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In the dizzying rise of cryptocurrencies, there is a new player in town. It's called a security token.
A security token represents a traditional, private security interest, like a share in a company. But instead of a piece of paper, like a stock certificate, the security token wraps it up electronically.
That's what Josh Stein says, and he should know. His company is working on the next big thing in blockchain technology.
It's Not Your Father's Bitcoin
Bitcoin and other cryptocurrencies are still the rage, even as values go up and down like wildfires. Investors are running towards the virtual currencies.
Security tokens are different. The are backed by real assets, such as real estate, equities, shares of a limited partnership, or commodities.
The next biggest difference -- especially for investors concerned about the lack of regulation with cryptocurrencies -- is security tokens are subject to securities regulations.
Security tokens and cryptocurrencies are similar in one important way: they are both based on blockchain technology. That technology -- which provides a digital ledger to verify transactions -- is the reason for all the excitement.
Where Can I Get Some?
Maybe like you, Sunny Dhillon is excited about security tokens. He is a venture capitalist and tech analyst.
"[I]magine if real estate was tokenized into security tokens that you could trade as safely and easily as you do stocks," he wrote for TechCrunch. "That's where we're headed."
He said the stock exchange is not there yet, but companies like Coinbase are getting close.