Binance recently held their “Binance Blockchain Week” special event in Singapore in late January. It is the first crypto conference held by the world’s largest exchange which also included a two-day hackathon. One of our reporters was present during the lively discussion by panelists on the topic of STOs.
“Utility tokens are not being used” — that was one of the major takeaways on Binance’s panel on STOs during their first-ever conference in Singapore. Repeatedly, we’ve heard regulators claim that “utility tokens are a myth.” And the SEC has been relatively consistent with this same opinion in its American jurisdictions. However, most of the crypto community at large seems to be missing the message. Have we learned nothing from the ‘wild west’ that was the ICO boom?
The panelists present to discuss STOs at Binance’s Blockchain Week were
One of the main topics of discussion is why the current token models seem to be insufficient, and how security tokens provide us with a new, better way of doing things.
“DApps Have Been Utterly Unsuccessful”
Utility tokens claim that their utility comes from their usage on the network. The network necessitates the token, many projects claim. However, if we look closely at the market capitalization for most tokens, we see an altogether different picture: inflated market capitalizations in the hundreds of millions, but a user base that has, at the most, only has a few hundred users at one time.
In short, it seems like people have been overestimating the so-called “usefulness” of utility tokens, and have dangerously inflated their value. Panelist Manmeet Singh brought this point home by arguing:
“Yes, there is very little regulatory clarity. But just wait for that first jurisdiction that says, hey, ‘we’re open for business.’ And then we’ll see how that develops…
However, as a concept, if you are investing in an enterprise that is at at the certain early stages of building, that has not shown traction or a viable business model, then to do it purely on a utility basis is ridiculous.”
Indeed, it seems preposterous to propose utility tokens in such an early stage of blockchain development when so little of the digital infrastructure has been created yet. This problem means that utility tokens could have years and years before they reach any actual use-cases, if any at all. Do we really expect investors to pour their money into such a poorly-utilized concept?
Security tokens, though, provide us with a new avenue and a chance to redeem the tokenomics of most crypto projects. Rather than claim “utility,” the token is instead seen as representative of an asset. Not to mention, such an understanding of tokens would significantly clarify the regulatory situation.
This is why we at the Tokenist, along with these Binance panelists, feel so strongly that security tokens are the future. And this panel really hammered that point during the length of their presentation which led to a lively conversation on the security token question.
Are utility tokens valid as a concept or should they completely be replaced by tokenized securities? Did you by any chance attend the Binance Conference in Singapore? Let us know your thoughts in the comments.
Image courtesy of Binance.