Every new technology has always been focusing on enhancing traditionally rooted processes and the new decentralized digital ledger called the blockchain also falls into the same category. Initial Coin Offerings or ICOs as they are commonly abbreviated have been seen as the first point of confluence between blockchain technology and the traditional world of investments. However, the lack of regulation is meant that ICOs would be marred by a lot of scams, not only tarnishing the image of ICOs but also creating a stumbling block for the adoption of blockchain.
What is Security Token Offering?
Security token offerings or STOs as they are commonly abbreviated came as the second attempt to unify blockchain and investments. Precisely addressing the territory that ICOs missed out in, STOs are completely compliant with the regulatory requirements of compliance-establishing bodies like the Securities and Exchange Commission (SEC). this makes them highly dependable and completely legal.
As opposed to the utility tokens offered in an ICO, STOs offer security tokens. As the name implies, security tokens represent shares for rights to certain returns on a tangible real-world asset. These assets can include but not limited to Gold, real estate, fine art and collectibles, and any other asset that has monetary value in the real world. These assets are represented in the blockchain using units called tokens. These security tokens represent tradable al2 units that can be exchanged between a buyer and a seller.
This trade between the buyer and the seller is facilitated by a security token exchange. A security token exchange can be considered one of the most vital platforms that help in the survival of security tokens and STOs as a valid method of trade and seeking investments in that order.
The process of security token exchange development is a grand culmination of multiple pieces of technology, business, market understanding, and a lot of auxiliary aspects. In the oncoming lines, we will look at the different features of a robust and versatile security token exchange platform.
The Relevance Of A Security Token Exchange
There is no question that security tokens issued in STOs have an innate value point that do not have to essentially comment on an exchange accepting a token like how it would be in the case of utility tokens. However, irrespective of the token having a value, it might be difficult to find a person to buy those tokens and give you a more liquid asset like cash in lieu of those tokens. Security token exchanges facilitate an organized barter between buyers and sellers of security tokens. The platform plays a major role in enhancing the liquidity of those tokens and in the long run, make them dependable instruments of investment.
In addition, it also provides an alternate learning opportunity for entrepreneurs who facilitate the exchange platform.
A Matching Engine
A security token exchange almost functions like a Tinder for buyers and sellers – the perfect buying order has to be matched with a matching selling order. The matching engine will take care to compare the quantities entered by the trading parties and will also ensure that there are no major anomalies when it comes to the cost consistency. It also takes care to co-ordinate the wide spectrum of requests within quantities like market and limit.
A robust security token exchange will facilitate payments being made using multiple methods. Just like any other crypto exchange, but security token exchange is also equipped with a wallet and the wallet can control the interaction between fiat and digital worlds.
The crypto wallet should be flexible enough to be loaded using multiple currencies both from the crypto and the fiat world. this would mean that your exchange should accept Bitcoin, Ethereum, and Litecoin, at the same time, also accept the United States Dollar, the Indian Rupee, and the Euro.
The exchange should also incorporate an installment gateway that enables users to purchase currencies through multiple payment instruments.
Escrow System To Build Trust
One of the greatest advantages brought about by the digital ledger is in its inherent smart contracts. With smart contracts, it is possible to place the token and the amount in an escrow, so the trade can be executed once the mutual verification is complete. Although it might seem like a cumbersome and long process, it is quite swift and effective, effecting it almost immediately.
Availability and Reliability
There are certain inbuilt highlights right within the exchange like DNS disappointment Geographic IP routing, and distributed server architecture. all these aspects will ensure that the trading continues to happen and the platform stays available irrespective of any DNS disappointments. This, in essence, makes the exchange extremely reliable, and as you may have inferred, for any business, being available all the time is one of the most important features that need to be insured at all costs.
On the surface, it might seem like just one security token, but it’s quite possible that even a single security token is worth a thousand dollars and sometimes, maybe even millions. Therefore, the security of the wallets, the tokens, and the entire exchange should be issued at all costs.
Security measures like server sharing encoded access to clients, two-factor authentication content-security-policy (CSP) assurance, DDoS insurance, and X-XSS assurance are bound to help you in enhancing the security of your security token exchange.
We have already seen that security token exchanges present a lucrative business opportunity as commissions can be earned in every transaction. This means that security token development services would find a new leash of demand, this business does not have to waiver when it comes to legality. While it cannot be said that all countries have accepted security tokens as valid instruments of investment, there are no grey areas with respect to the law.
If you would like to create a business out of security token exchanges, all you need to do is get in touch with a company that offers security token exchange development services. The company will take care not only to understand your requirement but also to customize your security exchange in line with your legal and aesthetic requirements. Security token exchange development companies also ensure that all the auxiliary aspects of your exchange platform are in place including but not limited to the payment gateways, the legal requirements like KYC/AML, and of course, top-notch security.