How Do Security Tokens Handle Dividend Distribution to Holders?
Security tokens use smart contract logic to automate the distribution of dividends. The contract can be programmed to periodically send a pro-rata share of the underlying asset's profits (e.g. fiat currency or stablecoins) directly to the token holders' wallets.
This eliminates the need for a manual, centralized transfer agent, streamlining the process and ensuring transparency.
Glossar
Smart Contract Logic
Execution ⎊ Smart contract logic, within cryptocurrency and derivatives, defines the automated enforcement of pre-defined agreements, eliminating intermediary risk and reducing operational costs associated with traditional contract management.
Security Tokens
Tokenization ⎊ Security tokens represent fractional ownership of tangible assets, often linked to sustainable projects or resources, enabling granular investment and enhanced liquidity compared to traditional asset classes.
Dividend Distribution
Mechanism ⎊ In the context of tokenized assets, Dividend Distribution is often automated through smart contracts, ensuring the timely and proportional allocation of earnings to all eligible token holders.