Security tokens are digital assets that represent ownership or rights to an asset, created through a process called tokenization. Unlike cryptocurrencies, which are used for transactions, security tokens represent things like stocks, bonds, or real estate, and are stored on a blockchain.
Tokenization allows assets to be divided into smaller units, offering fractional ownership and improving liquidity. Blockchain ensures the security, transparency, and immutability of these tokens. Though not yet available to retail investors, security tokens are gaining interest from institutions and require regulatory approval, like from the SEC.
While security tokens and cryptocurrencies both use blockchain, the main difference is their purpose. Cryptocurrencies are used as currency, while security tokens represent ownership of assets. As the technology and regulatory landscape develop, security tokens are poised to revolutionize investments with greater liquidity, transparency, and access to high-value assets.
