- Security Token Prime Insights
- Posts
- 🦍 Aping In On NFTs
In this month's edition of The ReCap we'll be covering:
Industry News: Traditional players are getting to know Web 3
Real Estate News: Tokens left and right, coast to coast
Vendor of the Month: IX Swap
Advisor Spotlight: Adrian Alvarez, Head of Consulting
Client Spotlight: Kairos - The Birth of Security Token Advisors
Crypto Corner: Ask a Token Advisor tomorrow at 12pm EST
Fun Fact: NFTs
But first...
NFTs are blurring the lines of securities and jpegs and it's a wonderful thing!
That’s right! In our third edition of The ReCap we are coming into April hot off of NFT week here in Miami. One thing is clear, NFTs have created a new shift in thinking for crypto. The concept breaks down the benefits of ownership via tokenization. These successful collections represent something more real than intangible internet funny money, which allows people to make the connection between attaching something of value to a token more easily. And that’s where entrepreneurs are starting to expand beyond images. First experiences, next investments. We’ve already seen companies like Propy use the model on homes. NFTs are nothing more than baby security tokens and their continued success will only further push knowledge of tokenized investments onto the average consumer as well as big institutions alike. We often wondered why the leading crypto exchanges didn’t jump into security tokens. Could we one day possibly see OpenSea get the right licenses and open up selling real estate, businesses and more? I’m happy to say NFTs are a good thing for the world and it’s best you keep an open mind when it comes to how they will ultimately layer into web3 and security tokens.
Best,
Founder and CEO, Security Token Advisors
By John Pittman AKA "The Token Advisor"
InvestaX has announced big names within the digital asset as new strategic investors. Of which include Coinbase Ventures.Coinbase along with other investors have joined the Singapore-based startups Series A round as the Monetary Authority of Singapore) licensed digital securities platform funds its ambitious growth plan.
Three individuals who bought cryptocurrency through Coinbase filed a proposed class action March 11 in the Southern District Court of New York alleging that Coinbase is operating as an unregistered securities exchange. The lawsuit lists 79 tokens that it claims are securities Coinbase is selling in violation of state and federal law, and the buyers were not warned of the risks involved in their purchases.
Security Token Advisor’s very own Peter Gaffney teamed up with sister company Security Token Market’s trading analyst Aneesh Shinkre to crank out a comprehensive analysis covering the tokenized real estate market. Ranging from billion dollar commercial property portfolios to single-family Section 8 homes trading for $50/share on the international market, the real estate sector proves to be one of the most compelling use cases for tokenization, allowing asset owners to explore complex liquidity structures and providing global investors with access to one of the most historically successful investments available, 24/7.
Major global cryptocurrency exchange Bitfinex has moved forward with its security token platform. The new STO platform is regulated within Kazakhstan’s national financial hub, known as the Astana International Financial Center (AIFC).
The study, conducted among fund managers in France, Spain, Germany, Switzerland and the UK with around $546.5 billion USD in assets under management, found more than four in five (83 per cent) fund managers agree that the shift into a tokenized economy offers greater potential for a more transparent, open, and fairer financial services industry. Around 85 percent of fund managers questioned said they believe financial services providers who are not prepared for mass tokenization of assets risk being left behind.
After conquering the analog public markets, the Depository Trust and Clearing Corporation has set its eyes on the private markets as the world shifts to a greater digital enablement. Specifically, the organization has seen potential for private shares to trade, transact, and settle much like the public counterparts on various exchanges and marketplaces. The opportunity is so strong that the DTCC has been fully in-motion since November 2021 when it comes to digitizing and facilitating private asset trades.
The private markets investment firm Hamilton Lane has partnered with digital securities exchange ADDX to tokenize a class of shares issued by Hamilton Lane Global Private Assets Fund (GPA). The partnership marks the first time Hamilton Lane has tokenized a fund, and it also makes it one of the earliest major private markets firms to do so.
March gave us another successful case of a real estate security token moving from the primary markets to the secondary trading markets. Owned by MarketSpace Capital, a near $500 million private equity firm, The Spot at Myra Park commenced trading on the tZERO Alternative Trading System via digital security. This property is a new development 250-unit active adult community in Dallas, TX that’s expected to be finished in late 2022, and the security token indeed represents equity in the property and its various operations. Even better, MarketSpace Capital has 20+ similar projects in its portfolio which, pending a successful experience with The Spot at Myra Park, should contribute to additional spillover from primary tokenized offerings to the secondary trading space like those that are currently tracked on Security Token Market.
Moving over to the West Coast, we have an interesting and quite sizable real estate project that is hitting the security token market. Unofficially known as “T27 Silicoin,” this San Jose tower is yet another new development project encompassing 374 multi-family units for an aggregate value of $237 million. With the goal of raising around $100 million for initial construction and financing, Alterra Worldwide, the owners and visionaries behind this endeavor, will be adding in retail-level operations in addition to the main-attraction condo units. The Tower 27 project represents Silicon Valley’s foray into the tokenization space, and with some true crypto firepower out on the West Coast, may make a big enough splash to attract attention from powerhouses like Pantera Capital and Polychain Capital.
Rather than highlighting a centralized marketplace for the transacting of security tokens, we are paying homage to the DeFi leaders in the digital assets space, with today’s specific focus on one of the first Decentralized Exchanges & Automated Market Makers for security tokens—IX Swap. Much like Uniswap enables investors to buy, sell, and swap cryptocurrencies in a peer-to-peer fashion, IX Swap will be used to pair security tokens against the IXS token, which will be staked and provided to liquidity pools by token holders. These liquidity pools will facilitate decentralized trades of security tokens while providing incentives to stakers and IXS holders.
IX Swap is owned by InvestaX, a securities exchange in Singapore that recently received an investment from Coinbase Ventures, and has officially gone live with its first token pair for the Millennium Sapphire ($MSTO) security token. What’s extra unique is that IX Swap is built for compatibility with centralized exchanges and marketplaces that share the same custodian services through Fireblocks, and we expect the CeFi & DeFi crossover to be strong in the coming years.
We are so excited to announce our Advisor of the Month: Adrian Alvarez!
The only long distance member of the team, Adrian is a Miami Native who now lives in L.A with his son Tony, as he manages the STA advisory team.
Adrian is a serial entrepreneur who co-founded InvestReady, MyVaxPass, SnapLeads, PrepSmart and more.
Adrian is a University of Miami Alum and currently Head of Consulting at Security Token Advisors and has been involved in numerous security token offerings from start to finish as well as NFT and DAO projects.
He met Security Token Group founder Herwig many years ago as they both worked at the Launch Pad - a UM program put in place to help entrepreneurs get feedback and funding for their projects.
From there they not only found a lifelong friend, but also co-founded InvestReady which is still successfully operating to this day!
He is so much more than just Head of Consulting and a great dad. Adrian is also a Lawyer, Realtor, coder, NFT connoisseur, our official DAO expert, talented artist and more. He is a self proclaimed nerd and can often be seen in the streets of LA on his way to karaoke or the latest Batman convention and usually dressed in full custom he probably made himself.
Even though Adrian lives on the other side of the company he is a huge part of the STA team and makes sure that we all have what we need to be the best at our job!
Tune in to Adrian's upcoming Twitter Spaces 'Ask An Advisor’ tomorrow at noon EST where anyone can ask questions about tokenization!
Kairos is a venture-backed AI company on a mission to bring their unique facial recognition technology to the blockchain.
There are 3 core features of their product:
Identity - used for searching and verifying faces
Emotions - used for measuring sentiment and mood
Demographics - used for gathering demographic data; age, gender, and ethnicity
They created the Kairos [blockchain] Protocol and the Human Identity Interface. Together they are the protocol that determine decentralized apps' (dApps) behavior upon using the Kairos identity verifier and implement smart contracts accordingly.
The Kairos Identity Token is a utility token to make biometrically-verified transactions on the Ethereum blockchain, essentially verifying ones' identity while preserving it simultaneously. This helps battle against malicious players such as those wishing to commit fraud, malicious payment requests, etc.
So what did STA do for Kairos?
When the company wanted to raise money they approached our CEO, Herwig Konings, as he had securities law expertise due to his previous company, Invest Ready. Invest Ready is an investor accreditation software he founded with our now Head of Consulting, Adrian Alvarez.
Considering this was back in 2017 during the ICO era, Herwig decided to help with the raise with one condition: They must do it fully compliantly.
This resulted in Konings advising one of the first security token offerings (STOs) and the first dual token offering. This is because each Kairos Security Token also came with a Kairos Utility/Identity Token. While the security token gave investors stake in the company's long-term vision, the identity token gave them use in the technology they invested in.
The Birth of Security Token Advisors
After successfully helping Kairos raise $7M, Herwig recognized the power of security tokens and decided to launch Security Token Advisors to help other issuers also leverage this technology in a fully-compliant manner.
In this week’s crypto corner, I’m going to talk a little about the potential future of NFTs and their functionality. Right now, most people associate NFTs with absurdly expensive pictures of apes or punks, and don’t get the appeal. But what most people don’t appreciate is the enormous power of having what basically amounts to an immutable public database of ownership for unique digital items. Aside from digital identity, the main issue right now is that ETH gas fees are so expensive that the only viable transactions for NFTs are extremely expensive ones, which can justify the fees (hence the limitation to expensive art pieces). These barriers are quickly being lifted however in a few ways:
Alternative chains are getting more attention, including Avalanche’s AVAX and Solana, which was just announced to be coming to the largest NFT market, OpenSea, soon
ETH level 2 or “side chains” are picking up popularity, with Polygon’s Matic NFTs getting a lot of support from the developer community as well as already being visible on OpenSea
Ethereum itself is planning on switching over from “Proof of Work” to “Proof of Stake” within the calendar year, which would theoretically lower gas fees exponentially
A combination of any or all of these will usher in new viable use cases for NFTs, including as membership or loyalty vouchers, tickets to events, and even as repositories of digital content. The future is bright for NFTs, even if the Apes don’t make it.
Did you know NFTs can be used to secure digital content? That’s right, when minting an NFT, one functionality is that the person minting it can encode certain text, including URLs, that can only be accessed by the person controlling the wallet that owns the NFT.
That combined with something like Dropbox (or IPFS if you prefer to stay decentralized) can allow for minters to send access to digital content through an NFT to would-be purchasers. Check it out yourself at https://opensea.io/asset/create (crypto wallet required).
