of a special kind of token which help to place some kind of guaranteed attention with reduced risk/loss of an already existing assets, deriving it’s premium value from this assets just like in our real estate, cars, stock/shares or even a house so as to continue to drive ownership status at any point in time. This kind of tokens too can also be seen to thrive in other areas like in paintings, artworks where they are digitally tokenize, and hence placing value of fractional ownership to the original creator.

This kind of token continue to place ambiguity on these assets due to the underlying potentials and resultant effect of its value back to the token which continues to place premium on all sides. Security tokens are seen as investment tokens where profits made from the company in which token is digitally created are paid some form of dividend to the original token owner. This invariably makes them to not only control the company in which token is domicile but also have paramount decision making and probably have a voting system which guarantees their opinions to be considered in issues concerned.

What has security token done over the couple of years was to reduce management cost and increase efficiency in the way handling all operational related activity which is basically one of the unique of a decentralized blockchain feature.

Advantages of Security Tokens

• The very thing that should come to our minds is efficiency of process in all aspects. The speedy in carrying out all issuance and transfer of security is done more swiftly with less manual and human errors.
• It is less labor intensive compared to the man hours put in just to start and finish up a process. Automation of process reduces all the energy and man hour which would have put in other task for optimization.
• It brings in more liquidity into the ecosystem by transforming the traditional unattractive and less valued assets into viable and valued assets into the blockchain, hence creating more entities of and initial/existing assets into fractional units rather than the previous individual owner.
• Due to the high regulation imbibed in the system, issues of risk and fraud are reduced to its minimum. System has the capacity to detect any misgivings before trades are initiated.
• It displays high transparency module. Transactions from start to finish are monitored, hence boosts the confidence in the ecosystem and trust to invest more.

Benefits of Security Tokens

• The Fractional ownership of properties through the security token is one of the trusting and confidence boosts seen from the investors who are always assured that they are in control of their assets any day anytime. Let me break this down, If I have a land and I want it secured, all I need to do from the blockchain system is to get it verified to have a legal representation of ownership which invariably is an investment drive.
• Due to the succinct feature of always attached on exiting assets, security tokens are seen to be natural bridge between the traditional financial sector and the blockchain system.
• Since There is a direct relationship of security tokens to assets they represent, the value of the company also have a direct effect of adding more value to assets unlike what is seen in the utility token
• Just like every other security token applied, they are highly regulated tokens with less scam and hack interference unlike its counterparts (utility token).
• Security tokens try to correct some amorally seen in the area of manual documentation and presentation of the traditional financial system, hence provide some digital approach which not only bring about transparency but fairness in all it dealings bearing in mind the confidence from investors.

How Security Tokens are created

Before we can think about creating a security token, we must have thought of reserving /naming the token symbol as well as come up with a token that has the capacity to enforce all regulatory guidelines in line with minting and distribution of this token to investors. To create this coin now, these are the two major ways;
Asset Tokenization: This is simply when an asset existing in an off-chain has an on-chain representation in the blockchain. Examples are tokenization of existing car or house certificates.
Asset Origination: Just unlike the asset tokenization which has a off-chain to On-chain representation, the asset origination only have its assets existed in the on-chain system. They do not have any traces of traditional financial origin and cannot be created in same line too.

Example of Security Token_TAPJETS
A typical Example of this Security Token is the Tapjets with headquarters in USA. They have shown that blockchain is the life wire of every business and sectors of the economy if truly we believe. They make booking of private jets more seamless with this platform and faster than we can think. Payments may also be recieved not just in Fiat but in Cryptocurrencies.

It's business model saddles on the use of the blockchain feature of scalability technology which also guarantees its modest fee charges and excellent finacial performance. It has continued to implore quality in service delivery and rebooking rates which definitely shown its acceptance. It has also improved in using this platform to directly connecting clients with available jet's. Hence not forgetting to open up for more SEO for more investors to come into the platform for expansion and enlarged investment.

What is Utility Token? And explain an example.
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This is the economic nerve of every start up project or company whose aim is to raise capital and assets to enable it deal with its obligation and survival of the project. This can be inculcated during the ICO process with purpose directed specially for the project in which it was created for. Investors into buy into this token during the ICO , are allowed to have access into the future products and services it offers. It is a digital asset created to be redeemed for future use at a discounted fee to the holders of it. These tokens are majorly the economic activity of the ecosystem with voting rights saddled to token handlers.

Unlike the security token which its company’s value is directly proportional to the valuation, utility token do not consider this factors as there are no effect of company’s present value to how the asset is valuated. This token is used in coupon creation which is an avenue for these companies to raise capitals for an intended project too with access only granted in future.

Some Examples of Utility Tokens

• Basic Attention Token: This is an ERC-20 token which allows all forms of the Basic attention tokens services run on its protocol. Basic attention Token was specially created for the bloggers which helps in the payment for the original contents created by these them. With this token, authors are better rewarded equitably and a rebate given to them as users of the system for invasive advertisement.

• Golem: This is a situation whereby computing power are lease out or sold out to others who find it worthy to use them in completing the needed task before them. This token maybe seen marketable for those who uses proof of work in mining.

Some Challenges of the Utility Token

• They are saddled with liquidity issues. Remember that Projects using these tokens are actually doing so to raise capital and hence may find it difficult to stand to face development.

• It is highly unregulated and hence there are high risks of scam during process.

• The value of token isn’t guaranteed as this is dependent on the sustainability of the project.
  Benefits

• This token serves as an economy within the blockchain system where holders of this token have some reasonable voting rights with the blockchain which gives them a little control in the ecosystem.

What is Equity Token? And explain an example.

When we refer to Equity, what come to our mind is equality and fair sharing, but in this case we may be looking at the percentage ownership of an asset which likely places the investor in the ownership status. Most times, the property or asset in questions maybe a third party assets but because we have some percentage of stake in it, it legally grants us ownership in the asset or investment.

Therefore when we buy into an asset even when not in wholesome, this equity tokens try to tell us the ownership percentage investment we’ve got. Over time, this kind of token allows investors to makes investment across so many assets, hence having wide spread with the little capital available to them. Funnily, to show us how regulated it is, it shares almost the same protocols like the Security Token and the other hand, the security token protocols are seen to attend to all required actions to be taken in the equity token.

Some would say during a company’s startup process that equity tokens are part of assets given to investors who invested and becomes part of voting and decision making team of the company. These tokens are secured and make them get more involved in the development of the company and interest and rewards given in form of incentivizing them in line with market performance. This equity tokens bought by this investors can either be made through its public or private placements via its regulatory entity.

Example of Equity Token _ Neumark
A typical Example of the Equity Token is the “NEUMARK tokens” which simply means New token. This runs on the Ethereum blockchain which allows a number of companies and investors to assemble in its Neufund platform and this determines the market capitalization of the platform. When an investor invests in the platform, it is seen that he gets rewarded with NEU in equivalent proportion of investment. When there’s also a successful transaction done in the neufund platform, a certain percentages goes to the platform and about 2% distributed amongst the equity token holders. Remember to be an active reward receiver; you need to have NEU in your personal wallet which is linked to your Neufund account with other verification details in place.

Thank you Prof @pelon53, this is my entry after a deeper research especially for ST.