In The News
Are You Ready for a $10 Trillion Stampede of Securities Tokens?
By Grace Schroeder
By some accounts, we can expect $10 Trillion in security tokens to hit the market within the next few years. To put that in perspective, 2017 saw 160 IPOs hit the street for a total raise of $36B. Suffice it to say, if the letter “T” is slapped on the new “security token” category, there will be tectonic disruption in the system.
For purposes of this writing, let’s talk about security tokens alone (vs. utility tokens), and let’s assume that issuers want to comply with both existing and evolving SEC regulations. Here is how I think it plays out.
First, let’s understand the three blockchains you should care about today — the three major projects. First, the Bitcoin blockchain, designed singularly to support the bitcoin cryptocurrency transactions, is not directly relevant to this discussion so we’ll ignore it for now.
The second is the Ethereum blockchain powered by the cryptocurrency Ether. Ether (like Bitcoin) has just been deemed “not a security” causing a collective sigh of relief in ‘hodl-world.”
Ethereum (the blockchain) has the largest number of nodes, and as such has been the go-to protocol for security tokens based on two standards, ERC-20 (I’m tokenizing a pool of real estate) and ERC-721 (I’m tokenizing The Plaza Hotel). The Ethereum blockchain processes transactions faster than Bitcoin, but the need for speed is driving the development of several new projects that we’ll be seeing later this year.
The third main project is Hyperledger. Originally designed for Enterprises who are pursuing non-crypto, permissioned blockchain projects, Hyperledger has become the home for several notable crypto projects that need more specialized technical underpinnings. IBM leads the Hyperledger coalition, and as such is driving the consortium with certifications and developer communities till hell won’t have it anymore. Hyperledger is promising, but currently not as appealing as Ethereum for security token issuance.
As the choir currently singing “we already have plenty of financial vehicles, why do we need tokens?” is being replaced by the hot, new “it’s the liquidity, stupid!” rock band, many existing market participants will be forced to reinvent themselves to remain relevant.
The Financial Services Players
Issuers who, might have issued stock or other instruments in the past, will instead issue security tokens. They will file a registration statement (S-1, Reg A+, etc.), write a white paper that endeavors to describe the monetary policy of the token, and commence with some sort of offering online or through a private placement. Token investors will need to submit to a KYC/AML verification just as they would when opening a brokerage account, and a new genre of KYC/AML APIs are struggling to add throughput to handle the volume.
Broker-dealers continue to get squeezed. If security tokens replace traditional securities, traditional brokers will see a continued decline in relevance and margin as clients seek specialized professionals to execute token transactions and reduce the friction experienced by the DIY cryptocurrency investor.
Traditional broker-dealers will experience further encroachment as the new breed of broker-dealer assembles itself out of existing machinery to offer “one-stop-shop” capabilities that help pave the new token highway. We are already seeing new securities exchanges register themselves with broker-dealers attached, and utility exchanges like Coinbase are starting to offer custody services in order to entice institutional investors.
Given these moves, I believe we will see new crypto-centric B/D’s that a) issue tokens b) are Licensed transfer agents c) can be token custodians d) and support tokenized private placements. Snappy!
Brokerage accounts in the new paradigm are replaced by wallets. Instead of KYC (Know your Customer) at the BD level, KYC will happen for wallets that are later whitelisted as suitable vehicles authorized to purchase initial token offers and in some cases in secondary market transactions.
Transfer Agents are in a bind if they choose to pursue the “I wish it wasn’t so” strategy. Instead, transfer agents can leverage the security token stampede to expand their roles and relevance in the eyes of their customers beyond token issuance to services that might otherwise have been offered by traditional ecosystem participants.
For example, transfer agents can offer 1099 reporting, automate the payment of token dividends, issue periodic statements of account holding, and even provide applications to help investors track their cost basis across their entire portfolio of holdings.
Transfer agents can also play a leadership role in making sure that token issuers have a valid “checklist” of features that are baked into the smart contract code to make sure that downstream compliance is frictionless. The services offered by transfer agents can evolve to very elegantly support cryptocurrency on a broader level than exists in traditional securities.
Exchanges will bloom like flowers. Due to the hostile regulatory environment, the bulk of growth for crypto exchanges is happening outside of the United States. There is heavy anticipation around the launch of tZero, widely believed to be the first live exchange in the US that will allow trading of security tokens.
There will be more exchanges to hit the U.S. market in 2018. These exchange will compete on the basis of a) their listings, b) the trading interface, which will be aimed at the segmented trader personas and financial institutions and c) their downstream services (e.g. paying dividends, issuing statements, tax reporting).
Clearing Firms = Dead technology walking. Clearing happens on the blockchain. If clearing firms decide to evolve, they will quickly need to augment their traditional services with blockchain equivalents and look to displacing some of the other ecosystem participants.
Blockchain technologies, fueled by cryptocurrency and self-deterministic ecosystems, are causing an upheaval that doesn’t mandate adoption for everyone, but cannot be ignored by anyone. Above all, there is a new playing field for financial services. With intellectual perseverance at the forefront, combined with common sense regulatory adherence and a brush of bravery, anyone can field a winning team.
Grace Schroeder is the CEO of SLINGR.io, the Inventor’s Low Code Application Platform. SLINGR Blockchain Solutions range from smart contract development and deployment to development of integrated on/off-chain solutions for issuers, brokers, transfer agents, and custody solutions providers.
What’s in your (crypto) wallet!
By Neil Jacobs
When the average person hears the word ‘cryptocurrency’, the first thing that may come to their mind is the many stories of people losing or having their cryptocurrency stolen. Today, I’ll try to put your mind at ease and I’ll be talking about the places you can store your bitcoin, ethereum, and other cryptocurrencies.
Wallets! You may be thinking, that’s a word I’m familiar with. And just like the way you store your US dollars (or other fiat currency) in that wallet in your pocket, you will want to store your private keys associated with your digital currency in a wallet. Today, I will be talking about some of the wallets available where you can store your private keys. The wallets I will be discussing today are:
- Hardware Wallets (safest)
- Desktop Wallets (can be safe)
- Web Wallets (less safe)
- Mobile Wallets (less safe)
A wallet can be classified as either cold or hot. A hot wallet is one that is connected to the internet. Hardware wallets are cold wallets and of the wallets, I will be discussing today, I would consider hardware wallets the safest wallet to store your private keys on. A hardware wallet is an actual physical device that will hold your private keys. I own two hardware wallets, a Trezor and a Nano S Ledger. The most time-consuming part of setting up either of these devices is writing down your 24-word recovery seed. This will be the only way you will be able to recover your private keys if your device is lost or stolen, so make sure you write down multiple copies. Before purchasing your hardware wallet, you will want to look into whether it holds the type of cryptocurrency you hold. (If you want to purchase either the Trezor or Nano S Ledger, I would recommend buying them directly from https://trezor.io or https://www.ledgerwallet.com.
A desktop wallet is a software you will download on your computer. First off, when you download anything off of the internet, you always need to make sure it isn’t a trap. Do your own research and make sure you are downloading software from a legitimate source. Desktop wallets are typically easy to use, but since they are on your computer, presumably your computer will be hot and connected to the internet. Anyone who gets access to your computer can theoretically steal your private keys. You can take extra precautions and buy a laptop specifically for crypto and keep it not connected to the internet (yes, people do this).
Web Wallets (aka Online Wallets) are typically accessed through a web browser. I would include exchange wallets in this category (Coinbase, Binance, etc.). Any time that your private keys are kept on a central server outside of your control, they are vulnerable to a hack. Additionally, while you are accessing these wallets, if a hacker has control of your computer, they could steal your crypto. One might ask, why use web wallets at all? In terms of exchanges, day traders will find it convenient to keep their crypto on exchanges. There are typically fees when you withdraw from wallets. Web wallets also provide easier use than a hardware wallet which you would need on you to access your private keys. Bottom line, if you can avoid keeping your private keys on web wallets, avoid it!
Like web wallets, mobile wallets are very easy to use and like most people these days, you will almost always have access to your phone. That is the advantage. The major problem with mobile wallets is that they are extremely vulnerable to attacks. Phones are subject to malware, actual physical tampering, and they are usually hot.
For the most safety and security, buy a hardware wallet! Investors and traders should invest in one of these. It will give you peace of mind.
As for anything in crypto (and in life), don’t just take my word for it. Always look at multiple sources and do your own research.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
SMB Nation Admin
Wise minds are always innovating. That’s exactly what’s occurred with long-time SMB Nation member Grace Schroeder (remember the Idea2 CRM?) with her new company Slingr. Schroeder and team have launched a supporting actor application in a category I just made up called SMB channel partner ecosystem extenders. Essentially Slingr found a gap that needed to be filled. In particular this blog concerns Slingr’s integration of Slack to the Autotask professional services automation (PSA) solution…
ChannelE2E – Nov 20, 2017, by Sarah Kimmel
The right communication tools are essential for successful interactions within the company, and even outside of the company. Amid that reality, Slack has gained tremendous popularity over the last few years. As more companies continue to choose Slack as their preferred method of communication, third-party tools are looking to integrate with the platform.That’s even true in the MSP-centric market, where SLINGR’s SLINGRbot has been promoting Slack integrations with PSA platforms. We mentioned a few months ago that SLINGRbot does, in fact, work well with Autotask. Fast forward to present day and we have a little more insight on how Slack and Autotask integrate, thanks to SLINGRbot…
ChannelE2E – Aug 24, 2017, by Sarah Kimmel
Chat programs have always been a great way to communicate internally. Back when MSN Instant Messenger was pretty much the only game in town, it was mainly used to chat about issues, projects or just life. Luckily for everyone, technology has advanced and chat programs can do so much more, including help you improve customer service.Companies are now creating integrations into chat programs, like Slack, to help bring a central platform that assists users with communicating not only with other people but programs they interact with on a daily basis.Indeed, SLINGR just announced its integration tool. SLINGRbot is a new approach to Slack bots that gives users a unified bot experience across multiple applications. So far, it integrates Slack with Autotask’s PSA (professional services automation) software. More integrations are coming.
New vendors arise regularly, often by targeting narrow use cases to establish themselves. Slingr enables quick creation of apps using front ends such as Slack and Salesforce as a back end.
Forrester Report – July 31, 2017, by John R. Rymer
Client interest in low-code development platforms is rising — a logical response to the extreme pressure for new, modern software to win, serve, and retain customers. How do low-code platforms help AD&D pros create better software more quickly? Declarative development and incremental application development allow developers to build major types of business applications faster and more accurately than traditional coding and enterprise licensing models. ..
TechCrunch – Nov 8, 2016, by John Biggs
Created by experienced product manager Grace F. Schroeder, Slingr was designed first as a platform and then as a product. Shroeder wanted something that a disparate team could use to connect with each other and set up tasks and code maintenance. Her experience at multiple very early cloud startups told her that software as a service was the way to go..
Press Release – Nov. 3, 2016
Press Release – Sept. 12, 2016
SLINGR launches Slack integrations with Google Contacts and Calendar. SLINGR, a workflow automation app for Slack teams, announces two new integrations available on the Slack Apps Marketplace. “SLINGR users wanted to put tasks on their Google calendars from Slack,” said Grace Schroeder, CEO.
SLINGR announces SLINGRbot, the only solution that communicates with any application or data source from Slack
Press Release – Aug. 23, 2017
SLINGR announces SLINGRbot, the only solution that communicates with any application or data source from Slack. “Today, many users experience chat overload when vendor-specific bots litter their Slack channels with different commands and behaviors. –