Jesus Rodriguez: “Security Tokens in the Bitcoin Blockchain Might be Closer Than We Think”

Jesus Rodriguez: “Security Tokens in the Bitcoin Blockchain Might be Closer Than We Think”

Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

In a recent publication, Jesus Rodriguez made a case for security tokens in the Bitcoin blockchain. While the idea is surprising to most, Rodriguez outlined five primary reasons as to why the Bitcoin blockchain could be a legitimate home for security tokens.

How the Current Blockchain for Security Tokens is Ethereum

Security tokens have continued to take off in early 2019.

Two US-based, SEC-regulated security token trading platforms— OpenFinance Network and tZERO— are both live and fully operational.

Outside the United States, existing shares from giants such as Apple, Facebook, and Tesla are purportedly tokenized, with one security token representing one share secured by DX.Exchange.

Ethereum has been the front-runner of security token standards, with most standards being ERC-20 compatible. Hardly any other blockchains have made a significant case for security tokens, with the one exception of Ravencoin (a hard fork of Bitcoin).

Jesus Rodriguez— a security token expert who frequently shares his knowledge via Medium— believes the Bitcoin blockchain could become a serious home for security tokens.

The following are his reasons why.

Five Reasons Why the Bitcoin Blockchain Could be the Next Home of Security Tokens

  • The Digital Gold Factor

Bitcoin has undoubtedly proven itself as the most effective store of value throughout the cryptocurrency industry as a whole. Rodriguez says for security tokens, “running on a blockchain with the biggest allocation of financial assets has some obvious benefits”. Ultimately, these could lead to the best opportunities for complex disruption of the capital markets industry.

  • The Security Factor

In the context of financial assets, the evolution and growth of assets has a typical trend of moving towards the most stable and secure infrastructure. The security needed to continue the growing success of Bitcoin doesn’t appear to be diminishing anytime soon. While the Proof of Work consensus mechanism isn’t exactly environmentally friendly, the high rewards of its distribution system have provided a level of security which has yet be matched. Right now, the Bitcoin network has a reward rate of 12.5 bitcoins per block mined, which takes an average of 10 minutes.

  • The Lightning Network Growth Factor

While scalability is likely to remain a huge issue for Bitcoin, numerous projects have been launched to provide solutions. The Lightning Network is one, which aims to expand Bitcoin’s transaction rate to millions of transactions per second. With nearly 6,000 nodes in its network and more than 20,000 payment channels, the effort is making an impact. Many of its features— such as side-payment channels, smart contracts, and blockchain interoperability— are extremely relevant to security tokens.

  • The Better Money Factor

In the cryptocurrency world, Bitcoin maintains its position as the best form of digital currency. Its pre-programmed and algorithmically enforced rate of distributing new bitcoins into its circulating supply are predicted to lead to both stability and scarcity. Rodriguez holds that such features are pertinent to security tokens: “in the same way that many financial securities scenarios are only possible in economies with access to strong currencies […], many security token scenarios will rely on the best forms of digital money and that, today, is Bitcoin”.

  • The Programmability Factor

Many perceive Bitcoin as limited to a system of currency. Yet Rodriguez has seen significant growth in Bitcoin-based smart contract platforms, and their corresponding developer communities. If more developers continue to experiment on the Bitcoin blockchain, given the impending surge of security tokens, the latter are bound to make their way to Bitcoin.

What do you think about Jesus Rodriguez’s thoughts on the Bitcoin blockchain as a potential home for security tokens? Do you agree that Bitcoin has such potential, or will it strictly stick to a form of digital currency? Let us know what you think in the comments section below.

Image courtesy of CBC.

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