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Security tokens & DeFi predictions for the 2019 by@jeremijak

Security tokens & DeFi predictions for the 2019

Jeremi Jak Hacker Noon profile picture

Jeremi Jak

2018 was an intense year for fundraising on Blockchain. New partnerships or ventures were announced almost every week, traditional financial institutions like stock exchanges have entered the space and lawmakers across the globe started to take a stand on regulation. As we’re entering 2019 there are a few things we should expect in the coming 12 months.

Regulatory certainty will bring new investors into play.

Regulators are finally catching up with innovation and as we can see more clear guidance for businesses being put into place we can subsequently expect more traditional investors, including venture capital and institutional investors, to enter the space. Tokenization will play a vital role, as it will bring new types of asset classes on-chain, including those investors are already familiar with , like equity. New sources of capital are likely to accelerate the market’s maturation and fill a gap left by a dropping market capitalization of the biggest cryptocurrencies over the past months.

Investors and businesses alike have been wondering whether and how Blockchain will impact the classic venture capital market, and while the first security token offerings were launched over the past weeks, it can be concluded that tokenization rather enhances enhances, than replaces existing solutions. Blockchain’s is not disrupting the way companies fundraise money, instead it offers certain benefits. For example, increased liquidity is an effect of token interoperability, which could make security tokens potentially tradable on any crypto exchange worldwide (if regulatory certainty is given).

The relation between primary and secondary markets will evolve.

The relation between primary issuance platforms of tokenized assets and secondary trading platforms, including traditional stock exchanges, will become much clearer once specific regulation will be given. Due to that, it is reasonable to expect more movements in the space, including consolidations. Developing their own secondary markets is a natural evolution for tokenization and issuance platforms, thus we should soon see mergers and acquisitions (as an example, coinbase has acquired Keystone Capital Corp.).

2018 has been a big year for traditional stock exchanges trying to enter decentralized markets, including the biggest players in the market. We have heard of many partnerships being established that enable the flow of know-how between traditional finance and DeFi, and in the coming months we should expect many of those to come to fruition.

User-centric decentralization & Blockchain startups.

Many crypto companies that conducted ICOs back in 2017 were expected to deliver their products by 2018. Users should have then be able to use new decentralized services in exchange for previously bought utility tokens. But, for the overwhelming majority, this did not happen which renders most utility tokens useless.

As the Blockchain community continues to mature and develop much-needed infrastructure, it has also realized that in order to live and flourish it needs clients. And clients, in turn, need simple solutions that they can intuitively understand without any special skills.

As a consequence, in 2019 we should anticipate Blockchain companies to put a greater focus on business models, user experience and delivering the actual product.

Immersed in innovation, crypto companies have neglected some of the necessary administrative and operational functions. This includes tax-related matters, like how to report your crypto earnings at the end of the year, how to tax tokens which do not have a clear tax classification, or how employees should report their earnings often paid in tokens.

Companies will have to extend their focus from managing the product to putting emphasis on real-world operations. Such a development will contribute greatly to limiting the discrepancy between the crypto and the startup world. Ultimately this might even impact how crypto companies raise capital (We might see more VC investments instead of ICOs/STOs?). In other words, it is time for crypto to get anchored in the real world.

STOs will find their place.

As the number of non-Blockchain companies conducting their private or public rounds increases, we might expect to get a clearer picture where exactly STOs will position themselves among existing fundraising avenues.

Many companies are too big and mature to conduct additional VC rounds, but are yet too small to go public on a traditional stock exchange. We might see this pre-IPO gep getting filled by Security Token Offerings. So far, STOs have proven themselves to be a natural fit for this segment of the market.

DeFi is just a new term, but it carries a lot of meaning.

2018 has been a breakthrough year for traditional financial institutions and companies in Blockchain. We have seen almost every major player to enter the space and launch some kind of sandbox or innovation lab. The Opportunity in decentralized applications has been noticed by the bull.

In the coming months we should expect an even greater commitment to building Blockchain products. However, the dynamics have changed and while for a long time the motivation for getting involved with Blockchain was curiosity, it is now fear. The threat of not having more robust applications with greater connectivity is far too big to be ignored by any business.

And maybe, just maybe, some folks will finally understand that blockchain isn’t just “a magic internet currency”, but a powerful technology that enables a variety of different applications.

What are your predictions for 2019 in Blockchain? Let us know in the comments.

Thanks to my colleagues, Zoe Adamovicz, Aga Sarnecka, Piotr Stroinski, Alex Mole and Marlene Ronstedt for contributing to this material.

Jeremi Jak — heading communications at Neufund, an end-to-end solution for assets’ tokenization and issuance. Get in touch with me on Twitter or Telegram.