Which blockchain should I use to issue a security token?

Some key factors to consider when choosing what blockchain to use to issue your token.

The blockchain is truly the backbone of the security token ecosystem and specifically the Security Token Offering. Choosing the correct blockchain or developing a blockchain will be a big decision for any token offering.

Ethereum has been the most popular blockchain used so far for token offerings. Due to its prevalent use, it has the advantage of a large ecosystem of users and developers. Other advantages of using Ethereum include wallets that are fairly easy to use, standardized protocols (ERC20, ERC725, ERC735, etc ) and also the flexibility of the smart contracts. There are also some disadvantages, the most notable is that the network can sometimes cause slow speeds for transactions.

The issuer should choose the blockchain bringing the most established ecosystem to get interoperability for its tokens. If the issuer is using a centralised blockchain, or a distributed ledger technology that other players don’t know or are not used to working with, it will create a lot of friction in the subscription process and during the lifecycle of the tokens. Investors won’t be able to participate easily, exchanges will need to do specific technical integration, etc.

Ethereum Network

Benefits:

  • Ecosystem
  • Wallets are easy to use
  • Standardized (ERC20, etc)
  • Flexibility of smart contracts

Disadvantages:

  • Speed of transactions
  • Scalability

Other blockchains:

  • EOS: Promising thanks to the Proof of Authority (POA). However, it is still very early for this network and there is no ecosystem yet
  • NEO: Very similar to Ethereum except it is running on 7 servers. The influence of the chinese government is not clear
  • Stellar: Very fast and cheap transactions. However, the smart contracts are very limited