cryptocurrency

What are security tokens? A guide to asset-backed tokens

Published

5 months ago

December 12, 2024

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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bear market

Think twice about your crypto PR strategy

Published

1 day ago

April 26, 2025

admin

Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial.

Although some believe that crypto PR and communications efforts should slow down when the markets are cooling off, it couldn’t be further from the truth. Sure, during crypto winters, product development teams huddle together to work on building their solutions—and that’s great—but these are also the ideal times for brand building.

Indeed, when the market is going through a crypto slowdown, the strategic brands are seizing the opportunity to strengthen credibility while everyone else is hibernating. And when the market inevitably heats up, this strategy will position such players ahead of the competition.

Now, not all might agree with this point of view, arguing that pushing PR during a downturn is tone-deaf. Others might see slow market communications as unnecessary noise when product development should be the only priority. But visibility isn’t vanity—it’s strategy, and it’s easier to get noticed in calmer markets.

Slower news, hungrier journalists

As the movements in the crypto market slow down, so does everything else that relates to it, including newsrooms. In other words, journalists have more space (and patience) for stories that go beyond mere price action. There are no big stories of exploding digital assets. Bitcoin (BTC) is nowhere near reaching a new all-time high, and altcoins are taking the cue from the industry’s number one, sleeping it off themselves.

Thus, when the hype and the noise in the crypto sphere die down, media outlets are on the lookout for stories worth telling. In such moments, true innovation and strong projects get their chance to shine and get real editorial interest, instead of getting lost among drama-driven headlines.

Small news can be perceived as newsworthy in a bear market

Here’s a secret—during a bull run, not even a $10 million funding round might turn heads. It’s just too common when there’s money flowing everywhere across the board. To illustrate, an insider source at a crypto media powerhouse once said that their “funding news coverage threshold is a minimum of $10 million, with exceptions.”

This might sound counterintuitive at first, but in a more bearish market sentiment, that same outlet might just be interested in a mere $5 million, or even a $1.4 million seed round, like the one recently raised by crypto payment hub Lyzi to expand its Tezos-based service.

In other words, Lyzi has just told the world that it’s there and constantly working on building its product. Arguably, in a period of market pessimism, it would be one hell of a smart and well-timed PR move, and the best part—the likes of CoinDesk might pick it up.

Pick up the mic when no one else is talking

Providing expert commentary when the industry goes silent becomes even more valuable. Journalists still seek third-party sources and insights, and this is your chance to establish yourself as an authoritative figure in the sector, to whom journalists will come back when the bull market returns.

This means that when it’s all quiet on the crypto front and a journalist comes knocking at your door, be ready. Hiring a good PR firm that will lead you, shape your story, and provide the stage is certainly the right move, but it’s up to you to step up with confidence and claim the spotlight.

Execution still matters

With this in mind, don’t mindlessly drop news just for the sake of it. Be strategic about timing, like holidays, conferences, and other major events that might overshadow your news, as well as the tone—this isn’t the time to brag but display resilience and value.

Also, use the time of market bearishness to build your reputation and flesh out your digital footprint through earned media placements in trusted crypto outlets. Potential users, partners, and investors will look you up online, so make sure they have good things to read about you—that’s your PR working in the background.

The real bottom line

All things considered, crypto PR in times of market stagnation and bearish sentiment is not so much about creating hype as it is about demonstrating real substance. It’s about crafting a narrative that portrays you as the crypto player who can weather the blizzard, better positioning your brand.

So, the next time you’re considering staying silent during a crypto downturn, think again. You might miss out on the best PR opportunities of the cycle, as at this time, you could get more attention than usual.

Don’t wait for the bull to charge—make your mark when the field is clear.

Afik Rechler

Afik Rechler is the co-founder and co-CEO of Chainstory, a results-driven crypto PR agency. He specializes in crypto communications and search-driven content marketing. Afik has been in the crypto industry since late 2016, helping blockchain businesses meet their marketing and communications goals.

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Bitcoin

Bitcoin ‘Apparent Demand’ Makes Sharp Rebound

Published

2 days ago

April 26, 2025

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As Bitcoin (BTC) edges closer to the psychologically significant $100,000 milestone, several technical and on-chain indicators suggest that a major breakout could be on the horizon. One such metric – Bitcoin’s Apparent Demand – has shown a strong rebound, signalling renewed interest and sustained accumulation in the market.

Bitcoin Sees Sharp Rebound In Apparent Demand

According to a recent CryptoQuant Quicktake post, contributor IT Tech pointed to a significant rise in BTC’s Apparent Demand. Most notably, this key indicator has returned to positive territory after spending several consecutive weeks in the red.

For the uninitiated, Bitcoin’s Apparent Demand (30-day sum) measures the cumulative net demand for BTC over the past 30 days by tracking wallet accumulation and exchange outflows. A sharp increase in this metric suggests strong, sustained buying pressure, which can indicate bullish sentiment and potential for a price rally.

The following chart illustrates this rebound in BTC’s Apparent Demand, which essentially reflects net changes in one-year inactive supply adjusted by daily block rewards – a metric designed to better represent organic demand growth.

Previously, this metric had fallen deeply into negative territory – dipping below -200,000 (highlighted in red) – suggesting waning demand. However, its recent reversal into positive territory signals that long-dormant capital is flowing back into the market. As noted in the post:

The demand pivot is closely aligned with the recent price rebound above $87K, implying this recovery is underpinned by real on-chain behavior rather than purely speculative flows.

This marks the first positive Apparent Demand reading since February and aligns with rising inflows into spot Bitcoin exchange-traded funds (ETFs), as well as growing accumulation by long-term holders.

Data from SoSoValue shows that US-based spot BTC ETFs have recorded five consecutive days of net positive inflows, totalling more than $2.5 billion. The cumulative net inflow into spot BTC ETFs now stands at an impressive $38.05 billion.

Is A BTC Rally In Sight?

IT Tech noted that past reversals in Apparent Demand have historically preceded either significant rallies or periods of strong price support. If the current trend continues, BTC may have the momentum needed to challenge the $90,000 level in the near term.

However, analysts caution that Bitcoin must hold its current support around $91,500 to maintain upward momentum. This level is particularly important because it is close to the realized price of short-term BTC holders, according to CryptoQuant contributor Crazzyblockk.

Further adding to this outlook, prominent crypto analyst Rekt Capital emphasized that Bitcoin needs to secure a weekly close above $93,500 and reclaim it as support in order to establish a clear path to $100,000. At press time, BTC trades at $94,492, up 2% in the last 24 hours.

Featured image from Unsplash, charts from CryptoQuant and Tradingview.com

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Bitcoin

Bitcoin Must Clear This Critical Cost Basis Level For Continued Upside, Analyst Says

Published

5 days ago

April 23, 2025

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Reason to trust

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Created by industry experts and meticulously reviewed

The highest standards in reporting and publishing

Strict editorial policy that focuses on accuracy, relevance, and impartiality

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Este artículo también está disponible en español.

In a recent CryptoQuant Quicktake post, contributor Crazzyblockk highlighted key Bitcoin (BTC) cost basis zones that the leading cryptocurrency must clear – or avoid breaking below – to sustain its bullish momentum.

Analyst Highlights Key Bitcoin Cost Basis Zones

Bitcoin is beginning to show signs of newfound strength, with the top digital asset surging nearly 3.5% over the past week and trading in the high $80,000 range at the time of writing. BTC’s rise amid the global equity market downturn has reignited discussions about the cryptocurrency’s potential to ‘decouple’ from traditional markets.

In a recent Quicktake post, CryptoQuant contributor Crazzyblockk outlined Bitcoin’s various cost basis zones and realized price cohorts to identify key resistance and support levels.

The analyst noted that short-term holders – those who have held BTC for less than 155 days – currently have their realized price, or average cost, sitting at the $91,500 resistance level. Crazzyblockk added that this group tends to be the most price-sensitive.

On the other hand, the cost basis for new holders – those who have held the digital asset for one to three months – currently has its strongest support level around $83,700. The analyst pointed out that this level represents the cost basis of recent market participants, who often lead short-term trend changes.

To clarify, cost basis zones are price levels where a significant amount of BTC was last moved or acquired. A potential breakout above the short-term holders’ realized price would suggest new bullish momentum, as these holders would be back in profit and less likely to sell their holdings.

Conversely, a break below the new holders’ cost basis support level could signal potential downside movement, as recent buyers might begin incurring losses and be forced to capitulate.

Notably, each cost basis line highlighted in the chart below is calculated based on the realized price of Unspent Transaction Outputs (UTXOs) held within a specific age band. Similarly, realized price is determined by dividing the total value of all UTXOs by the number of coins.

Are Investors Expecting Further Upside?

Recent on-chain analysis suggests that BTC holders may be anticipating further upside. Short-term holders appear to be holding onto their BTC despite being in a loss position.

Additionally, crypto exchange net flow data hints that a BTC price rally may be imminent. Some analysts are also drawing parallels to gold’s recent historic price action and predicting that ‘digital gold’ may soon experience similar momentum.

That said, Bitcoin futures index sentiment is pointing toward rising pessimism surrounding BTC, driven by macroeconomic uncertainty. As of press time, BTC is trading at $88,759, up 1.7% in the last 24 hours.