As I preach the gospel of the blockchain, one of the pillars of my sermons is that blockchain technology must solve problems that cannot be solved any other way; without this requirement, blockchain solutions will never be adopted into the mainstream. Besides allowing peer-to-peer transactions without the oversight of a third party, what other problems can the blockchain solve? In my opinion, security tokens are one of the use cases for blockchain technology that will have the most immediate and long-term impact.
A security token is a digital asset that derives its value from an external, tradable asset. This could include shares in a company, an interest in a partnership, a commodity, or proof of ownership of an asset like real estate. Security tokens enable us to take something that used to be a piece of paper and to place it on the blockchain; a cryptographic representation of a real-world asset. Even though we live in what we consider to be an increasingly digital world, many of the important things in our life still only exist on paper. Whether it be the deed to your house, your marriage license, your identification, or a stock certificate, we are still living in a paper world.
We used to send letters to one another; letters that would arrive at their desired destination in a few days once we dropped them in the mail. Then email came along, and now we just hit send. That’s it. No buying stamps or licking envelopes. We found a better way to send information to one another. Now the same information can be sent either by letter or email, but the digital version is much faster, more efficient, and cost effective. Security tokens are going to revolutionize ownership the same way email revolutionized correspondence.
Polymath is a cryptocurrency with the vision of bringing this disruptive technology to our existing financial markets in the US. Their platform can be used to allow financial institutions to create and issue their own tokenized securities. Polymath is compliant with SEC regulations concerning securities (a necessary step for cryptocurrency to become usable by institutions); Polymath’s protocol embeds regulatory requirements into the tokens themselves, something that was impossible under the current system.
With $80 trillion in securities being traded worldwide last year, the addressable market is enormous and would benefit greatly from the increased efficiency and reduced costs that would accompany adoption of this technology. An instantaneous stock transaction, with fees near zero is the evolution that the financial world needs. This is a real-world application for the use of blockchain technology, in an existing market, that could not be done any other way. When big banks and financial institutions make the leap into crypto, they will need to do so into a regulated environment; the team at Polymath is hoping to make that transition a reality in the near future.
The age of paper has come and gone, and the blockchain is here and here to stay. If you disagree, feel free to send me an email.