LeoGlossary: Security Token

A security token is essentially a digital form of traditional securities.

Many think of security tokens the same as cryptocurrency like Bitcoin. The difference is they are derivatives to represent others assets. Also, they are not base layer coins. They essentially run on Layer 2.

It is possible they will one day be legitimate competitors for stocks and other securities.

Investment in these is done the same way as other vehicles. Investors are seeking a return that could come in the form of appreciation (speculation) or dividends.

Security tokens are in their early stages. Crypto Synthetic Assets are also believed to hold enormous potential in expanding the financial system.

By building on top of blockchains, transactions pertaining to security tokens are on decentralized infrastructure. This means one does not have to go through a centralized exchange like with the equities markets.

Security tokens can be treated like any other cryptocurrency in the sense one can access with a wallet such as Metamask.

The combining of the infrastructure along with assets such as security tokens is only going to propel Decentralized Finance (DeFi) forward.

These are often brought to market via Security Token Offering (STO).

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