Templum, an experienced security token facilitator, is turning to Symbiont for a private blockchain. The public blockchain of Ethereum, says Templum, poses too many risks for the successful transfer of tokenized securities.
Templum’s Transition from Public to Private Blockchain Explained
Previously, regulated broker-dealer Templum utilized the public blockchain Ethereum to launch Security Token Offerings (STOs).
Now however, Templum is turning to Symbiont who will construct a private blockchain and smart contract-based system for future STOs.
The shift from Ethereum is a result of the network’s scalability issues which can pose challenges to the successful transfer of assets during high transaction volumes.
Templum co-founder Vincent Molinary said,
“A blockchain like public Ethereum may slow down or stop capacity when you are in the middle of a million dollar or ten million dollar transaction.”
Such a risk is not something most are willing to take in the emerging security token industry.
Regulatory compliance also poses a challenge when using Ethereum for security tokens. According to Templum CEO Christopher Pallotta, legal concerns over the status of Ethereum miners also played a role in Templum’s latest transition:
“We believe for securities issuance, you need a private, controlled blockchain … [you] need control of the full lifecycle.”
Last year, Templum took part in one of the first cases of securities tokenization by offering Aspen Coins to eligible investors. Aspen Coins now currently utilize Securitize’s DS Protocol.
Why Templum Switched to Symbiont
According to Pallotta, Symbiont’s notable investors in its recent $20 million funding round played a role in the selection of Symbiont. Participants included Citigroup and Nasdaq.
The companies formed a partnership which aims to market private securities to accredited investors. They won’t be registered with the US Securities and Exchange Commission (SEC), but their offerings will feature legal status due to their limited pool of eligible investors.
Molinari believes the current model of utilizing unregistered securities is clouded with ambiguity and results in unnecessary friction and added expenses.
Ben Spiegelman, strategy leader at Symbiont, described how the $20 billion raised by Initial Coin Offerings (ICOs) in 2018 provides a strong indication of global investor interest:
“Investors want greater access to companies. Entrepreneurs want a larger pool of investors. They want more streamlined capital raising processes and they want enhanced liquidity – all the things that were sort of promised with ICOs.”
Some believe security tokens can finally fulfil that promise.
What do you think of Templum shifting from Ethereum to a private blockchain? Will an ERC-20 compatible security token standard become the norm for future security tokens, or will another protocol on a private blockchain become the frontrunner? Let us know what you think in the comments section below.
Image courtesy of Templum.