security token

A security token is a type of cryptocurrency that represents a small portion of an asset of real value, such as a stock, company, or property. The owner of a security token essentially has ownership or a share of the value of the asset, similar to owning shares in a company. They are entitled to receive a portion of the profits generated by those assets.

In contrast to traditional cryptocurrencies, security tokens operate on an existing blockchain, such as Ethereum, and do not have a native blockchain. A well-known example of a security token is Blockchain Capital (BCap).

As an investment instrument, security tokens are a digital form of traditional investments such as stocks, bonds, or other securitized assets. They reflect ownership or the right to transfer the value of an asset or asset class into tokens. In this way, security tokens bring together the digital and traditional investment worlds, opening the door to innovation in asset management and ownership.

For example, a company planning to raise funds for an expansion project may choose to issue sole ownership of its company via digital tokens, rather than using traditional options such as issuing shares. The tokens can be offered to investors via platforms or exchanges that support digital security token trading.

Example:

Polymath is an Ethereum project that functions as a decentralized network. The main focus of Polymath's development is to make it easier for users to manage security tokens, by providing high security, robustness and verification. It aims to provide users with the ability to use security tokens in transactions in a more secure and efficient manner.

Utility Tokens, on the other hand, have a different primary goal than seeking financial gain. The main focus is to provide utilities on a platform or application that gives its holders the right to use its products or services. This type of token is often used in ICOs as a way to finance specific projects. Through the ICO mechanism, project creators gain funding sources, while investors gain access to products or services developed within a certain period of time.

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