Don’t Underestimate Security Tokens (Or Overestimate Them)
Security Tokens are still ahead of their time despite all the hype
Historically, technology has always been seen as either too far ahead of its time or something that explodes overnight. The reality ends up looking closer to the adoption curve for far out technologies being much shorter than we actually foresaw or the overnight phenomenon ended up being something that was years in the making.
The best example for the far out technology is the mobile phone. In the 1980-90s, mobile phones were considered something that was only ever going to be used by business people or was critiqued as something that wasn’t needed by the every day individual since we all already had home phone lines. The same thing was also said about computers around the same time. Funny enough, today’s mobile phones are actually now also computers!
In 1993, only 5% of Americans owned a mobile phone. In 2003, this number grew to a whopping 55% just ten years later. Today, this number sits closer to 96%. That means 9 in 10 people that weren’t using a mobile phone in 1993 are now using one today.
The best example for the overnight technology is ride-sharing, pioneered by the now most valuable startup company in the world today, Uber. In 2010, Uber launched in San Francisco with the idea that you could call up a taxi with your phone to improve the taxi industry with technology. The app launched and according to downloads had about 5000 early adopters — not a crazy number. And now in less than a decade supposedly 1 in 3 Americans have taken a ride using a ride-share technology amounting to billions of rides every year.
Uber seemed like a simple idea when it first launched and many questioned why the taxi industry didn’t take advantage of GPS and app technology sooner. The reality was that before 2010, smart phones didn’t have enough market penetration for Uber to even be a viable business. It wasn’t even until 2012 that Lyft and a slew of other competitors followed suit. Once the technology was developed and proven, it kick-started the adoption which was fueled by private investors even further.
All in all, technologies all around us have different growth curves but the same thing always seems to ring true — in the beginning the technology looks too far out from being mainstream so that only the true believers are left building on a vision until a tipping point is reached and the bandwagon starts.
When it comes to evaluating the technology of Security Tokens and its future, we must be wary of condemning this technology in the same way critics had with mobile phones in 1993 or ride-sharing apps in 2010. The early adopters take time to hit mainstream acceptance, and Security Tokens — the first of which have only begun trading in late 2018 — are no different.
Will we see almost 1 in every 3 issuers decide to use Security Tokens in the next few years? Probably not — but history suggests we will get there sooner than we think. Keep this in mind when you read articles critiquing the current validity of the technology from sources like TechCrunch, industry insiders, and outsiders.
The same must also be said about those who are overpromising the current value of Security Tokens. This is often what is causing the naysayers to speak up when they see articles claiming STOs as the future of ICOs or promoting that trillions of dollars will be tokenized overnight (just some examples #1, #2, #3).
As we continue to see more hype as well as more critics, we need to remember that the Security Token industry is only just getting started!
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This post was written by Herwig Konings, a Founding Partner of Security Token Group. Previously, Herwig served as the CEO of InvestReady and the Managing Director of the Miami Venture Capital Association.
