cryptocurrency
What are security tokens? A guide to asset-backed tokens
You probably come across a lot of paperwork and restrictions when it comes to buying a piece of real estate or a company share in the real world.
Security tokens offer a solution to this problem by becoming a digital representation of your real-world asset in the blockchain world.
In this article, we’ll take a deep dive into what are security tokens, their types, how they work, and their future in the cryptocurrency world.
What is a security token?
Security tokens are the bridge between traditional finance and digital assets. These non-tangible tokens represent your ownership in the real world and hence make the whole process of buying, selling, and trading real-world assets a whole lot easier.
It can be any real-world asset including real estate, stocks, bonds, or even a piece of art. If it’s tangible and can be bought and sold, it can be tied to a security token through which ownership can be transferred easily from one person to another.
While normal cryptocurrencies may not be subject to many regulations, tokens acting as security must abide by stringent regulatory laws to keep operating as a security. They are usually issued through a process known as Security Token Offering (STO), in which interested investors buy tokens that represent their ownership of any physical or digital asset in the real world.
Now that we’ve explained security tokens, let’s learn how they work.
How do security tokens work?
Security tokens operate on blockchain platforms that are coded through smart contracts that abide by strict laws of ownership and transfer, coded within them. Each token represents an ownership or a real-world asset, and anyone who owns a token acting as security has a legal claim to a share of the asset to which the token is tied.
As discussed above, these tokens are issued through an STO which ensures the rights of both the issuer and investor of the token. Blockchain and smart contracts play a key role in automatically calculating and transferring ownership of security tokens from one party to another without the need for third-party intermediaries.
Furthermore, anyone can own a fraction of a real-world asset and isn’t bound to buy the whole asset, making this concept even more attractive for global investors.
Types of security tokens
There are many types and examples of security tokens in the real world, however, not all of them are popular. Here we will discuss some of the most commonly used tokens that act as securities for real-world assets:
Debt tokens: Companies can issue debt tokens that represent loans or bonds issued by them, and these tokens are then used for paying interest to token holders over time.
Equity tokens: Equity tokens are given to anyone who purchases a company’s share or ownership. In return for buying equity tokens, a person can vote on governance matters and claim the company’s profits as long as they hold the equity tokens and don’t transfer them to another user.
Asset-backed tokens: Asset-backed tokens are one of the classic security tokens examples, as they tied to tangible assets like real estate, gold, or artwork. These tokens give investors fractional ownership of these assets, making these big markets easier to access for a global audience.
Each type of token that acts as security offers unique opportunities for investors to diversify their portfolios and gain exposure to new asset classes while maintaining compliance with regulations.
Advantages of security tokens
Security tokens offer a lot of advantages to the global financial ecosystem which includes investors, issuers of these tokens, and the general public as well. Here are some of them:
Liquidity: Limited access means less liquidity and this restriction is lifted when real-world assets are tied to securities which are represented by digital tokens that can be bought by anyone in the world without much paperwork or travel.
Transparency: Every transaction on the blockchain has a permanent record, is secure, and is tamper-proof and all of this promotes transparency between the issuer of the tokens and the investors as well.
Fractional Ownership: Not everyone has the same level of financial capacity to buy an expensive piece of art or real estate. Instead, tokens acting as security allow everyone to buy some part of a real-world asset and sell their part of the asset in profits, when that asset has appreciated over time.
Automation: The lack of human involvement on the blockchain on which these tokens operate, reduces any administrative costs and errors. Real-world assets are bought and sold seamlessly, and dividend distribution and ownership transfers happen within seconds by following automated hard-coded laws in the blockchain’s smart contract.
Security token vs cryptocurrency
While both cryptocurrencies and security tokens may seem the same at first glance, in reality, they have a lot of differences between them.
You see cryptocurrencies like Bitcoin or Ethereum are digital money that are traded on crypto exchanges and are primarily not tied to any asset or claim, and are purely used as a store of monetary value.
On the other hand, tokens acting as security directly represent ownership of assets in the real world. They are also required to follow strict laws of traditional investments in the real world. Cryptocurrencies are unregulated and often decentralized, while tokens issued as securities are issued in a legal environment with regulated and documented laws.
Challenges and risks
Regulatory uncertainty poses the biggest challenge and risk in the mass adoption of tokens that are deemed as securities or plan to apply for becoming a security token. While many countries have shown interest in this concept, there is still confusion about when proper laws will be formed around these tokens that provide a sense of security for investors and issuers alike.
Not being widely accepted also means that liquidity can be a big problem as they are not yet traded on traditional exchanges. A limited market means it is difficult for a common investor to invest in tokens acting as security and choose to go for traditional cryptocurrencies instead.
Also, the technology behind these tokens on the blockchain is still evolving, which means a potential threat of security breaches is possible.
The future of security tokens
According to several experts, tokens registered as security have a bright future ahead of them and will completely transform the financial sector. This means that the capacity to tokenize a broad range of assets, is anticipated to grow and we may get to see more security token examples in the future.
Furthermore, advancements in smart contract technology will make asset ownership and transfer even more efficient. A wider institutional acceptance of blockchain-based securities is expected which might boost traditional financial sectors including private equity, real estate, and banking.
Overall, the future of these tokens is heavily dependent on two key factors. One is the extent of advancement in blockchain technology and whether it can handle the risks and capacity of challenges that will arise. And secondly, it is regulatory compliance on a global scale that will make or break the future of these tokens in the real world. In all of this uncertainty, your job is to learn what is a security token and spread awareness about its advantages and risks in your ecosystem which may fuel its adoption significantly.
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The ecosystem of a popular meme coin has attained two major milestones, showing the continued interest in the token that could lead to a bullish scenario. Analysts reported that Shiba Inu recently reached 1.5 million holders while its Shibarium recorded 10 million blocks, an indicator that the SHIB ecosystem could attract new users.
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1.5 Million SHIB Holders
Crypto analysts revealed Shiba Inu successfully achieved a major milestone, offering a bright spot for the broader cryptocurrency market which has faced some challenges recently.
The project’s marketing lead, LUCIE noted that the meme coin hit 1.5 million holders on March 18, reaching such a milestone is an important achievement for any crypto.
As of writing, about 843 new holders have joined the Shiba Inu ecosystem, indicating that the token remained attractive to traders.
SHIB has reached 1.5 million on-chain holders!
pic.twitter.com/sKaAO57R6I
— 𝐋𝐔𝐂𝐈𝐄 (@LucieSHIB) March 18, 2025
Analysts believe that Shiba Inu’s milestone suggests continued interest in the meme coin, fueling the token’s significant growth. It also showed a bullish outlook on the meme coin.
Market observers said that the milestone might signify the unwavering belief of its community in the token.
10 Million Blocks For Shibarium
Meanwhile, Shiba Inu’s Ethereum Layer 2 network, Shibarium also recorded a win after surpassing 10 million blocks with an estimated 10,010,974 blocks as of press time.
Crypto analysts said that this achievement is proof of the network’s longevity and reliability, adding that it could entice more new users.
Market observers noted that the network has experienced exponential growth in total addresses in the last few weeks as it now tallies almost 175 million.
Shibarium’s growth is crucial in burning SHIB tokens and a major price control mechanism. Many investors are optimistic that diminishing supply and solid demand might send the token to surge. Shibarium played an essential role in burning around 713 million SHIB.
Unmoved By The Crypto Downturn
Many analysts say that milestones achieved by Shiba Inu and Shibarium offer a great deal of hope to investors, considering the ongoing downtrend in the cryptocurrency market.
For instance, Shiba Inu tanked by about 68% in the last four months, dipping from a high of $0.00003343 in December 2024 to a low of $0.00001082 in March 2025.
On the other hand, some analysts raised their concern about Shiba Inu underperforming the competition, noting that the token only increased by 98% following the US presidential election, while the Dogecoin skyrocketed by 200%.
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Currently, Shiba Inu is traded at $0.00001288 per token, down by 0.2% in the past 24 hours with a total market cap of over $7.5 billion.
Featured image from Getty Images, chart from TradingView
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Lace, a web3 non-custodial wallet developed by Input Output, is now multichain, with initial support including Bitcoin.
Input Output, an infrastructure and web3 research platform founded in 2015 by Charles Hoskinson and Jeremy Wood, announced the development via a press release on Mar. 20. Hoskinson is the founder of Cardano (ADA), one of the top cryptocurrency and blockchain projects.
According to IO, the Lace wallet’s non-custodial solution is now officially multichain. The launch expands the wallet’s support beyond Cardano, with initial support for Bitcoin (BTC).
“The future of blockchain is multichain, and with Lace, we’re making sure users have everything they need in one powerful, easy-to-use wallet. Building on the foundations we have established with Cardano, we identified Bitcoin as the logical next step. And we’re just getting started,” Brandon Wolf, general manager at Lace, said.
Lace now allows its users to store, manage, and transfer BTC.
According to IO, the integration of BTC is a milestone that brings web3 closer to reality.
This is because the support does not only help accelerate adoption for Bitcoin—it also boosts the broader ecosystem. As the top blockchain network sees increased traction across decentralized finance and smart contracts, several layer-2 solutions built on top of it are gaining further adoption.
“Bitcoin was the starting point for many people’s Web3 journey, and now we are witnessing its next evolution with the rise of Bitcoin DeFi. With Bitcoin integration now live, Lace is creating a seamless, intuitive gateway to maximise the best of blockchain innovation” Hoskinson said.
The integration provides an “intuitive gateway” that will help maximize blockchain innovation and add to the growth of DeFi, the Cardano founder added.
Other than DeFi, Lace’s web3 traction includes non-fungible tokens and multi-chain asset management.
Bitcoin continues to attract attention for its potential, with zero-knowledge powered platform BitcoinOS among those to champion its integration with crypto.
The project’s open-sourcing of its BitSNARK v0.2 unlocks unlimited BTC programmability, the protocol’s team posted on X. BitcoinOS’ code allows anyone to verify ZK proofs on Bitcoin.
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