What Financial Derivative Is Most Analogous to a Security Token?
A security token is most analogous to an equity derivative, specifically a share of stock, or a fractional interest in an underlying asset. Security tokens can represent ownership in real-world assets like real estate or art, or in the equity of a company, similar to how a stock certificate does.
The token simply digitizes and fractionalizes this traditional financial instrument on a blockchain, offering programmable features and enhanced liquidity.
Glossar
Financial Derivative
Valuation ⎊ Financial derivatives, within cryptocurrency markets, represent agreements whose value is derived from an underlying asset ⎊ typically a digital asset like Bitcoin or Ether ⎊ or a reference rate.
Fractional Interest
Allocation ⎊ Fractional interest, within cryptocurrency and derivatives, denotes a proportional ownership stake in an underlying asset, often representing a claim on future cash flows or asset value.
Security Tokens
Instrument ⎊ Security Tokens are digital representations of ownership in an external asset or enterprise, explicitly designed and issued to comply with existing securities laws, often granting rights like dividends or voting.
Security Token
Token ⎊ A security token represents ownership or rights to an underlying asset, leveraging blockchain technology to facilitate fractionalization, enhanced liquidity, and programmable compliance.
Financial Instrument
Instrument ⎊ A financial instrument, within the evolving landscape of cryptocurrency, options trading, and derivatives, represents a tradable asset embodying a contractual right or ownership stake.