Blockchain has been one of the most promising technology in recent years. If we talk about crypto assets, most of the people are quite familiar about utility tokens but the concept of security token is relatively new. Furthermore, utility tokens merely act as an access to service while the security tokens are entitled various rights such as profit share rights, voting rights, dividends etc. In this article we will learn in detail about how to launch a security token.
Most of the startups which go through the process of initial coin offering tend to avoid classifying their tokens as securities. One of the major reasons for this is the hectic regulatory frameworks that come attached with the process. This includes – Regulation A+, Regulation D, Regulation S and Regulation Crowdfunding.
Well it is quite true that issuing a security token at present is not as easy as issuing a utility token. But, there are various benefits also that come along with the security token such as tokenizing securities increases liquidity of assets, more investors, increased market efficiency and may more. Read about all the benefits of security tokens in detail here
In this article we will first have a look at a few security token issuance platforms and after that we will go through a step by step guide which will enable you to launch your own security token.
Security Token Issuance Platforms
Polymath enables trillions of dollars of securities to migrate to the blockchain. It wants to offer a method for traditional investment assets to be tokenized and tradable. In addition, The platform uses a blockchain-based protocol that provides a suite of tools to coordinate and incentivize participants to collaborate and launch financial products on the blockchain.
Polymath has a platform that facilitates the trade of security tokens, authentication of investors, connecting with legal counselors, and accessing a developers’ marketplace. To power this new platform of polymath for issuing and trading of regulatory compliant securities on the Ethereum blockchain, an ERC20 standard Polymath (POLY) token is created and distributed to network participants.
Polymath is founded by Trevor Koverko. Some of the advisors of Polymath includes big names like Patrick Byre (CEO at Overstock, Anthony Diiorio (CEO at JAXX & Ethereum co-founder) and many more.
Securitize is a turnkey, white-label solution for the tokenization of securities issued by funds, companies, and other entities. In addition, the firm manages the whole process of the solicited investors from login to capital received, as well as the issuance, management of the security tokens throughout the lifetime of the asset and customizing smart contracts.
Because, of their quality features, Securitize has received commitments from various ICOs ranging up to $500 million. Some major ICOs in the list are Lottery.com, Kairos.com, CryptoOracle.com and many more.
Securitize top management has experienced players like Carlos Domingo as CEO (also Managing Partner, SPiCE VC), Jamie Finn as president (Former EVP Business Development Aki, AT&T etc.) and Shay Finkelstein as the CTO (also the CTO at SPiCE VC).
Harbor is the compliance platform for tokenizing private securities such as real estate, company equity, investment funds, fine art, etc. It ensures that tokenized securities comply with existing securities laws at issuance and on every trade, everywhere across the globe.
The Regulated Token (R-Token) is an open source standard and a core component of the Harbor compliance protocol. R-Token applies regulatory compliance at every step and across jurisdictions — from issuance to secondary trades.
Notably, the team of Harbor includes big names like David Sacks as CEO (former COO of Paypal, CEO of Zenefits & Founder of Yammer), Bob Remeika as CTO (also VP Zenefits & Engineer at Yammer), Arisa Amano as the CPO (also VP Zenefits & Marketing at Yammer) etc.
Swarm is a fully decentralized capital market place that democratizes investing by using the power of blockchain to open up high-return, alternative investment classes to smaller investors through asset-backed funds using cryptocurrency tokens.
Also, Swarm’s blockchain allows real world objects to be “tokenized” using the SRC20 protocol, a cryptographic standard for security tokens, and the world’s first. Cryptocurrencies like SWM, BTC, and ETH can be invested into real-world assets in exchange for the SR20 token. The firm is focusing on various industries like agriculture, tech companies, renewable sector companies, crypto hedge funds etc.
Philip Pieper is CEO and Co-founder of the firm. Major advisors include Ethereum Co-founder and Jaxx Founder Anthony Di’Iorio, Sequoia Heritage Fund Co-founder Mark Oei and more.
This was all about the security token issuance platforms which are available in the market. Though, there are other platforms that exist but these four at the moment might be your best bet in terms of services and features if you are looking to tokenize securities.
Now it’s time for the step by step guide. For illustration purposes we will take Polymath as a base. (I have chosen it after analyzing the platform services and its ease of use, this is not an endorsement of Polymath.)
How to Create Your Security Token in 10 Steps
Step 1: Before you start building your security token, first you need to have a Metamask account and you need to fund it too. Download the Metamask chrome extension here (https://metamask.io/) and then add some Ethereum to your account.
Step 2: Next, Open the polymath website link here and click on “Create your Security Token” to get started.
Create Your Account
Step 3: Now it’s time to create an account with polymath. You can use your preferred name and email address. After filling up click on “Create Account.”
To complete the account process, click “sign” on Metamask. This will sign up your email address with your wallet address.
Choose Token Symbol
Step 4: After creating the account. Now its time to finalize a token name and symbol. When you are done choosing your desired token name and symbol. Click on “Reserve Token Symbol.”
After you have reserved your symbol you will have a 15-day period to consult your advisors and lawyers. Then, You will see a popup displayed on the screen if you are satisfied you can confirm and reserve the name and symbol.
Step 5: After you have reserved your token symbol. Polymath will immediately send you further information about your token offering. First you need to verify your email via the email verification mail you get. Once you are verified, just click on the “link to transaction details.”
Step 6: After you have created your account and reserved the token symbol. Now its time to choose your preferred service providers. On the next page that appears you can choose your partners like the marketing team you want to choose, KYC/AML providers or other advisory and legal teams. After you are done choosing, click on “Create your Token” button.
You will witness a popup, which will ask you to take an advice from a legal advisor before proceeding. If you are satisfied. Click on “Create Token.”
Step 7: You can add any additional information in the blank space on the screen like website link or anything you want to provide. Then click on the Metamask Submit Button to finally create your token. A copy of transaction details will be mailed to you directly.
Step 8: Below capped STO, you will see the number of tokens at a predetermined price per token. After your limit is reached, you cannot sell more tokens. Finalize the details given and then click on “Select and Configure STO.”
Step 9: Also set up the further offering details like start and end date, mode of payments accepted, rate of token etc. After filling up all categories click on “CONFIRM and LAUNCH STO.” You will see a page like the below image.
Step 10: This step marks the end of your process to create your security token. In this step you just need to create a whitelist for your future investors. As a result, the whitelist will enable the investors to participate in your STO. It can be updated before, during or after the STO.
Now, when investors will send POLY/BTC/ETH to your STO contract, they will get your STO tokens in return.
This was all it. With these simple 10 steps you can issue your own security token. However, which platform you choose is totally your choice, but the process more or less remains the same.
Finally, if you have any doubts, feel free to comment below.
Also Read: Top 5 Security Token Exchanges