How Security Tokens Can Be Created In Blockchain?

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How Security Tokens Can Be Created In Blockchain?

In recent days , the concept of Security Token Offerings sounds louder than Initial Coin Offerings . This is because of the advantages of security tokens over the utility tokens.All the investors are aware of the importance of security tokens and also the risks involved in ICO process.

This made Initial Coin Offerings move aside and providing a way to security token offerings to move forward on crypto world . In this blog let me tell you something about security token and security token blockchain's architecture .

Security Token 

Security Token is one which says YES to Howey's test . In short , the tokens which allows investors to claim for profit / share after the launch of ICO are known as security tokens . Hence , the process is termed as a new form of ICO ,called Security Token Offerings (STO ) .

Security Token Blockchain 

As security tokens function different from utility tokens , they require a different or a new blockchain . Blockchain of security token will be in different infrastructure from utility token blockchain . The building blocks that makes secuity token blockchain are listed in detail below :

Building Blocks 

The blockchain building blocks can be imagined into two tires  for easy understanding .

Tier 1 Infrastructure 


Tier 2 Infrastructure 


Tier 1 -Blockchain Runtime 

The tier 1 blocks involves Components that abstracts main participants in security token offering process and Protocols that abstracts the interactions between those participants .



An assets represents the legal ownership claim , represented by set of documents of ownership of specific physical or virtual entity .


Owner are individuals who have ownership on specific entities or assets .

Validator Nodes 

The ownership of assets should be estabilshed by legally reputable financial institutions .These institutions should participate in the blockchain network as validator nodes . 

Experts Delegate Nodes 

Expert Delegate nodes  that represents different players in the architecture of financial systems,  abstract functionalities such as legal assessments, broker-dealers, clearing-custody and other key participants in crypto-security transactions.



The basic protocols responsible for the creation of on-chain representation of real assets .


The participants and the assets should be identified both legally and technically . 

A protocols that maintain  the validity of a transaction on financial correctness and on immutable transfer of ownership .


The ability to establish privacy protections on different information sets related to assets and owners comes under privacy .


Oracle is  responsible for access of off-chain data that is relevant to crypto-securities . 

Tier - 2 Crypto securities Protocols 

Tier 2 block  of a security token blockchain should involve protocols that are relevant to security token transactions.

Crypto - security Primities 

This involves the protocols that are used for the implementation of debt , equity and derivative tokens .


There are many compliance rules related to security token transcations .A security token blockchain should include a simple way to implement those compliance rules in a way that can used in security token transfers.


Owners and the one in validator nodes  should have the ability to disclose material information that can be relevant to the price and validation of a security token. The mechanics of such disclosures should be abstracted in a security token blockchain.

As there are many different interesting blocks in security token blockchain , since the above listed are most important blocks in implementation of security token blockchain .

Reference :

1. Security tokens: The New Blockchain Era

2. Security Tokens are Not Ready for the Blockchain

3. Do We Need a Blockchain for Security Tokens ?

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About Anushya

Hey Peeps !! This is Anushya an enthusiastic and energetic individual who persists in the field of Blockchain and Cryptocurrency for more than 4 years. At present, surviving as a Business Consultant and Blogger at Bitdeal. I am fascinated towards the upcoming trends and technologies in the digital globe. Stay tuned with us to move forward with innovations in the crypto industry !!

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