Benjamin Ong, the Project Manager at Rate3 Network, just recently published a detailed piece on the supposed ‘security token wave’ that is building behind the scenes. In it, he discusses the security token value chain and how players in the blockchain space are currently competing over first-mover advantage.


As the market winter of 2018 for cryptocurrencies continues, blockchain conferences around the world have been speculating on what seems to be building behind the scenes: it seems clear that the security token wave will soon be among us. Benjamin Ong argues in his new article for Hackernoon that we are now witnessing the transition period from the “wild west that was ICO-mania” to the “Security Token Offering (STO) spring.”

From ICOs to STOs

It should come as no surprise to anyone who has been following the cryptocurrency space that ICOs have become a dying model of raising capital in the blockchain sector as of this year.

ICOs have taken a hit along with all cryptocurrencies in this bearish market winter, but there seems to be less and less belief among analysts that the ICO model will ever return to its former glory. Now that regulators are closely monitoring the space, ICOs have proven to be far too risky after materializing on so few of their promises since last year.

Part of the appeal of security tokens is that they possess a concrete value chain as explained by Benjamin Ong. The value chain should be imagined like a “series of production line steps,” around which an ecosystem will be developed.

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The Security Token Value Chain

This structure, from the top of the chain to the bottom, is as follows:

  1. Deal Flow Origination: The demand and supply of capital has to be matched along with a consensus on asset types (equity ownership, bonds, real estate, and so on).
  2. Issuance Platforms: A clear structure of auxiliary services necessary for the token industry must exist including corporate actions (such as revenue sharing, voting rights, interest payments, etc).
  3. Services: The core services must be created to allow for security token issuances and ownership rights.
  4. Secondary Market Trading: Deciding who the participants will be in this new market, how taxes will be sorted out, and making sure that settlement solutions exist.

In this value chain, the start of the chain begins at “Deal Flow Origination” and works its way up to “Secondary Market Trading.” However, all parts are necessary for the entire security token ecosystem to function.

Benjamin Ong goes into detail on each step of the security token value chain in his piece Why You Need To Know The Security Token Value Chain (aka Yet Another Stack) on Hackernoon. Be sure to check it out.

Is the era of ICOs over? Do you agree with Ong’s conception of the security token value chain? Let us know in the comments below.


Image courtesy of TokenData.

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