Perhaps, we might not see those 0 to 100 stories in the security token market like we saw in the NFT Bull Run where $100 investments grew a hundred times more valuable within a few months. Thus, people seeking quick gains and fake projects looking to capitalize on market sentiment rushed into the market looking for quick dollars without offering any real value. Of course, we know how these stories end.
But the beautiful thing in all of the chaos is that it has brought attention to crypto / NFTs.
The ugly thing about it is that the hype around investing and making big returns has trumped the main value digital assets offer. As such, the attention NFTs have gained may not extend to the security tokens. Securities tokens are different, and they can be quite boring, to be honest.
What Makes Them Boring
Security tokens are quite different from crypto and NFTs because:
⮚ There is more regulatory compliance: Companies operating in this space are required to follow laws and regulations that are relevant to their operation. Regulations can impose different sorts of restrictions and requirements on service providers and users.
⮚ For the most part, security tokens are backed by tangible real-world assets such as real estate, which are much less volatile than NFTs or cryptocurrencies, so it is unlikely that one's investment will bring n crazy returns in a few months.
Having said that, there is a market for these boring, stable, and less volatile tokens in developing countries such as countries in sub-Saharan Africa where I am from.
There is tremendous interest amongst Africans to improve their “finances”. Security tokens may just be the most appropriate tool to help fulfil that interest because they can provide them access to investment opportunities held in a more stable currency as opposed to their local currency.
One factor influencing the desire to get into dollar-denominated investment is the high rate of inflation in these countries. Over the last five years, there has been an explosion of online investment platforms in countries like Nigeria. These platforms offer young people secure dollar-denominated investments. Their relative success prompted regulators to take a closer look into their activities as they see them as a threat to traditional financial institutions.
The main point is that foreign-denominated investment remains largely attractive to young adults in developing countries. And Security tokens are a better alternative to these investment platforms for several reasons which include:
⮚ They give retail investors direct access to investment opportunities previously only accessible to institutional investors.
⮚ Investors can have custody of the tokens that represent a share of their investment in their digital wallet and these tokens are also tradable in a secondary market
⮚ Security tokens can serve a number of use cases to these investors. For example, they could be used as collateral to secure loans on Defi platforms.
Final Thoughts
Digital tokens, which can be (currencies, securities, commodities, or property), will disrupt traditional financial systems and many other industries, as the right players come in and use the technology to solve real-world problems by building projects and businesses.
It is therefore crucial for entrepreneurs to understand the biggest problem they are solving and take their solutions to the biggest market.