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Crypto Guides

What Should You Know About ERC-20 Tokens?

Introduction

ERC-20 tokens are dedicatedly used on the Ethereum platform. These tokens represent a wide range of digital assets and feature value and can be used as a mode of transaction. Presently, there are over 200,000 ERC-20 tokens available on the Ethereum blockchain. It is an official protocol, which extends advancements in the Ethereum network. ERC is an abbreviation for Ethereum Request for Comment, and the 20 is referred to as the proposal identifier. 

The Core ERC-20 Standard

Creating a smart contract on the Ethereum blockchain is quite simple. This allows users to create different forms of tokens. The standard basically offers core functionality to transfer and allow tokens to be authenticated so that other on-chain third parties can use them. The standard interface enables tokens on this platform to be used again by other applications.

The ERC-20 standard is basically a list of events and functions that each contract needs to integrate to adhere to the standard. The name, behaviour, supply, and ticker of the contract can differ from one another, but they need to execute the core functions of ERC-20.

Smart Contract and Ethereum

Smart contracts are leveraged to generate ERC-20 tokens. They are also used to execute transactions of these tokens and record token balance information. These contracts are written in the programming language centring on the “If-This-Then-That” approach. Once the tokens have been created, they can be traded, spent, or offered to other parties. These tokens are basically universal languages that are used by all the tokens present in the Ethereum network. The unified approach allows trading of one token with another.

How to Send and Receive ERC-20 Tokens?

When sending an ERC-20 token, you are indicating the token contract to initiate a transfer operation. To execute a contract on Ethereum blockchain will need a fraction of Gas (Ether). Considering that Ether is used during the process, it is vital to ensure that the users have sufficient Ethereum Balance. 

Moreover, people can receive ERC-20 tokens by sending their wallet address. Considering that these tokens only exist in Ethereum blockchain, users can only use Ethereum addresses. 

Benefits of ERC-20 Tokens 

There are tons of benefits that ERC-20 offer that we would not find in any other tokens. It envisions to optimise the usage of the accounts by making transactions more efficient and convenient. By amalgamating different sources, these tokens create an ideal zone for constant token creation. And when it comes to efficiency and speed, ERC-20 stands at the forefront. And this is the reason why tokens hold such a massive adoption.

Efficiency and speed are two important facets of cryptocurrency trading, and ERC20 tokens do not disappoint in this regard. Its core structure offers unparalleled speed and efficiency. This easy to use token makes it easier for traders to leverage most of the blockchain technology.

It is not challenging to acquire ERC20 tokens these days; we can even develop it ourselves. It is considered one of the best payment methods for businesses, and its streamlined process makes the transactions easier for both sender and receiver. Cheers! 

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Crypto Daily Topic Cryptocurrencies

Best Security Token Issuance Platforms 

Thanks to blockchain, asset tokenization is now a possibility. This is the process of converting the ownership rights of real-world assets into digital rights on the blockchain. Assets are tokenized to improve their market liquidity, and also to open up your asset to a global market through the power of blockchain. 

Several tokenization platforms are scrambling for the spotlight in a bid to become the go-to place for tokenizing assets. Let’s look at some that are hacking the game right now. 

#1. Securrency 

Founded in 2015 and headquartered in the US, Securrency is a one-stop token issuance platform. It supports token issuing, post-issuance support, and the interoperability of tokens across several blockchain networks.

The platform also came up with the CAT-20 and CAT-721 token standards. Tokens created with this standard can be transferred across blockchain networks (including Stellar, EOS, and Ethereum) and legacy financial systems. This interoperability with several blockchain platforms gives it an edge over other platforms that are only compatible with Ethereum. 

Securrency has also embedded customer management applications that customers can utilize to manage investors and token buyers without having to rely on external applications. 

The platform has entered into partnerships with fintech companies SharesPost, AX Trading, Entoro, Vertalo, OpenFinance, and SeriesOne.

#2. Securitize

Securitize is a token issuance platform founded in 2017 and based in Tel Aviv. The company raised $12.75 million from Blockchain Capital, Coinbase Ventures, Xpring (Ripple), NXTP, and Global Brain Corporation. Securitize has also partnered with fintech companies Tzero, Blocktrade, OpenFinance, Airswap, ShareSpost, Hyperion, and Bnk to the Future. The platform offers the tokenization of equity, funds, and real estate, and plans to add debt in the future. 

The company created the DS Protocol, which generates “DS tokens” that can run on top of the ERC-20 token standard. This means the tokens are only compatible with Ethereum. There’s no mention of compatibility with other blockchain networks. 

Securitize tokens can be traded on crypto exchanges as well as be hosted on clientele systems. The platform has a record registry that supports KYC details, a regulations compliance layer, and a communication protocol that notifies investors of industry trends.

Some of Securitize’s clients have been Blockchain Capital, SpiceVC, Augmate, 22x Fund, and Science Blockchain. 

#3. TokenSoft 

TokenSoft is another trusted token issuance platform that features a ton of functionalities. It’s been funded by investors such as eVentures, Base10, Coinbase Ventures, and Fidelity Ventures. The company has partnered with several other platforms, both in blockchain and fintech, such as OpenFinance, Stellar, Hyperledger, R3 Corda, and Tierion, to enhance its service delivery capabilities to customers. 

Services offered include token issuance and distribution, payment of dividends, trading of issued tokens, post-token issuance support, and digital asset custody solutions. 

TokenSoft developed the ERC-104 standard that enables token issuers to manage investor whitelists and investor limits, and issue tokens globally. Some of the clients that have used TokenSoft for token issuance include Andra Capital, Hedera Hashgraph, and the Tezos Foundation. 

#5. Polymath 

Polymath is a security token issuance platform based out of Toronto and founded in 2017. The platform has partnered with various industry players in finance, legal, custody, and escrow such as SelfKey, IdentityMind, OpenFinance, Pegasus Fintech, Vertalo, Blocktrade, Prime Trust, Monarch Wallet, Netcoins, Genesis Block, Tokenizo, Athena Blockchain, Blocktrade, Prime Trust, Glyph, Cassels Brock, Aird & Berlis, and Messner Reeves LLP to provide the highest level of customer experience to users. 

Polymath features a token marketplace, a token studio for token creation and issuance, and token compatibility with the Ethereum network. On the Polymath Token Studio, token issuers can customize and launch their own security token offering (STOs), and still be able to select a Know Your Customer (KYC) and anti-money laundering (AML) service provider of their choice.

Examples of companies that have issued security tokens via Polymath include Corl, 7PASS, MintHealth, IPwe, and BlockEstate. 

#6. Harbor 

Founded in 2017, Harbor is a tokenization platform based in San Francisco. The company is led by individuals with a ton of experience, including former PayPal COO David Sacks, who is also the founder of Yammer, Craft Ventures, and Zenefits. The company managed to raise over $38 million from VC firms Founders Fund, Pantera Capital, Fifth Wall, Kindred Spirits, Andreessen Horowitz, Valor Capital Ventures, Future Perfect, and more. 

Through integration with BitGo, Harbor facilitates investor onboarding through KYC/AML procedures, accreditation, tax forms, e.t.c. 

Harbor supports an ERC-20 token known as R-Token that ensures supported ERC-20 wallets or exchanges are compatible with the necessary requirements for trading. It also uses an Oracle feature to act as the go-between for peer-to-peer token transfers and exchanges.

#7. Swarm 

Swarm is an ”open infrastructure for digital securities.” The company has partnered with several companies such as OpenFinance, Maker, Tron, Security Token Network, Jaxx, Mercury, Copper, MVP Workshop, Monarch, Standard Consensus, Glyph, Blockpass and STOCheck to avail the best services to clients and other platform users. 

It uses the SEC20 protocol that facilitates the creation and issuance of security tokens. Swarm allows users to tokenize all manner of assets, including real estate, renewable energy, agriculture, tech companies, cryptocurrency hedge funds, and so on. Swarm makes it easy to manage, transfer, and trade tokens. 

Other supported functions include STO fundraising and post-issuance and support such as token redemption and the issuing of dividends to clients. Swarm features the Market Access Protocol (MAP), a protocol that supports token interoperability between various players, including issuers, investors, exchanges, and qualification providers. 

Swarm allows users to purchase security tokens with either of several supported cryptocurrencies, which include a native token called Swarm (SWM), BTC, ETH, BNB, DAI, MKR, XLM, XRP, TRX, ADA and DASH. 

#8. Tokeny

Tokeny is a Europe-based tokenization platform founded in 2017. The company serves over 180 jurisdictions and has had $27 billion worth of assets tokenized so far. 

Tokeny allows for the issuance, management, and transfer of tokens. Properties such as individual, company and government assets, business equity, investment funds, and even goods and services can all be tokenized on the platform. 

The platform features a cloud-based T-REX (Tokens for Regulated Exchanges) that allows investors to manage securitized assets such as by paying and receiving dividends and carrying out audits. T-REX also offers interoperability with crypto wallets, exchanges, and identity providers. It also allows clients to issue and transfer assets globally. 

Some of Tokeny’s past clients include Black Manta, Property Token, Lition, Bakari, Mash, Vivo Play, Key Pasco, Neovate, Block Port, and b40Lux. 

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Crypto Guides

What Are Security Tokens & What Is Their Importance?

Introduction

Security tokens provide the digital ownership of traditionally traded securities. The concept of security tokens is a genuinely revolutionary concept developed by the advent of blockchain. Tokens perform a wide variety of roles, depending on the ecosystem they are used in. Tokens may give voting rights, which may be used as a currency, to be used as a value exchange. The more roles the tokens have, the more useful it can be termed.

People often get confused with cryptocurrencies and tokens. Tokens and cryptocurrencies are fundamentally different. While cryptocurrencies can be used anywhere, I mean, depending on the people/business who accept them as a mode of payment. In contrast, tokens can only be used in the designated environment where they are intended to use. Tokenization, the issue of tokens, is a new concept that came up with the advent of blockchain and created new business models with security and utility tokens.

How are the Security tokens issued?

Security tokens are issued just like how cryptocurrencies are issued using ICO’s. ICO’s are Initial Coin Offerings offered by developers whenever a new DAPP is to be developed. The ICO will have a goal to aim for. Depending on the goal, if the people are interested, based on the platform, the DAPP is developed, they pay the local currency and take the ownership of the tokens. The token gains value depending on the functions, roles, and purposes.

Importance of Security tokens

Security tokens are essential because of the role they play in the securities. Utility tokens need not follow any rules and regulations of the real world since they are used in the intended environment only; everything works as per the rules and regulations formed by the creators. When it comes to security tokens, they are representing something that exists in the real-world in real.

The security tokens are a digital representation of real assets in blockchain so that the transfer of securities will be smooth, verifiable, and, most importantly, to eliminate paper documents. Hence Security tokens should follow all the rules and regulations even when the ICO is conducted, then only it is termed as a success. Therefore these tokens are essential in connecting the real-world assets to the blockchain. The impact of security tokens is as below:

🧾 Credibility

The ICO space is not credible enough at the moment, with a lot of failures. Since the ICO’s of security tokens follow all the existing rules and regulations, people are confident enough to invest in the ICO’s where they are interested instead of thinking about the credibility infrastructure and stuff.

🧾 Reducing the costs associated with traditional finance

In traditional finance, a lot of money is involved in the form of registration when you want to transfer money from one person to another. Lawyers are required, as well. In the case of security tokens, a lot of money can be saved. Smart contracts will even further reduce the complexity involved in the process.

🧾 Execution times

Since no third party is involved, execution times are very less compared to traditional finance.

🧾 Unlimited Market

People from different countries find it extremely difficult to invest in any foreign country. Security tokens ease out this difficult task. Because of this simple reason, investors across the globe can invest without worrying about paper documentation, rules, regulations, and stuff.

🧾 Easier Liquidation

With the available platforms, it will be easy to liquidate your token whenever and wherever required since only the internet is required to liquidate your funds.

Even though the security tokens are less popular than the utility tokens, people will start flocking towards security tokens due to its functionality. Most prominently, it follows all the rules and regulations of the governments; hence these adhere to the credibility of people which utility tokens lack in general.

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Cryptocurrencies

A Complete Guide to Asset-Backed Tokens 

Blockchain technology heralded a new era of transparency, fairness, and democratization of finance. Currently, there are numerous applications of blockchain that are helping make the world a better place while reducing financial barriers. One of these is tokenization, a process that enables asset owners to sell a portion or the whole asset and get compensated fairly. Also, assets that could only be afforded by the high net worth individuals can now be afforded by the average investor, thanks to asset-based tokenization. 

In this article, we break down asset-based tokens, the rationale behind tokenizing assets, and take a look at assets with great potential for successful tokenization. 

What Are Asset-Based Tokens? 

Asset-based tokens are tokens whose value is backed by a real-world, tangible asset. Essentially, they are crypto coins whose value is pegged against an existing asset value. People tokenize real-world holdings so as to increase their liquidity (the real-world assets) in a market place. 

Asset-backed tokens are offered during a Security Token Offering (STO). 

An STO is a process where an investor exchanges money for tokens representing an investment. As such, we can describe security token offerings as events that distribute securities. And since tokens represent real-world property, STOs represent a secure investment option. 

Why Tokenize an Asset? 

Asset owners or managers tokenize assets to increase liquidity for the underlying asset. Liquidity is the degree to which an asset can be quickly and easily purchased or sold at a price reflecting its true value. Securities like stocks and bonds have high liquidity as opposed to assets like cars, real estate, jewelry, and so on. Liquidity commonly affects an asset’s trading volume. Good liquidity can also enhance an asset’s value since it’s easier to convert such an asset to cash.

Examples of Tokenization Use Cases

Tokenization is mainly used to back assets that generally have limited liquidity. Some of these assets include derivatives, real estate, art, company shares, commodities, and other assets that usually take long to find a buyer. 

Below are examples of asset tokenization use cases: 

☑️Tokenization of company equity.

☑️Tokenization of real estate investment trusts (REITs) for investors who want to venture into real estate. REITs can be customized to suit client needs or characteristics, such as risk tolerance 

☑️Tokenization of real estate or rental returns. Today’s real estate is prohibitively expensive to scores of people who would otherwise be interested in a smaller percentage of the property. Tokenization allows such property to be “fractionalized,” allowing more people to invest in a property. 

☑️Tokenization of intellectual property such as film licensing, royalty payments, etc. This allows fair distribution to every party that has a claim to such a movie, song, album, or book. 

☑️Tokenization of accounts payable and receivable, potentially replacing factoring and other models of supply chain finance. This substitution would allow data to flow seamlessly between accounts payable and accounts receivable in Enterprise Resource Planning (ERP) systems. 

Tokenizing an asset increases its value by opening up previously unattainable markets. Since asset tokenization is based on smart contracts, it also eliminates third parties and intermediaries – saving up money in the process. Moreover, investors who can’t afford these third parties are afforded the opportunity to take part in asset ownership. Not to mention, the automated tokenization process is faster, saving everybody’s time. 

Categories of Asset-Backed Tokens

There are four main categories of potential tokenization of assets; these are:

  • Tokenization of equity and debt
  • Tokenization of commodities
  • Tokenization of non-fungible hard assets
  • Tokenization of non-fungible soft assets

I. Tokenization of Equity and Debt 

Tokenizing equity and debt is a method of fundraising for startup companies. This process removes the need for intermediaries, such as banks and stock exchanges. 

Fractionalization of equity ownership is by no means a new concept – stock certificates, timeshares, mutual funds, etc. have existed for a long time. But asset-backed equity and debt tokens now offer something much more – an immutable, transparent, and liquid digital representation of a company’s debt or equity. Any shareholder can access the blockchain platform and verify ownership and its authority to trade. 

As such, although debt and equity are assets that anyone can purchase and sell today, blockchain technology radically improves the process. Private equity funds are traditionally low liquidity assets that require investors to hold their stake for at least one year. Hedge funds are another type of asset that is moderately liquid – requiring investors to hold for several months. 

Increasing liquidity via tokenization would dramatically increase the value of these asset classes, enabling investors to better adapt to market fluctuations.  

II. Tokenization of Commodities

Commodities that are normally traded on exchanges can also be converted into security tokens. Whether it’s oil, gas, grain, sugar, tea – any commodity that’s already traded through intermediaries can be tokenized. 

Cross-border trading of more fringe commodities such as hydro, wind, or solar power can also be done via a blockchain-based exchange. Governments, utility companies, and consumers can all participate and interact on a single trustless and open platform. 

As for tokens that are backed by real-world assets, physical verification is needed to establish the accuracy of the token value. Already, there are third-party auditors that exist for this end. These auditors can now combine real-life verification with blockchain-based tracking to increase confidence in the marketplace. 

For gold, which commonly trades through exchange-traded funds, tokenizing it completely changes the game. Each token represents part or the whole gold bar that’s stored and audited by a third party “oracle.” The oracle verifies the gold’s weight, purity, authenticity, etc. 

Bitcoin, the ‘digital gold,’ could be even replaced by tokenized gold in the future. The advantage Bitcoin holds over real gold is its ability to be easily divided and transferred. It’s easy, for instance, for a token exchange to take Bitcoin worth $3,000 and send 1% of that to another crypto holder. It’s, however, challenging to do the same with a bar of gold. But once you tokenize it, it becomes much easier to sell and transmit a fraction of that gold, and the same is true for other commodities.

III. Tokenization of Non-fungible Hard Assets

Hard assets are tangible and physical assets. Hard assets also present many opportunities for tokenization. In this category, we will look at two hard assets: real estate and collectibles. 

  • Real Estate Tokenization

Tokenizing real estate could make it a borderless investment, more profitable, and more affordable for all types of investors. Real estate here means things such as rentals, hotel chains, motel chains, care homes, etc. 

  • Collectibles Tokenization 

Traditionally, collectibles such as rare art pieces have been a preserve of the rich. With tokenization, anyone anywhere can hold a percentage of a collectible. 

Also, tokenizing an asset helps it achieve more value in the long term. An art piece, for instance, can be tokenized and distributed on the blockchain with each ‘shareholder’ holding a tradable share of the piece. 

IV. Tokenization of Non-fungible Assets

Soft assets are assets that are intangible and which are usually hard to quantify and establish their value. We’ll look into two types of soft assets: intellectual property and digital asset collectibles. 

  • Intellectual Property (IP) Tokenization

IP assets such as copyrights, royalties, patents, and trademarks have traditionally had low liquidity and have never had a secondary market place on which investors can buy. Tokenizing IP ownership would not only enhance its liquidity but also increase its value.  

  • Digital Asset Collectibles Tokenization

Usually, it’s difficult to prove ownership of digital collectibles – with the only proof being a contract between the provider and the user. However, tokenization could create a market place for these virtual goods, even increasing their liquidity and hence value. 

Challenges and Opportunities for Asset-Backed Assets

Asset-backed tokens go toe to toe with Bitcoin in terms of being fungible, transferable, scarce, and durable. As such, asset owners can find a market place for their assets easier than ever. 

Tokenization could face a hostile environment depending on territory. For instance, China, Qatar, and South Korea have banned STOs outright, while countries like the US, Singapore, Germany, and the EU allow it, albeit with strict regulations. Other countries like India are yet to take a definitive stand on STOs. Some jurisdictions like Malta have granted STOs free rein – placing no limitations or regulations on them whatsoever. 

Tokenization might also be prone to user error, and it’s easy to lose your tokens if you’re not careful with your wallet private key address. 

Asset-backed tokens are immune from the volatility swings experienced by utility tokens and cryptocurrencies. Asset-tokens can trade 24/7 if listed in crypto exchanges. This exposes them to market liquidity from investors all over the world. Also, asset-rich companies may soon adopt tokenization, increasing its visibility. This would popularize the idea of asset-backed tokens, pushing it into the mainstream. 

Conclusion 

Asset tokenization enables a physical asset to be divided into smaller parts, making it easier to convert into cash. Thanks to asset-based tokens, times may be gone when people had to wait for months or years to finally get a move in market position for their assets. And anyone, regardless of geographical location or the capital they possess, can get a share of attractive assets that they previously couldn’t. Tokenization will help create more inclusive, fair, and effective marketplaces.