For you to understand what security token, utilities token and equity token is all about.

it is necessary to understand the mean a token means. Tokens have different meaning cause they serve different purposes like in English language, it is seen as a representation of feeling or fact while in the business world it is like a gift or promotional voucher that can be exchanged into money, goods and service easily. In all this examples, it is easy to know that token represent a value.

A token is a unit of value,it is a physical and digital representation of an utility. Meanwhile, Securities are exchangeable financial instruments that are used to raise fund in public companies. They are fungible financial assets like bonds, shares, debentures, etc.

Security Token

A security token is a form of digital security whereby an investor is given a cryptographic token which allows him or her to have access to dividends, interest or share of the companies profit it also allows holders to invest in other tokens or assets to generate profits for the token them and it takes care of the liquidity issues.

Tokens are subject to central authorities regulation that governs securities. Failure to adhere to these regulations could result in severe punitive measures including penalties and termination of the development of a project.

It enhance assets liquidity, security tokens makes it easy for investor to convert their tokens into cash easily also they can buy shares easily through thereby producing an easy flow of shares and enables the enhancement of secondary trading platforms to manage new market opportunities.

security tokens uses a uniform and transparent method of validating and tracking data and prevents tampering or interference of a third party. With these features , it becomes the best framework to document ownership of securities in a fully secured and transparent way. Thereby making reporting and auditing more easier and fraud, mispricing, arbitrage, manipulation by financial institutions and any means of corruption is eliminated.

Merits of security token

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Limited secondary market trading platforms : only few platforms are licensed by the government, the government in a way to regulate the transfer of security token set some restriction and one of the restriction is that trading can only be done on licensed platform only.

It is cheaper and faster

Regulations:The restriction imposed on security tokens increase cost, the regulations made by the government to ensure the safety of investors thereby increasing the legal cost.

Example of a security token is polymath.

Polymath is a decentralized ethereum developed with the major aim of making security tokens management and creation easier. This platform allows users to tokens that are specially designed to comply with securities regulation and make transfer easier.

It was launched by Chris Housser and Trever Koverko in 2017 and they raised the sum of $59 million through an initial coin offering (ICO), this platform has it own native token which is known as POLY. This POLY is spent and earned through the process of smart contract creation, issuance, and verification. POLY security tokens are issued on the polymath network which is known as ST-20.

Utility token

A utility token can be seen as a virtual asset that is used to fund a project or it development by companies and the company gives it buyers a guarantee of being able to consume some of the company products. This tokens enable future access to products or services offered by a company.

Therefore, utility tokens should not be mistaken for an investment. Utility tokens are often used for Initial Coin Offerings (ICO). While performing a utility token ICO company issues a certain number of tokens that are sold to the public The buyers of the tokens are granted some rights in the usage of the company’s products like being giving preferential treatment.

Merits of utility token

Aids new startups in funding their business: with the use utilities token, new companies raises capital easily by giving buyers token to make them have more access to the business facilities than others. Also this fund can be used to develop a project.

There is no regulation on the transfer of this coins and buyers can get as much as they want without any fear of violating any government law.

Demerits of utility tokens

Utilities tokens are susceptible to fraud, due to no the absence of regulations, people can easily fall a victim of scam as some business may cook up lies to convince people to buy their token.
Utilities tokens are not securities thereby it is more like an expenses than an investment cause token holders are not recognized as an investor in the company, they are viewed as an user instead. So only the company enjoys all the profits.

Example of an utility company is Golem.

Golem also known as gnt is a token that allows users to rent computing power, users are allowed to tap into the computing power of a user who has achieved alot or a part of their processing power available for rent thereby it gives you the ability to access a supercomputer. It native token is known as GNT and it used to reiver and make payment for resources on the golem protocol.

Equity token

Equity token is a type of security token that works as a traditional share, the token holders possess some form of ownership in the company and the value of these tokens depends on the the success or failure of the company.

The more the holders tokens, the more the ownership he or she has in the company and the more the profit he or she will get. The major difference between an equity token and a traditional share is the system of recording ownership, traditional share is logged into a database and can be attached by a paper certificate.

Merits of equity token

Ownership: it allows an investor to claim part of the company's ownership base on the the proportion of it shares, the more your shares, the more power to participate in the control and deciosn making process of the organization.

Also the value of equity does not change so far the company does not seize to be in existence, if you have ten token it does not change but the worth of this tokens depends on the success or failure of the company.

When the majority of participants in a blockchain begin to make money outside of trading then its token. Some examples of utility tokens include, savedroid (SVD),Sirin Labs (SRN), Storiqa (STQ).

These tokens are on the Ethereum technology. This system depletes the interest of the investor with that of the company, the investors goals can be aligned with the company's goals since the company is managed by the token holders also this system is well regulated by the government so it more secured from scam.

Example of equity token is Neufund

Neufund represents equity token and It’s company headquarters is based in Berlin, Germany and was founded by Marvin Rudolf and Zoe Adamovicz in 2016. This platforms allows companys to issue cryptocurrency tokens to investors.

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