Security Tokens on Tezos: Higher Demand?

Tezos came into the crypto world by raising $232 million in just two weeks in their then record-breaking ICO. If you haven’t heard about Tezos or want to know a little more about it, here are some insights into the project

What’s Tezos?

According to the project’s website, Tezos is “a decentralized blockchain that governs itself by establishing a true digital commonwealth and facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financial weighted smart contracts.”

In simpler terms, Tezos is a blockchain network linked to a digital token, called a Tez or a Tezzie (XTZ). Unlike other digital currencies, Tezos does not involve the mining of Tez tokens –  instead, token holders receive a reward for taking part in the proof-of-stake consensus mechanism.

Security Tokens: Why Companies are Choosing Tezos

One of the reasons Tezos is an attractive place for security tokens is that Tezos focus itself on that market, and it brings the tools and facilities that make Tezos an accessible home for security tokens.

Having said that, the securities market will likely look towards Tezos, instead of Ethereum or EOS. For instance, in recent months, more and more companies are choosing Tezos to issue their security tokens.

Enterprises such as tZERO, Alliance Investments, BTG Pactual, Dalma Capital, Elevated Returns, Securitize, and more have announced over $2.643 billion worth of STOs to be deployed on the Tezos blockchain.

Tezos became very attractive because with three differentials or points.

The first one is institutional-grade smart contracts –  Tezos utilizes formal verification, a process that proves the mathematical correctness of the code. Tezos uses a smart contract language that allows people the discipline to mathematically prove a contract (off-chain, during its development) before putting it on-chain – also known as formal verification.

For instance, Cardano has a similar formal verification, but the Tezos community vouches that Tezos aims to be a high-security, high-value chain and wants to make rigor and safety key practices, making it part of its culture.

The second one is secure custody, meaning that Tezos includes a formally-verified multi-signature contract allowing cold-storage deployment and management of smart contracts for the highest level of security. Again, storing and deploying large amounts of capital over the blockchain makes Tezos a high-value blockchain.

And last but not least, upgradeability – a feature that allows of the newest features/tech that emerges can be ported onto the Tezos protocol via on-chain governance and will make Tezos last much longer and be able to evolve and adapt continuously through time.

About the future of security tokens, however, Tezos’ CEO Arthur Breitman said in a recent interview

Even if I own such a token, I still have to trust that the issuer is going to honor the contractual claim it represents, in stark contrast with cryptocurrencies which do not represent a claim on anything.

It’s safe to say that the future for STOs looks bright with Tezos. Its native features such as institutional-grade smart contracts, secure custody, and the much talked about upgradeability of the protocol will be an attractive contender for companies to issue security tokens.

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