I confess I am still a strong believer in Utility Token Ecosystems, but I agree that the ICO craze was not sustainable. As neither those who issued tokens nor those who invested understood what they were doing, it is good that alternatives, such as security tokens, are popping up.
For me, they are simple digitized shares or bonds of small and medium-sized companies that are a financing instrument to them—nothing more and nothing less. Some may argue they are tokenized “pink sheets.” 🙂
Some influential people see them as instruments for a whole new generation and that the generation who grew up with the Internet and everything digital is the market for Security tokens. I personally do not think this is right.
Millennials are crazy and they do buy expensive brands, invest, and trade, but they do not use traditional company assets. They do it with things like limited edition sneakers, pop art, or brands like Supreme.
I do agree that we are at an early stage in the game. There have been past ideas to tokenize real companies’ shares, like those of Facebook, and make them more freely tradeable and transferable between people across borders. But, as we all know, that is not so easy.
The most interesting space where the tokenization of traditional investment products is happening is in discussions about real estate and physical assets like gold, silver, and palladium. I see great potential in them and in the potential that millennials will like those kind of assets, which they can acquire simply, comfortably, and digitally in a nontraditional bank or other investment method.
Challenger banks, like Revolut, have been offering cryptocurrencies along with standard banking products, and they gained a lot of attention and new customers because of that.
Recently, I was at the Goldzip launch in Hong Kong where 300 MIO worth of gold was getting tokenized, and people will be able to purchase Gold easily in a pure digital form. At a similar time, popular European crypto to fiat exchange Bitpanda added digital gold to their offering. How long it will take to see their property offerings?
In conclusion, I do not think millennials are the main investors in security token offerings, nor will they be. Security token offerings will most likely not be volatile at all as most of the companies that issue them do so as revenue participation notes or profit shares. There are not many companies who are offer security tokens that represent equity because the nature of tokenized equity for early-stage companies includes some problems. Tokenized equity is more appropriate for projects that need a one-time funding round, such as property projects or movies— not start-ups, which generally have multiple funding rounds.