Bitcoin for Securities Tokens

Categories:Personal
Bruce Fenton

Using the World’s Strongest Chain for the World’s Strongest Use Case

Securities make up a multi deca-trillion global industry that is here to stay. The old rails and systems used by the securities industry can be improved on with distributed ledgers. Every Bitcoin supporter should be excited about this massive use case. I don’t think there is any world where Bitcoin can become a global money standard without also being the settlement currency for a lot of securities.

If more assets in the world are digitized, digital money is a natural fit for payment. People won’t hold Bitcoin, convert to fiat to buy and sell stocks, then convert back to Bitcoin. That doesn’t make sense. Especially as more stocks are digitized / tokenized. Whether you like it, care, believe in it or see the value of it, digital securities are coming.

This covers some Bitcoin related protocols which can be used to issue securities.

Note: This also applies to stablecoins which may not be securities but have similar needs.

Why Use Bitcoin for Securities

Bitcoin is not just the largest coin by market cap, it’s also the first DeFi token platform. Bitcoin hosted the first ICO, Mastercoin, the first token platform, Counterparty and today is home to several token creation platforms.

Bitcoin is the largest oldest and is considered by most to be the strongest chain. Bitcoin is the most widely held and supported asset and has a large number of security engineers and supporters.

Bitcoin and Bitcoin related token platforms:

Counterparty — this is the first token platform — it was used by Mastercoin and Tether. The secure underlying code is its strength — however it is not as dynamic or customizable as many of the newer protocols and therefor does not have much development by securities service providers.

Liquid by Blockstream — this is a newer but very well known token creation platform which uses sidechain technology. Liquid is supported by Blockstream who are known as dedicated Bitcoiners and cypherpunks with strong security and engineering focus. Liquid uses a federated sidechain validation model. Bitcoin developers like Pieter Wuile have noted that this doesn’t mean that Liquid assets are verified or secured by the Bitcoin chain. Liquid uses a federation for verification. Blockstream and Liquid have a great deal of support and have some securities projects already being built using the protocol. They have some of the best Bitcoin engineering knowledge in the world and strong street cred with many supporters.

RGB — The RGB Project is a completely free, open-source, non-profit and community-oriented effort aimed at the development of standards and best practices to issue, transmit and store digital assets issued in LNP/BP networks. RGB is exciting because it’s built on Bitcoin and Giaccomo Zucco is a contributor. RBG has a common characteristic among good projects which are free and open source: enough people don’t know about it. Chainstone would like to work more on supporting RGB — it’s a very cool idea and structure. A free and open source protocol built on top of Bitcoin is a powerful combo.

RSK / Rootstock — RSK is an early company in the ecosystem staffed and supported by a number of cypherpunks and OGs. The company has worked on building a very advanced protocol for some time now and now has lots to show for it. RSK allows full smart contract capabilities and is built on Bitcoin. RSK also created a currency called RBTC and uses merge mining with Bitcoin. RSK is robust and has announced many technical developments.

Building on Bitcoin provides a solid protocol and a solid network of fellow builders and testers. If we can make Bitcoin work well for securities it could be the ultimate chain for assets as well as cash. Key to this is second layer builders. Almost everything in Bitcoin for securities will need to be on the second layer.

How to help Bitcoin grow as a securities base layer:

  • More service providers / consultants / companies who can help issuers with the legal, logistics and tech. There’s A lot more to issuing a security than the tech. Issuers need high touch, customizable services to interact with legal, security (as in stopping hackers not buying stocks) and logistic issues.
  • More issuers
  • More second layer builders
  • More financial ecosystem supporters such as exchanges and brokers
  • More groups/ discussions dedicated to this topic

This summer we plan to have this type of building be a topic of a small event in New Hampshire.

We often host small discussions and can sometimes do hacking / dev sessions.

If you are interested in securities and Bitcoin and are building on one of these protocol or know of others, please follow and keep in touch so we can work on this.

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