New players are entering the security token ecosystem every single day. Ethereum just joined the playing field as they reveal a suite of security token standards under the ERC-1400 protocol.
Ethereum continues to adapt to the current trends of the cryptocurrency world. While many claimed Ethereum would slowly die off and become irrelevant, it has proven to get back up and throw punches. Ether just claimed its second place spot on the market cap valuation leaderboards. Recently they unveiled a suite of Security Token standards under ERC-1400.
The goal of the Tokens under ERC-1400 will work to provide different entities with a wide range of asset building standards. The purpose of this is to give the companies different options for modeling, trading, and managing the ownership of their tokenized security asset. This suite was created in order to motivate the issuance of security tokens on the Ethereum platform.
Erc 1594 is meant to be the core functionality security token. Many people are worried the tokenized securities boom will remove the decentralizing of cryptocurrencies, but with this, both smart contracts and data will work without any interruptions. This fluid interoperability between the smart contracts and the data will occur on-chain. Off-chain would require sign authorizations which in turn lowers cost, improves workflows, and simplifies smart contracts. This will dramatically increase blockchain adoption.
Trading the ERC 1594 will be seamless. Transactions will be checked on-chain the same way we check ERC-20 transactions on etherscan. This on-chain process will also verify if the transaction is valid in terms of the amount the sender says they have sent. The information provided on-chain will also prevent the sender from transacting if they have not filled out a KYC which will be required to trade security tokens.
ERC 1410 will serve partitioning balances. The blockchain provides transparency for cryptocurrencies, and according to how many tokens you hold, you will be partitioned into a specific category. An example of this will be this excerpt taken from Adam Dossa article:
“As an example, suppose an investor has the following categories of shares:
- 30 tokens — Locked for 3 years, no voting rights
- 40 tokens — Locked for 1 year, full voting rights
- 50 tokens — Unlocked, full voting rights
For the purposes of governance you’d want to know that there are 90 tokens with voting rights, for the purposes of trading there is a balance of 50 tokens, and for valuation purposes you care about the total of 120 tokens.”
Next up is the ERC-1644 token. This token will allow a function many people will find odd. A controller operation will give someone who is vetted to perform a transaction between address forcefully. This is mainly needed for court orders, fraudulent activities or lost private keys. This process would remain visible to the main token holder, and they too can prevent it if the action taken to transact forcefully has not been approved.
The ERC 1643 will provide a smooth documentation program. This feature will allow verified personnel to attach documents that have been notarized to the tokenized securities. Investors would be notified if such an event took place. Every update will be recorded with the hash number that’s attached to the document that was uploaded. Every action gets documented and time stamped.
The ERC 1400 security token ecosystem is still growing. New areas that are under investigation are how dividends will be handled, capital distribution, and confidential transactions.