Editor’s note: this publication has been updated on 15th January 2019 with Abacus and Atomic Capital “Helium” solutions added to the review.
WHAT IS A SECURITY TOKEN?
A Security Token shares many of the characteristics of both fungible (erc20) and non-fungible tokens (erc721). Security tokens are designed to represent complete or fractional ownership interests in assets and/or entities. While utility tokens have no limitations on who can send or receive the token, security tokens are subject to many restrictions based on identity, jurisdiction, and asset category.
SECURITY TOKEN UMBRELLA ARCHITECTURE:
- ERC 1410, For partial fungible token.
- ERC-1594, which splits out the non-partition related core security token functionality. It is based on ERC-20 rather than ERC-777
- ERC-1643, which splits out document management functionality.
- ERC-1644, which splits out controller operation functionality.
HOW DO THEY DIFFER FROM UTILITY TOKENS?
The concept of utility tokens is fairly well understood in the blockchain space today. Utility tokens represent access to a network, and your token purchase represents the ability to buy goods or services from that network — kind of like purchasing a game token being used to play an arcade machine. Utility tokens give you that same type of access but just to a product or service.
On the other hand, security tokens represent complete or fractional ownership in an asset (such as shares in a company, a real-estate asset, artwork, etc). Having a stake in a company, real estate, or intellectual property can all be represented by security tokens. Security tokens offer the benefit of bringing significant transparency over traditional paper shares through the use of the blockchain and its associated public ledger. Security token structure, distribution, or changes that could affect investors are now accessible to all via the blockchain.
Security tokens and the digitalized assets they represent ownership will form the backbone of finance 3.0 driving innovation, adoption and accessibility across the financial
Table 2 Wallet and Exchange Comparision analysis by Dappros
- T-REX doesn’t create ethereum wallets on sign-up (new user account).
- T-REX supports integration with internal, Centralized, Decentralized exchanges.
- T-REX uses ERC-20 as standard.
- ERC-725 or ERC-735 is used for Identity management.
The token structure is based on the ERC-20 standard, it remains fully compatible with it and all the available exchanges and tools based on ERC-20 tokens.
The main goal of the T-REX standard is to create a set of global tools, fully based on blockchain technologies, to allow frictionless and compliant issuance and use of tokenized securities on a peer to peer basis or through marketplaces but in full compliance with regulations and issuers requirements.
License: Creative Commons Attribution-NoDerivatives 4.0 International Public License (https://github.com/TokenySolutions/T-REX/blob/master/LICENSE.md)
R-Token is a permissioned token on the Ethereum blockchain, enabling token transfers to occur if and only if they are approved by an on-chain Regulator Service. The Regulator Service can be configured to meet relevant securities regulations, Know Your Customer (KYC) policies, Anti-Money Laundering (AML) requirements, tax laws, and more. Implemented with the correct configurations, the R-Token standard makes compliant transfers possible, both on exchanges and person to person, in ICOs and secondary trades, and across jurisdictions. R-Token enables ERC-20 tokens to be used for regulated securities.
- 0x and Harbor team up to optimize a security token stack based on Ethereum open standards
- 0x is enabling the exchange of tokenized securities by providing developers an open protocol to build on.
License: Apache License, Version 2.0
Polymath is a security token platform that uses the ST-20 token standard to ensure compliance with government regulations when issuing digital securities. Polymath is often confused with Ethereum, but they are both very different when compared to each other. Plus, Polymath is not an exchange. It is a security token issuance platform but for liquidity and secondary markets exchange it has tie-ups with security token exchanges like tZero.
- Only provides STO feature.
- No wallet creation for a new user, No exchange,
- POLY tokens (platform tokens for polymath are required).
- Ethereum compatible security token.
License: MIT license
TokenD can be divided into two parts: DLT-based logic (node) responsible for the key functionalities such as tokens management and distribution, rights management, etc.; auxiliary modules, which interconnect DLT with external systems, store user data, etc.
Node is a key component of the platform. It processes transactions, manages history, and provides an easy to use API to access the blockchain data. It consists of two modules:
Core — a replicated state machine that maintains a local copy of cryptographic ledger and processes transactions against it in consensus with a set of peers. It implements the federated consensus protocol and is responsible for tokens accounting and roles management.
Horizon is the client-facing REST API server. It acts as an interface between the core and applications that want to access the network. It allows submitting transactions to the network, checking the status of accounts, and viewing transaction history.
- Microservices based architecture using Docker.
- Not based on Ethereum.
- No smart contract mechanism.
- Provides Features like wallets, Asset Exchange, and Issuance UI.
The protocol replaces what central middlemen do in today’s finance industry with smaller, more modular services such as identity verification, compliance checks, and collateral appraisal. These services are executed through smart contracts on the protocol, lowering fees and reducing transaction times. Abacus keeps track of data attested by the aforementioned services through an on-chain storage layer, which allows data to be reused across all assets, services, and marketplaces within the Abacus Ecosystem. The protocol itself does not impose any costs on its users– fees are only incurred when users request rent-seeking services performed outside of the blockchain. Decentralized governance is used for the curation of service providers on Abacus and ensures that the expansion of the protocol aligns with the needs of its stakeholders.
- Modular Architecture.
- Services like Compliance, Identity, and Appraisal are provided.
- Based on Ethereum.
- Smart contract mechanism.
- Provides Features like Token issuance and Token Exchange.
Github: *Repository inactive
An extendable smart contract standard for digital security issuance and automated regulatory compliance. The Atomic Digital Security Standard (DSS) is a permissioned, ERC-20 compatible digital security that enforces transfer restrictions based on an upgradable RegulatorService contract. Once deployed, the RegulatorService can be replaced and configured to maintain ongoing compliance with securities regulations e.g. the enforcement of KYC/AML requirements, accredited investor checks, trading lock-up periods, tax laws, and other contractual agreements.
The Atomic DSS overrides standard ERC-20 functions transfer() and transferFrom() with additional checks to determine whether a transfer ought to be restricted. This is implemented by calling verify() from inside the current RegulatorService to supply the necessary restrictions logic. The verify() function returns byte code that signals the status of a transfer and the specific reason for a restriction if it occurs. Additionally, the RegulatorService implements restrictionMessage() that returns a human-readable error message corresponding to the given byte code.
- It has three flavors: Helium, Oxygen, and Nitrogen.
- Provides Fundraising, Issuance, and Advising of Security Token.
- Permissioned Environment.
- Based on Ethereum.
- Smart contract mechanism.
- KYC/AML features are available.
License: MIT license