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What the !@#$ is a Security Token?
Traders Magazine Online News, July 12, 2018
If you’ve been following cryptocurrency chatter on Twitter or Telegram for the last thirty days, you’ve probably seen something about security tokens.
You may have seen that Polymath is building a protocol coded to allow compliant trading of security tokens on the Ethereum blockchain. You may have also seen that AirSwap, a Brooklyn-based technology company, has successfully built a decentralized platform that will soon allow peer to peer trades of security tokens on the Ethereum blockchain. These projects will allow owners to fractionalize the ownership of any asset using blockchain tokens, after which they can trade seamlessly and legally between verified investors anywhere in the world. 
What a freakin’ time to be alive.
Unlike security tokens, the concept of utility tokens are fairly well understood in the blockchain space today. Utility tokens represent access to a network, and your token purchase represents the ability to buy goods or services from that network?—?kind of like an arcade token. Remember those days? Every summer, purchasing arcade tokens meant you could play Space Invaders or Marvel vs. Capcom without owning the game. Utility tokens give you that same type of access.
On the other hand, security tokens represent complete or fractional ownership interests (like shares or stock) in things like startups, public companies, real estate, art investments, intellectual property, or even professional sports teams.
As with any disruptive technology, there’s been some confusion as to what security tokens are, who can trade them, the exchanges that can sell them, and what benefits they’ll actually bring to the financial world. Over the coming months, I plan to write a series of articles that will try to answer some of these tough questions. You can follow my security token journey @derekedws on Twitter.
Before we can get to “what is a security token?” we need to understand “what is a security?” In this first article, we’ll explore the origin of securities laws in the United States. And where better to start than with Black Tuesday.
The Roaring Twenties
On October 24, 1929, the most destructive stock market crash in the history of the United States wiped out billions of dollars overnight, leading to a decade of widespread economic depression around the world.
There were warning signs. Over the summer that same year, national spending slowed, the agricultural economy was starting to fail, and consumer debt rose.
But in the words of @APompliano, the virus had already spread.
In the years leading up to the great crash, America had been gripped by a new favorite pastime?—?playing the stock market. Through the 1920s, America soared during a rapid financial expansion that saw the nation’s total wealth more than double during a period we call The Roaring Twenties.
And stock prices? Stock prices were damn near going bananas.
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