On January 27th, 2020, security token management and issuance platform Vertalo announced a transition from Ethereum to Tezos as its blockchain of choice. Vertalo says a number of factors were a result of the decision, including transaction speed and an existing network with stability.
Vertalo Transitioning to Tezos Explained
Based in Texas, Vertalo offers a number of services related to digital assets. The company specializes in cap table, investor, and on-chain asset management for entities operating in the security token industry. In November of 2019, Vertalo received registration confirmation from the SEC in its quest to become a transfer agent.
Now, Vertalo has announced a transition regarding its blockchain of choice. Going forward, Vertalo will opt for Tezos over Ethereum.
Vertalo CEO Dave Hendricks said,
“We think that that covers 99 percent of the security token and smart contract landscape for equity and debt.”
Vertalo has previously supported the use of Ethereum, which it still plans to do. Tezos will become the platform’s default blockchain, however.
With 18 customers who currently utilize Vertalo’s platform, Vertalo allows companies to tokenize assets through its V-token protocol. It will now allow existing ERC-20 tokens to be converted to smart contracts on Tezos.
Tezos or Ethereum: Which is Better for Security Tokens?
Vertalo is making the transition because they say Tezos is better suited to handle security token transactions. For one, Hendricks says the smart contracts via Tezos allow for a number of programming languages.
The Tezos blockchain is also touted to feature faster transactions and therefore greater scalability when compared to Ethereum. Hendricks said additional factors considered by his company included transactions per second along with a stable network comprised of active users.
“A real estate fund managed via a Tezos security token could simultaneously pay out a staking-based dividend next to an asset-secured dividend as is traditionally paid in investments like real estate investment trusts, an area that is a key focus for Vertalo and other security token platforms around the world.”
Some members of the security token industry have already criticized Ethereum’s fit for the security token industry. Jesus Rodriguez is one of them.
Rodriguez is an outspoken advocate of the Ethereum blockchain. He says it could go down in history as “one of the greatest technological contributions of the first century of computer science”.
Yet when it comes to token protocols capable of handling security token infrastructure, Rodriguez remains skeptical. He says,
“The fundamental limitation that makes Ethereum a painful choice for security tokens can be expressed as the friction between transactions and asset ownership. Ethereum is a very powerful platform that is fundamentally optimized for one use case: transfer a crypto-asset from point A to point B. The behavior of security tokens, on the other hand, is fundamentally dictated by dynamics related to asset ownership that have little to do with transaction mechanics.”
He adds that smart contracts turn into “monster coding efforts” when it comes to security tokens. He has remained open to the idea of new blockchain architecture not just appearing, but becoming the go-to blockchain across the industry.
Will Ethereum Remain the Go-To Blockchain for Security Tokens?
Quite significantly, Ethereum has been the blockchain to power 94% of security token offerings (STOs) thus far. In 2019 for example, Seychelles-based MERJ Exchange became the first national stock exchange to tokenize its own equity. The tokenization was powered by Ethereum.
It is unarguable however, that a recent transition to Tezos is clear. San Francisco-based Andra Capital, for example, just launched an STO to fund a late-stage technology focused investment fund. The underlying asset, Andra’s Silicon Valley Coin (SVC), will be issued on Tezos.
Germany-based securities tokenization platform Fundament has also said it will use Tezos for token issuance. A luxury residential real estate development in the UK will also be tokenized on Tezos, in collaboration with tZERO and Alliance Investments.
What do you think about the ongoing transition from Ethereum to Tezos by a number of companies in the security token space? Will Tezos emerge as the default blockchain for security token issuers? We want to know what you think in the comments section below.
Image courtesy of Vertalo.