- A traditional security is simply a piece of paper that proves ownership of stocks, bonds, and other investments
- Digital securities are digital representation of traditional securities
- Adopting blockchain technology for digital securities endows them with features that inherently give them advantages over traditional securities
Digital securities VS traditional securities. So, what are the differences?
First up, let us understand what security is.
What is a security?
When you provide capital in exchange for a financial stake in a company, fund, or project, that financial interest is bound by an agreement between you and the issuer, or a company, fund or project raising money.
The official term for this agreement is a security.
A traditional security is simply a piece of paper that proves ownership of stocks, bonds, and other investments.
What about digital security then?
Digital securities are digital representation of traditional securities, i.e., a traditional financial asset classes like equities, fixed income, real estate, and more, that are recorded and traded on a blockchain.
The use of blockchain technology as a foundation upon which the securities are recorded and traded is important because it endows digital securities with features that give them advantages over traditional securities.
See the table below for the advantages:
As we can see, digital securities not only make assets in the private markets that are usually out of reach for everyday investors accessible, but more affordable, efficient, and liquid, too.
(Learn more about how we make private market investing possible here using blockchain and smart contract technology.)
Start gaining access to diverse asset classes in the private markets here at KLDX.