Introduction

Hello fellow students of steemitcryptoacademy, I hope we are doing all fine? My pleasure to participate in your class Prof @pelon53 and for your lectures on Tokens_part1 and homework thereafter, it was quite impactful. After attending your lectures, I will want to attempt the set homework accordingly without wasting much of our time.

Tokens as we all know are coin-like or alternative to coins which could stand as a representation for means of exchange. It could be an acceptable means of reward or payment in a firm, or private organizations. Most of the token we see are effectively in use in the decentralized platforms and private firm just like how the legal tender-currency is to the government. That is to say, the token is yet to be a legal tender publicly accepted by all, since all we see are effectively harnessed by a group of firms.

Tokens have continued to wax stronger in the daily activities seen since the advent of the blockchain systems, where ICOs are the major players of it. For them in this platform, it is a stronger legal tender that triggers influence, performance and stability in the ecosystem.

What is Security Token? And explain and example

Security tokens are digital assets issued by a company or firm which are designed to serve as a means payment, reward of fundraising. They are digital assets which are seen to derive its value from an existing tradable and valuable asset. They are digital assets, liquid contracts with fractional investment on already existing valuable assets with certainty of ownership preserved in the blockchain ledger. Existing valuable assets here may include real estate, cars, houses, paintings, artworks etc. Security tokens ensure that the ownership of an asset when tokenized is placed on the blockchain ledger. This guarantees authentication and verifiability of an asset at all times by outright preservation of ownership except otherwise.

Security tokens are seen to derive its value from the already existing assets given that these assets are of value and potentials, whereas placing more premiums on those assets it is tokenized. Do you know that holders of security tokens are eventual collective owners of a firm, with voting system created from the blockchain which gives controlling access to decision making in the firm. In other words, these are the highlights of what the security token meant to the investor;

• They are digital assets and liquid contracts
• They fraction on already existing valuable assets
• They are created for investment
• They are ensures ownership stake of assets linked to the investor
• Tokenized assets are stored in the blockchain ledger which guarantees ownership at all point in time.
• They control the decision making via system voting of any firm which they are holders of her tokens.

Having said all this, we can categorically say that a security token is an investment contract which has a representation of legal preservation and ownership of an asset which also have a verifiable documentation from the blockchain ledger.

Benefits of Security Tokens

• The fractional ownership of assets which is one of the major tips of the security tokens guarantees an outright preservation of investor’s assets in blockchain ledger.
• It has helped to close up the gaps in placing some of these valuable assets as premium as it gives the already existing traditional assets a platform to be tokenized and confidence boost to investors.
• It comes with high regulations just as the name security implies unlike what is seen in the utility tokens. Issues of scam and fraud are drastically reduced.
• Security tokens tend to ameliorate some of the poor documentation and computation errors seen in the traditional system, where it comes to digitalize and store all data in its blockchain ledger which can be accessed and used by all.
• Security tokens have direct value effect in proportion to assets they represent. The higher the value of the firm, assets also means that it will increase the value of the security tokens.
• Due to its decentralized platform, transactions are monitored from start to end which also showcases high transparency seen in process. This builds trust and confidence amongst investors.
• Security tokens helps in driving more liquidity into the system by its placing premium value on already existing valuable assets, hence by making them more viable and attractive for more fractional investment.
• It brings about more efficiency in process and reduces work load which ordinarily would take ages before executed.

Creating Security Tokens

There are two ways to create security tokens but before doing that we should think of the enforcement regulations guiding its existing and also name and symbol reservation. These are two major ways of creating the security tokens.

• Through asset origination
• Through asset tokenization
  In Asset origination, assets only exist on the on-chain system and never existed on the off-chain which invariably means they do not have traditional beginning and origin and hence cannot be created in alignment with the traditional origin.
  For the assets tokenization, it has the off-chain to on-chain links in the blockchain, which allows for tokenization assets. There are both presence of the traditional financial origin and the blockchain.

Example of a Security Token

A typical example of the security token is the *TAPJETS which has successful used the initiatives from the blockchain and token itself to drive this underlying and existing project to profitability. Tapjets with headquarters in USA have consistently used the activities of the decentralized platform and with security token drive the services seen in the Tapjet firm. Here, they have made booking of private jet look so seamless and faster with ease of transactions. Payments are received in Fiat and cryptocurrencies. The scalability nature of the blockchain enables it to handle volume of transactions at a time.

What is Utility token? And explain an example.

This is may be called a universal token since it happens to play the role of a User/App coins which are all used in transactional activity in the system. It is seen to be the economic activity of every platform as most activities use this coin as an access to its full services. During ICOs when tokens are given, when firms decides to give out utility tokens, it is specifically for projects which investors may likely redeem in future and not any time in the recent, or they are created to give investors access to a products and services of a project created for their use. These tokens usually come with discounted fees also and not always used as investment unlike what we see in the security tokens.

Utility tokens, do no have any investment power that guarantees the effective control of decision making in the blockchain but are given to investors to incentivize them to act on a particular way which the firm seem urgent for its operational drive. They are unregulated just unlike what we know about the security tokens which are strictly regulated by the authorities, hence there are occurrence of scams within its system. Perhaps the value of utility token is not tied to the recent company's financial status which brings in uncertainties for every investor coming in as he may acquire a supposed valued token from an insolvent firm.

Example of Utility Token

Golem: this is a typical example of the utility token where a user lends out its Computer power to other users who needs it in conjunction with their computing power in carrying out remote services hence giving him a supercomputer services.

Another example of utility token is the BASIC ATTENTION TOKEN (BAT) which allows bloggers to receive payments for author contents created by them. This has shown a significant reward system to content creators as discounts are also f=given to active users of the platform. Users of Brave browsers are rewarded in BAT for using this platform and also viewing ads in them. This just got my attention BRAVE, and I have been using this browser for over a month now and not aware of this. Going to pay more details and harness all of its benefits.

What is Equity Token? And explain an example

This kind of token just as we see from the name places a certain fractional ownership status of a token to an investor which mostly are derived from third agents/brokers. This percentage ownership acquisition grants us some level of legality to trade and invest in it as demanded. It is the equity token that directly reveals to us to what extent are we participants or liable to trade on the assets. I will say it is a kind of security token that allows some kind of fractional investment on an underlying asset.

The good thing about the equity token is that, it allows for multiplicity of tradable assets across several investments by the investor. Since the cost of acquiring an asset may be more intensive and hence tie up assets in one investment, it perhaps allow the investor to have several fractional percentage investment across several assets as his at his disposal. It has some level of regulations likened to that of the security tokens and the it is seen that the security tokens also work efficiently in handling all of the actions raised from the equity token.

Investors who move to invest in equity tokens during a firm's startup process are intended to have some level of decision making and voting as seen in the company depending on how much of these tokens are in their possession. Equity tokens ensures that investors and holders of this token take part in the developmental and growth of the firm, hence all share from the interest and rewards that emanates from it.

How Equity tokens are Issued

The equity token can be offered both in the private and public placements which allows for flexibility from both sources. These tokens are seen to be interchangeable and also regulated by the authority that makes it have similar protocols like the security tokens. Equity tokens must follow guided regulations as seen in each country before they are created for use. The firm has to do the following;

• Enlist in the exchange platform to help record all information from listed equity tokens
• Declaration of commercial provision which helps to pass detailed information of the terms and provision.
• Perform a pre -ETO (Equity Token Offering) which helps to know the impact of the ETO from the investor’s performance and if sufficient, there won’t be any need for a public offers. But if not sufficient, the last stage is to open up for a public ETO.
• Perform a public ETO.

Benefits of Equity Tokens

• It is highly regulated and hence guarantees high level of asset safety. There are reduced risks of scams as they follow guided regulations which n=hence prevent those short comings.
• An investor has 100% of control in its assets at any time. Guarantees maintain or give control of asset at every point in time.
• Value of equity tokens remain intact so far company continue to exist.

Example of Equity Token

There are many examples of equity token, and they include;

• Neufund
• The elephant Private equity coin
• Slice
• The dao
• RRT token etc.

The Nuefund with equity token Neumark runs on the Ethereum blockchain. It serves as a marketplace where investors and other companies assemble in the Neufund platform to perform transactions. Neufund capitalization at any point in time is a function of the collective capitalization of all companies present in its platform. Successful transactions done by an investor on this platform rewards him with Neu token equivalent with a certain percentage distributed to all equity token holders. Not forgetting, a fractional percentage amount is paid to the platform which uses this site upgrade and other contingencies.

Conclusively, it is good we know that security tokens are investment driven to help preserve ownership status of an existing assets while utility token simply is that economic player that stirs the transactional drive of the system. It is sometimes given to investors to incentivize them on lead to follow at any particular time the firm desires. Equity tokens with resemblance with the security token determines the level of ownership an investor has in a given asset.

Thank you Prof @pelon53 for this task. This is my entry.