Token and Cryptoactive Investments: Everything You Need to Know About Them!

With the Digital Transformation that has occurred and continues to occur over the years, it is undeniable that new ways of doing business have emerged. Among the fundamental tools for them to be carried out, we cannot fail to highlight the cryptoactive .

  • What are cryptoactives?
  • How do cryptoactives work?
  • How to operate cryptoactives?
  • How do cryptocurrencies and tokens differ?
  • What is the difference between Tokens and Actions?
  • Equity: the similarity between tokens and actions
  • Understanding the difference between Tokens and Actions
  • IPO and STO: the difference between tokens and shares at launch
  • Why invest in tokens instead of stocks?
  • What are the advantages of tokenization?
  • What is diversifying investments?
  • How do tokens help diversify investments?
  • How to get the information of a token in Blockchain?
  • What is Blockchain and how does it work?
  • What are the main risks when investing in tokens?
  • Cautions when investing in a token

What are cryptoactives?

These are digital assets that are protected by encryption . They are exclusively present in digital records and all operations involving cryptoactives are carried out and stored on a network.

Cryptoactives emerged to to facilitate electronic financial transactions or payments between individuals or companies. Thus, the intermediation of Financial Institution , which brings much more agility for the processes.

How do cryptoactives work?

The functioning of cryptoactives is based on the technology known as Blockchain. It works like a ledger and secures all the information related to the transactions carried out.

All this information is stored within blocks , which have a time and date stamp. From time to time, a new block is formed and coupled to a previous block, thus making it extremely secure.

When a “blockchain” is created (hence the name Blockchain ) it becomes immutable, that is, it will not be changed under any circumstances . If a single comma were changed in the first block, all the other thousands of blocks would have to be changed as well.

Before being actually inserted into the Blockchain, all information about cryptoactives is validated and need to be approved . When this happens, they are identified by a alphanumeric code .

The Blockchain has a great importance in cryptoactive transactions, since it is it who registers and guarantees the security of all data.

Who owns the alphanumeric code becomes the owner of the cryptoactives. These assets can be traded through Exchanges or bilaterally, without intermediation.

How to operate cryptoactives?

In order for you to operate cryptoactives, you must have a wallet, which has a public key is private key . The public serves to publish your transactions on the network, while the private is necessary when accessing the wallet and operating with it.

Importantly, cryptoactives do not reside in any financial institution's digital records.

There are currently hundreds of cryptoactives, such as the cryptocurrencies , you tokens , the stablecoins and others. Each one has its own rules operating systems, which are elaborated by the creators and developers of cryptoactives.

What is the difference between cryptocurrencies and tokens?

cryptocurrencies are native assets of a Blockchain network that can be used as a means to transactions is for storage of value. They are decentralized , that is, are issued directly by the Blockchain protocol in which they are executed, not by specific banks or governments.

In many cases, cryptocurrencies are not only used to pay transaction fees on the network, but also to encourage users to keep the cryptocurrency network secure.

Tokens, in turn, are basically value units Blockchain-based organizations or projects build on existing blockchain networks. Although they often share deep compatibility with cryptocurrencies on this network, they are a class of cryptoactives. totally different .

The difference between cryptocurrencies and tokens is that cryptocurrencies are the native asset of a specific Blockchain protocol, while tokens are created by platforms that are based on these Blockchains.

Being tokens or cryptocurrencies, it is undeniable the impact that cryptoactives have had and still have on the way people carry out transactions. just look at evolution in the ways in which business was done, first by bartering, then using coins, paper bills, credit and debit cards, internet banking and getting to where we are today.

What is the difference between Tokens and Actions?

Before we start talking about the difference between actions and tokens, it's important to point out that there are 4 main types of tokens.

Here, we will focus mainly on the Security Tokens , which represent the right of participation of companies, have well-defined regulations and are the closest to actions.

It is also important to always follow up on STO updates which will be discussed later on, as their rules may change over time or depending on the region.

Having said all that, let's start by defining the concepts.

What are tokens?

Tokens are created on existing blockchains and can represent different assets , from real estate developments to digital works of art. They are easily traded from the technology of Smart Contracts.

As tokens are capable of representing any asset, they can be used as digital assets, company shares, or access to certain projects.

You Security Tokens are those that the value is tied to an asset that can be traded and have changes in its own value. Therefore, they are often compared to actions.

What are shares?

actions are fractions of a company or organization which are distributed among the owners to represent your possessions . This way, adding all the actions, you find the value of the company they represent.

Many companies are defined as “ open capital ”, which means they distributed their shares to be traded on the stock exchange .

If the value of these shares increases, all owners have their shares valued and, in certain cases, they may receive dividends.

So far, you may have noticed that there is something in common between the shares and the tokens that represent participation in companies.

Equity: the similarity between tokens and actions

In traditional investments of equity , a person can own part of a business when investing in shares of the same. Owning a stock is proof that you own a percentage of the company it represents.

But why is it beneficial for companies give up parts of your equity ?

The main objective of a company when making shares available is raise funds . Depending on the stage of the business, the offering of shares can take place through brokers, stock exchanges or IPOs.

As we said above, by investing in stocks, you are becoming the owner of the company. That does not mean that you directly own the physical or material objects. that are part of it.

Shares are divided into two categories depending on what they offer:

  • common stock : offer investors voting rights and dividends. However, common shareholders are paid after preferred shareholders, creditors and bondholders. These are usually those ending in 3.
  • Preferred stock : Investors are often not entitled to vote, but have priority in receiving earnings, dividends and bankruptcy. These are usually those ending in 4.

The basic function of actions is the same as tokens, they are just a relatively recent invention that was made possible by the blockchain.

Therefore, the tokens can also represent the equity of a company and the law about the same. However, whoever has a token is not considered a member, but a holder.

And just like stocks, there are tokens to represent company participation in two different ways, both the possibility of remuneration and decision-making.

Now that we understand what tokens and actions have in common, let's definitely understand the difference .

Understanding the difference between Tokens and Actions

The main differences between tokens and actions are in the way they are traded , US costs for the investor, in the presence of intermediaries and the way they are released on the market .

Here's how investing in stocks and investing in tokens differ.

where are created

The first difference between tokens and actions is where they are created.

tokens are made from blockchain technology , while stocks don't.

Due to the use of the blockchain, it is also possible to associate Smart Contracts that offer a legal guarantee even bigger to tokens.

proof of ownership

Proof of ownership of shares is usually provided by means of a broker or directly on the company registration .

With tokens, however, investors themselves can keep the property , since it is possible to store tokens in a personal blockchain wallet.

Sale

The difference between tokens and shares that draws the most attention is the way in which the sale of these assets works.

To sell shares, trading needs to be brokered by a broker and sold on a stock exchange .

Tokens can be sold quickly on trading systems of regulated Security Tokens.

In addition, unlike stocks, token trades can occur 24 hours a day , every day of the week.

Records

Unlike actions, tokens have their recorded transactions in blockchain.

This network stores all the most important information such as sender, recipient, value and date. And she's immutable, so, cannot be rigged .

Legislation

Currently, there is still a certain legal and regulatory indeterminacy around tokens, which is not the case with actions.

This leads to more uncertainty for investors, but regulation is advancing each time more due to the popularization of tokenization around the world.

Finally, the last difference between tokens and actions is related to their releases , which we will talk next.

IPO and STO: the difference between tokens and shares at launch

The launch of a new Security Token offer is called STO ( Security Token Offering ) and each country has its own regulations.

If you participate in the STO, you can acquire an equity interest in the company. In exchange, you will receive a set amount of tokens.

The STO is similar to the IPO ( Initial Public Offering ), in which a company publicly offers its shares to be acquired.

Private companies already have shareholders, mainly founders, first investors and investors venture , but they are still private companies at this stage (not publicly traded).

The IPO is the way to allow anyone can trade and invest in company shares.

THE main difference between tokens and actions in this aspect is the size of operations and practicality to carry out the public offering.

The STO, known as (Security Token Offering) allows businesses/companies to have the opportunity to issue their own tokens, and distribute them as if they were “stocks on the stock exchange” through blockchain. Although it is complicated to make this type of offer viable on behalf of the regulatory bodies (CVM), the STO is seen as the future opportunity for decentralization of investments.

But that is not all! Let's talk about others below. 3 advantages of STO .

Agility

The STO allows companies to have the opportunity to get tokens (which work like shares) tradable on an exchange more quickly .

For a company, getting from the start-up phase to the point where it can launch a successful IPO can take much longer.

Practicality

An STO offers a faster way to trade the equity of a company.

A startup that makes an STO has tokens that already can be traded freely .

On the other hand, a regular start-up without an STO or IPO has shares that may not be so easy to buy and sell.

Democratization

Invest in private equity shares by stock exchange may require a lot of money to participate.

In the case of an STO, investing in tokens is more affordable , as it may have a much lower limit.

Why tokens and not the current financial market?

Why invest in tokens? Why not keep your investments in the traditional financial market? Why choose tokens and not actions?

You already know what an asset token is, but you are still in doubt if it really makes sense to direct part of your investments to this modality.

Okay, many investors are still trying to understand how asset tokenization is revolutionizing the financial market . And those who get the best information will definitely get get ahead .

Why invest in tokens instead of stocks?

Asset tokenization offers investment opportunities far beyond those made possible by the stock exchange .

But tokens can also represent a company's right to participate, equity tokens. In this case they work "like actions" , and are security tokens, one of 4 main types of tokens .

Actions represent parts of an organization or company and serve to authenticate ownership partial of those who have them. In this way, whoever owns a share is also holder of a percentage of the company represented by her.

The main interest of companies when making shares available to be acquired publicly is to raise funds.

But then, why invest in tokens?

Tokens can operate exactly like stocks, that is, representing the participation of companies. They are just less known for being relatively new, a evolution developed from the blockchain .

Tokens also represent ownership of a fraction of a business and have their values linked to valuing what they represent , as well as actions.

However, there are some benefits to investing in tokens over investing in stocks. We'll talk about them next.

The differentiators of investing in tokens

There's a lot differences between tokens and actions that demonstrate why investing in tokens can be very advantageous .

Check out some of them below:

  • structuring : the tokens have the blockchain and smart contract technologies , which guarantee security.
  • Autonomy : the investor can store your tokens on your own , without depending on brokers.
  • Sale : token negotiations do not depend on the stock exchange and can be carried out to any time of day in every day of the week .
  • Anti fraud : blockchain technology also guarantees the record of information of all transfers and cannot be rigged or altered .

On top of this, equity tokens are publicly offered to investors through a STO (Security Token Offering) , which are similar to the IPO (Initial Public Offering), but have their own advantages:

  • Agility in going public : Companies are able to have their tokens traded much faster than it would take to make an IPO.
  • Trading practicality : Through STO, startups can offer their tokens much more easily.
  • Access for smaller investors : Token values in STO are usually much cheaper than those in the stock exchange.

Now that we understand a little more about the benefits of tokens over actions, let's dig deeper into the overall benefits of tokenization.

What are the advantages of tokenization?

If you're still wondering why invest in tokens, know that company share is just one example of assets that can be tokenized .

Tokenization is nothing more than turn a real asset into digital parts so that they can be traded more easily .

This means that when investing in real asset tokens, you have the possibility to generate returns from assets you would never have access by the stock exchange.

Also, there are 5 features that demonstrate how you can take tokenization advantages :

  • Access : tokenization makes it easier for anyone to invest in high-performance assets and the liquidity for the owners of these assets is much greater.
  • Protection : as previously mentioned, blockchain and smart contracts confirm the safety of investments in asset tokens.
  • Transparency : all token trading records are saved in the blockchain and can be consulted by participants at any time.
  • Efficiency : by reducing the number of intermediaries in the process, tokenization reduces the costs of operations and makes them more agile and less bureaucratic.
  • Divisibility : tokens are always small fractions of assets, this allows you to invest in unusual assets so far and for small amounts.

Due to the many benefits that tokenization has, there are several sectors that already tokenize .

If so far you have not been convinced of the advantages of tokenization, let's explain a little more about the technological and legal security of tokens.

Why is investing in tokens technologically secure?

As you saw earlier, tokenization is made in extremely well-protected technologies .

Now, let's better describe each of the security modalities so you can understand why investing in tokens is safe.

Blockchain

To understand why investing in real asset tokens is technologically secure, you only need to know one word: blockchain !

The blockchain is also called trust protocol , because that's where they are registered all information related to transactions : senders, recipients, dates, token quantities, etc.

Regularly, a block of information is formed and dated. These blocks are coupled together forming a chain that indicates which transactions have already taken place and When were realized.

all this in a way encrypted , that is, through complex codes .

These data only form these blocks after being validated and approved by the participants in the transaction.

What makes the blockchain extremely secure is the fact that blocks are interdependent. So an attempt to change in any of them becomes impossible , as it would be necessary to decode all the other blocks.

In this way, all data related to tokens are registered and protected by this technology, which is decentralized (they are not stored on just one server).

Due to the blockchain, it is virtually zero chance of any invasion or tampering during asset tokenization.

But, in case that wasn't enough, investing in tokens is even safer from the technology of Smart Contracts.

Smart Contracts

Smart Contracts do the work of a traditional contract, but optimally , cheapest and safer . They are the ones define the clauses of tokenized rights.

They are prepared during the Issuance step of the tokenization process and load all previously defined rules in the legal field.

You Smart Contracts are also immutable, as are blockchain data, and there is no possibility of fraud . For being pre-programmed , they are activated quickly and conveniently through clicks.

These digital contracts ensure that the rules , which are always very well described and accessible for the parties interested in the negotiation, will be respected .

So far, you've managed to understand a little more about why investing in tokens is safe. Now, let's talk about the risks associated with investing.

What are the main risks when investing in tokens?

Investing in tokens carries the same risks as any other type of investment. .

In fact, many types of tokens can have lower risks than those related to the stock market, but let's focus on the risks of all tokens.

The first main risk for investors is the market . It is associated with uncertainties that can generate value variations in the market, such as interest curves, exchange rates and volatility.

Also enter into market risk issues relating to legislation and taxation countries, especially when it comes to changes in these rules.

The second main risk is the credit , which are present in the tokens that represent debts and act as prepayment of receivables. In this case, the risk is the non-payment by the debtor.

Finally, the third main risk is the liquidity , but in this case, he is often lower than traditional investments , since tokenization facilitates the liquidation of assets.

Anyway, it's still possible for you to find difficulties in selling your tokens or just find buyers offering values below your expectation .

As you can see, all the main risks of investing in tokens are present in other types of investments, but can be mitigated with some practical attitudes, such as:

  • know the right that you are acquiring
  • Do long term strategies
  • Conduct research about the asset and the issuer of the token
  • Read and understand the terms and conditions

Finally, it is not possible to understand why investing in tokens is a good idea without talking about the transformation that this modality is generating in the financial market.

Why does investing in tokens change the Financial Market?

In view of the current scenario in the world, which requires ever faster information and operations, it is important that the financial market modernizes and offer safer and more agile solutions for all processes.

All of this can be accomplished by tokenizing due to the blockchain.

In addition, it is essential that more and more the access to investments is democratic . And not just some, but different types of investments, including those that until then they did not reach small investors .

This is one more change that tokenization offers.

It is also necessary that there is data protection , transparency , cost savings and agility in transfers and operations.

Again, these are elements that investment in tokens offers by facilitating processes such as custody, settlement, clearing and by reducing intermediaries between investors and asset owners.

But the main way the tokenization will change the current financial market is in the behavior .

After all, tokenization makes it easier for investors to have custody of their assets in the form of tokens and have greater control over their own capital .

Tokens are already present on the market and can further diversify your investment portfolio !

There is no reason to abandon the stock market, but it is very worthwhile expand your access to assets and return opportunities .

How to diversify your investment portfolio with tokens?

Tokens are a new opportunity for investment diversification , after all, they expand the possibilities of assets with which you can earn rewards.

But not only that!

The best part of tokenization is power. diversify your portfolio with different types of tokens , which work in completely different ways.

Some tokenized assets provide more conservative investments and insurance , others provide high risk investments , but with higher chances of returns.

That way, you have a whole new range of options to add to your stock and cryptocurrency applications.

What is diversifying investments?

Investment diversification is a strategy to mitigate risks and limit exposure to possible losses .

Anyone who is more familiar with the world of the stock exchange and cryptocurrencies knows this concept well.

Portfolio diversification means allocating your money into different types of investments both fixed income and variable income. While you maintain a emergency reserve .

The idea here is keep an open mind and don't just focus on a few specific products . Betting on varieties, you have more chances that when a certain investment is down, another is up.

To diversify your investment portfolio, you need, then, organize your money and apply it to varied assets and sectors .

And it is necessary to keep in mind that the chosen assets are framed in your profile of investor and in your goals .

Why is investment diversification important?

One of the reasons to diversify your portfolio is not lose touch with other types of investments that can grow and present advantageous returns for you.

It's no use being a great specialist in just one aspect of the financial market and turning a blind eye both to other opportunities that already exist and to new models that may arise.

Another reason to diversify is avoid the risk of ruin , which means losing everything.

If all your money is allocated to the same asset, the same sector or the same type of investment, you are more apt to suffer major impacts if something unforeseen occurs .

Investment diversification allows you to have more flexibility to move your money between assets and enjoy the best moments .

It is exactly from this premise that you can use tokens to diversify investments.

How do tokens help diversify investments?

Tokens are a Recent opportunity to diversify your investments .

they open a new portfolio to add to the stock Exchange and at the cryptocurrencies . Therefore, investing in tokens is not the same as investing in other cryptoactives.

Tokenization opens unprecedented possibilities for diversification , which is already a great reason to invest in tokens.

And this happens by two main reasons .

Reduced costs and greater access to assets

The first one is the chance to access traditional assets , such as participation of companies or debt securities, distributed more efficiently .

This makes the same assets you are used to can become more profitable , as they often include less intermediaries and less costs that could reduce the return on investment.

Here, diversification with tokens follows the same precepts of other modalities financial market, but with the advantages of tokenization.

Access to innovative assets

The second reason is the fact that tokens enable the access to assets that until then were not subject to investment and that generate pay in very different ways .

These innovative tokenized assets include athlete or artist rights, real estate projects, artwork, receivables, small business participation and much more.

In this way, investment diversification can become even more plural.

That's because it starts to involve a asset variety that were not accessible before and that can mitigate risks for offering returns not associated with other financial products traditional ones.

How to diversify investments with tokens?

To diversify investments with tokens, you must follow some of the same strategies that other modalities use.

That means that you can include tokens in your wallet :

  • of different assets;
  • from varied economic sectors;
  • whose remunerations operate in different ways;
  • that balance lower risks and higher risks;
  • that remunerate from currencies with different valuations.

This can be carried out in practice very simply .

You can start by purchasing solidarity engine tokens, for example. Then you can choose receivables tokens that pose lower risk, then choose company equity tokens, and so on.

You may build your wallet little by little , then, there is no reason for anxiety.

The diversification of your investments in tokens will depend so much on the your goals how much of the own market and of the offers you have access to .

also remember diversify within token types , that is, try to buy tokens from more than one company or startup, more than one football club and more than one receivable.

Finally, it is worth repeating: a diversified investment portfolio is built over time! The most important thing is to know the strategy and apply it whenever possible.

How to get the information of a token in Blockchain?

To answer this question, we first need to briefly explain the concept of wallets . They allow you to perform transactions, monitoring and storing tokens.

However, the wallets only served as a control and access interface for their cryptoactives. All records (dates of transactions, who are the holders of the tokens, the amount each one has) are registered in the Blockchain.

In order for you to interact with a token in the Blockchain, you must have the necessary key. And that's where wallets come in.

the wallets communicate with Blockchain and manage the public/private key pairs related to her address. And only the person who has the private key can access the tokens.

If the token represents an asset, the owner can initiate the transfer of the tokens by signing with their private key, which in turn generates a fingerprint or digital signature.

If the token represents an access right to something that someone else has, the owner of that token can initiate access by signing with their private key, thus creating a fingerprint.

But if the token represents a vote, the owner of that token can vote by signing their private key, creating a digital signature.

And that's not the only way to find information about a token on the blockchain!

Each token also has an address on the blockchain on which it was issued. And you can access this address to have access to information, including that which is present in the Smart Contract.

It's that simple! Just access your wallet or blockchain token address and you can read all the related information.

After all, is it safe?

Understand that an important fact about Blockchain is that it is fully decentralized . This means that it does not have a central data storage server, but rather several servers connected to each other.

They use cloud computing to process, gather and store all data blocks and are spread all over the world. with this decentralization , there is greater protection for everything contained in the Blockchain and data intrusions become more difficult.

Investing in tokens through Blockchain is safe , since the data cannot be changed. Furthermore, because of their decentralized processing, organization and storage, you will avoid headaches involving the information theft .

In order to guarantee that all transactions are duly fulfilled by the agreed parties, Blockchain also uses Smart Contracts technology.

What is Blockchain and how does it work?

Did you know that it was from bitcoin in 2008 that Blockchain technology was first implemented? Due to this event, the year was marked as the one in which it appeared.

But it is important to note that Blockchain is not only an single technology made to solve all problems related to the market. It incorporates diverse technologies and studies focused on the most diverse areas, such as:

  • key encryption;
  • hashing numbers;
  • authentications;
  • among many others!

We can say that Blockchain works as a ledger . It is where all the information related to the transactions carried out will be concentrated, such as, for example, the amount of tokens transacted, who sent and received them, the date of transactions and much more !

The information is stored in blocks that have date and time and, from time to time, new blocks are formed and join those that already exist. That's why the name, which, translated into Portuguese, means "block chain ”. And this chain is immutable !

Before being inserted into the chain, all information is validated and need to be approved . Once the process is completed, they get a code made up of letters and numbers that will be the new " identity ” of each of the information.

Thus, we can easily conclude that one of the main amounts of Blockchain is to maintain registered all transactions and ensure security of the data present in them.

What are the main risks when investing in tokens?

We need to talk about the risks of investing in tokens! As tokenization is a recent topic in Brazil, it is still there are many doubts about the topic.

To explain in the best possible way, let's talk here about the 3 main types of risks that stay in the minds of those who want to invest in tokens:

  • Technological Risk
  • Legal Risk
  • Asset Risks

In addition, we'll indicate some processes you can do yourself before investing to mitigate risks in the section: caution when investing in a token .

To advance the matter, it is worth noting that there are almost no risks in the technological and legal sphere , which we are going to develop further on.

From an asset perspective, the risks are the same as for any other type of investment.

Stay with us, we'll explain everything!

Come on?

Token Investment Risk: Technological

When we talk about technological risks in token investments, one word is essential: blockchain , also known as "trust protocol" .

The blockchain's function is to act as a log book of all key data for transactions, such as sender, recipient, date and quantity of tokens sent or received.

This data is recorded in a block with a date and time. Constantly, a new block is joined to the previous one , saving the new information and setting up this "block chain" .

All data are validated and, obligatorily, approved before being included in the blockchain. And when they become part of the chain, they are complexly encoded by letters and numbers.

All blocks are interdependent. That way, if someone tried to hack into the system, they would be forced to unravel all the countless codes present in jail.

The main function of the blockchain is ensure data protection and recording , which brings security to the investment in asset tokens and to other sectors that tokenize.

That is why, the network is decentralized , there is no central server, but several interconnected servers. This property makes any possibility of attack even more difficult. .

On the technological side, the risks of investments in tokens are practically nil. And, to add to that, the blockchain can still have Smart Contracts so that all clauses are followed.

So, we come to the legal issue.

Token Investment Risk: Legal

In the legal field, the Smart Contracts are one of the precautions when investing in tokens that issuers or the tokenizing company prepare for the security of negotiations .

Smart Contracts operate in the same way as a physical contract: regulate obligations and benefits for all parties. In addition to occasional penalties that may fall in case of breaches of contract .

These smart contracts also incorporate certain terms that have been pre-programmed into the blockchain, making virtually automatic validation , which happens through clicks.

Also, they are immutable , that is, cannot be cheated . And all clauses must be explicit so that interpretations do not differ.

From a legal perspective, Smart Contracts mitigate most of the risks of investments in tokens.

So, is there any risk to this type of investment?

Not quite, the main uncertainties have to do with assets, as we will see below.

Token Investment Risks: Assets

The main risks for tokens are the same as for any investment .

This means that the investor is, in general, subject to risks market , credit and liquidity .

Let's explore this subject further.

market risks

One of the main risks of token investments is derived from the market itself .

After all, there are different aspects that can generate uncertainty depending on your token type.

Some elements that establish market risks they are:

  • interest curves
  • commodity fluctuations
  • volatility
  • exchange rates

Also, there are external issues that also integrate market risk, such as changes in country regulations or taxation .

Understanding these risks is even more important for investors interested in security tokens or making high-risk investments.

Credit Risks

As there are debt tokens and prepayment of receivables, one of the risks of investing in tokens is the credit .

It basically comes down to the possibility that the party who must make the payment do not fulfill your obligations .

Both cases of do not pay as the cases of recurring payment delays are called default .

Liquidity Risks

One of the advantages of tokenization is that it offers greater liquidity for assets that used to be more difficult to trade. However, the liquidity risk it is still a possibility in token investments.

liquidity is turn an asset into cash , usually from the sale of it.

Therefore, the risk is not being able to sell your tokens , whether by the absence of buyers or by predetermined duration time his.

There is also the possibility of there being buyers, but only willing to pay very low values . This is also an example of liquidity risk.

Now that you know the main risks, it's worth knowing some practices you can adopt to decrease them.

Cautions when investing in a token

In investments in tokens, there are almost no risks regarding legal certainty or digitized information . All these processes have exceptional protections.

Apart from them, as with any type of investment, there is no magic formula to avoid risks. After all, the higher the risk, the greater the return.

However, there are certain attitudes that you can take to mitigate these risks .

Know the acquired right

Every token represents the right to a certain asset.

So whenever investing in tokens, make a point of knowing which right you are acquiring .

think long term

Always keep in mind that investments are long-term operations.

When choosing a token to invest, consider if it can generate future profitability what if tends to be valued .

Search on your own

The best tokenizers pre-select assets that become offers on their platforms, taking into account their profitability potential.

Even so, it's critical that you know which tokens make sense with the your investor profile .

Also, it is important to do some research. about the company owner of the tokenized asset and about the characteristics and risks inherent to the market of which she is a part.

With the Digital Transformation that has occurred and continues to occur over the years, it is undeniable that new ways of doing business have emerged. Among the fundamental tools for them to be carried out, we cannot fail to highlight the cryptoactive .

We prepared this article with everything what you need to know about cryptoactives and why their potential is growing.

Good reading!

What are cryptoactives?

We can understand how cryptoactive the virtual assets that are protected by cryptography . they are present exclusively in digital records and all operations involving cryptoactives are carried out and stored in a computer network .

Cryptoactives emerged to to facilitate electronic financial transactions or payments between individuals or companies. Thus, the intermediation of Financial Institution , which brings much more agility for the processes.

How do cryptoactives work?

The functioning of cryptoactives is based on the technology known as Blockchain. It works like a ledger and concentrates all the information related to the transactions carried out.

All this information is stored within a block , which has a time and date stamp. From time to time, a new block is formed and joined to a previous block.

In this way, a “block chain” (hence the name Blockchain ) immutable, that is, that in no chance will be changed. If a single comma were changed in the first block, all the other thousands of blocks would have to be changed as well.

Before being actually inserted into the Blockchain, all information about cryptoactives is validated and need to be approved . When this happens, they are identified by a alphanumeric code .

Blockchain has a big importance in cryptoactive transactions, since it will leave everything registered and will guarantee the safety of all data. This is because the blocks are dependent on each other and each piece of information has a specific encoding.

Who owns the alphanumeric code becomes the owner of the cryptoactives. These assets can be traded through Exchanges or bilaterally, without intermediation.

How to operate cryptoactives?

In order for you to operate cryptoactives, you must have a wallet, which has a public key is private key . The public serves to publish your transactions on the network, while the private is necessary when accessing the wallet and operating with it.

Importantly, cryptoactives do not reside in any financial institution’s digital records.

There are currently hundreds of cryptoactives, such as the cryptocurrencies , you tokens , the stablecoins and others. Each one has its own rules operating systems, which are elaborated by the creators and developers of cryptoactives.

How do cryptocurrencies and tokens differ?

cryptocurrencies are native assets of a Blockchain network that can be used as a means to transactions is for storage of value. They are decentralized , that is, are issued directly by the Blockchain protocol in which they are executed, not by specific banks or governments.

In many cases, cryptocurrencies are not only used to pay transaction fees on the network, but also to encourage users to keep the cryptocurrency network secure.

Tokens, in turn, are basically value units Blockchain-based organizations or projects build on existing blockchain networks. Although they often share deep compatibility with cryptocurrencies on this network, they are a class of cryptoactives. totally different .

The difference between cryptocurrencies and tokens is that cryptocurrencies are the native asset of a specific Blockchain protocol, while tokens are created by platforms that are based on these Blockchains.

Being tokens or cryptocurrencies, it is undeniable the impact that cryptoactives have had and still have on the way people carry out transactions. just look at evolution in the ways in which business was done, first by bartering, then using coins, paper bills, credit and debit cards, internet banking and getting to where we are today.

What is the difference between Tokens and Actions?

After all, what’s the difference between tokens and actions?

Now that investing in tokens is becoming more common in Brazil, many people still don’t understand how it differs from investing in stocks.

We’ve prepared this full article to let you know:

  • What are tokens and actions
  • Equity: the similarity between tokens and actions
  • The main differences between tokens and actions
  • Difference in launch: IPO vs STO

Come on?

What is the difference between Tokens and Actions?

Before we start talking about the difference between actions and tokens, it’s important to point out that there are 4 main types of tokens.

Here, we will focus mainly on the Security Tokens , which represent the right of participation of companies, have well-defined regulations and are the closest to actions.

It is also important to always follow up on STO updates which will be discussed later on, as their rules may change over time or depending on the region.

Having said all that, let’s start by defining the concepts.

What are tokens?

Tokens are created on existing blockchains and can represent different assets , from real estate developments to digital works of art. They are easily traded from the technology of Smart Contracts.

As tokens are capable of representing any asset, they can be used as digital assets, company shares, or access to certain projects.

You Security Tokens are those that the value is tied to an asset that can be traded and have changes in its own value. Therefore, they are often compared to actions.

What are shares?

actions are fractions of a company or organization which are distributed among the owners to represent your possessions . This way, adding all the actions, you find the value of the company they represent.

Many companies are defined as “ open capital ”, which means they distributed their shares to be traded on the stock exchange .

If the value of these shares increases, all owners have their shares valued and, in certain cases, they may receive dividends.

So far, you may have noticed that there is something in common between the shares and the tokens that represent participation in companies.

Let’s talk a little more about this.

Equity: the similarity between tokens and actions

In traditional investments of equity , a person can own part of a business when investing in shares of the same. Owning a stock is proof that you own a percentage of the company it represents.

But why is it beneficial for companies give up parts of your equity ?

The main objective of a company when making shares available is raise funds . Depending on the stage of the business, the offering of shares can take place through brokers, stock exchanges or IPOs.

As we said above, by investing in stocks, you are becoming the owner of the company. That does not mean that you directly own the physical or material objects. that are part of it.

Shares are divided into two categories depending on what they offer:

  • common stock : offer investors voting rights and dividends. However, common shareholders are paid after preferred shareholders, creditors and bondholders. These are usually those ending in 3.
  • Preferred stock : Investors are often not entitled to vote, but have priority in receiving earnings, dividends and bankruptcy. These are usually those ending in 4.

The basic function of actions is the same as tokens, they are just a relatively recent invention that was made possible by the blockchain.

Therefore, the tokens can also represent the equity of a company and the law about the same. However, whoever has a token is not considered a member, but a holder.

And just like stocks, there are tokens to represent company participation in two different ways, both the possibility of remuneration and decision-making.

Now that we understand what tokens and actions have in common, let’s definitely understand the difference .

Understanding the difference between Tokens and Actions

The main differences between tokens and actions are in the way they are traded , US costs for the investor, in the presence of intermediaries and the way they are released on the market .

Here’s how investing in stocks and investing in tokens differ.

where are created

The first difference between tokens and actions is where they are created.

tokens are made from blockchain technology , while stocks don’t.

Due to the use of the blockchain, it is also possible to associate Smart Contracts that offer a legal guarantee even bigger to tokens.

proof of ownership

Proof of ownership of shares is usually provided by means of a broker or directly on the company registration .

With tokens, however, investors themselves can keep the property , since it is possible to store tokens in a personal blockchain wallet.

Sale

The difference between tokens and shares that draws the most attention is the way in which the sale of these assets works.

To sell shares, trading needs to be brokered by a broker and sold on a stock exchange .

Tokens can be sold quickly on trading systems of regulated Security Tokens.

In addition, unlike stocks, token trades can occur 24 hours a day , every day of the week.

Records

Unlike actions, tokens have their recorded transactions in blockchain.

This network stores all the most important information such as sender, recipient, value and date. And she’s immutable, so, cannot be rigged .

Legislation

Currently, there is still a certain legal and regulatory indeterminacy around tokens, which is not the case with actions.

This leads to more uncertainty for investors, but regulation is advancing each time more due to the popularization of tokenization around the world.

Finally, the last difference between tokens and actions is related to their releases , which we will talk next.

IPO and STO: the difference between tokens and shares at launch

The launch of a new Security Token offer is called STO ( Security Token Offering ) and each country has its own regulations.

If you participate in the STO, you can acquire an equity interest in the company. In exchange, you will receive a set amount of tokens.

The STO is similar to the IPO ( Initial Public Offering ), in which a company publicly offers its shares to be acquired.

Private companies already have shareholders, mainly founders, first investors and investors venture , but they are still private companies at this stage (not publicly traded).

The IPO is the way to allow anyone can trade and invest in company shares.

THE main difference between tokens and actions in this aspect is the size of operations and practicality to carry out the public offering.

The STO, known as (Security Token Offering) allows businesses/companies to have the opportunity to issue their own tokens, and distribute them as if they were “stocks on the stock exchange” through blockchain. Although it is complicated to make this type of offer viable on behalf of the regulatory bodies (CVM), the STO is seen as the future opportunity for decentralization of investments.

But that is not all! Let’s talk about others below. 3 advantages of STO .

Agility

The STO allows companies to have the opportunity to get tokens (which work like shares) tradable on an exchange more quickly .

For a company, getting from the start-up phase to the point where it can launch a successful IPO can take much longer.

Practicality

An STO offers a faster way to trade the equity of a company.

A startup that makes an STO has tokens that already can be traded freely .

On the other hand, a regular start-up without an STO or IPO has shares that may not be so easy to buy and sell.

Democratization

Invest in private equity shares by stock exchange may require a lot of money to participate.

In the case of an STO, investing in tokens is more affordable , as it may have a much lower limit.

Why tokens and not the current financial market?

Why invest in tokens? Why not keep your investments in the traditional financial market? Why choose tokens and not actions?

You already know what an asset token is, but you are still in doubt if it really makes sense to direct part of your investments to this modality.

Okay, many investors are still trying to understand how asset tokenization is revolutionizing the financial market . And those who get the best information will definitely get get ahead .

Therefore, we decided to present a text that solves once and for all the question of why to invest in tokens and not in the traditional financial market.

Come on?

Why invest in tokens instead of stocks?

Asset tokenization offers investment opportunities far beyond those made possible by the stock exchange .

But tokens can also represent a company’s right to participate, equity tokens. In this case they work “like actions” , and are security tokens, one of 4 main types of tokens .

Actions represent parts of an organization or company and serve to authenticate ownership partial of those who have them. In this way, whoever owns a share is also holder of a percentage of the company represented by her.

The main interest of companies when making shares available to be acquired publicly is to raise funds.

But then, why invest in tokens?

Tokens can operate exactly like stocks, that is, representing the participation of companies. They are just less known for being relatively new, a evolution developed from the blockchain .

Tokens also represent ownership of a fraction of a business and have their values linked to valuing what they represent , as well as actions.

However, there are some benefits to investing in tokens over investing in stocks. We’ll talk about them next.

The differentiators of investing in tokens

There’s a lot differences between tokens and actions that demonstrate why investing in tokens can be very advantageous .

Check out some of them below:

  • structuring : the tokens have the blockchain and smart contract technologies , which guarantee security.
  • Autonomy : the investor can store your tokens on your own , without depending on brokers.
  • Sale : token negotiations do not depend on the stock exchange and can be carried out to any time of day in every day of the week .
  • Anti fraud : blockchain technology also guarantees the record of information of all transfers and cannot be rigged or altered .

On top of this, equity tokens are publicly offered to investors through a STO (Security Token Offering) , which are similar to the IPO (Initial Public Offering), but have their own advantages:

  • Agility in going public : Companies are able to have their tokens traded much faster than it would take to make an IPO.
  • Trading practicality : Through STO, startups can offer their tokens much more easily.
  • Access for smaller investors : Token values in STO are usually much cheaper than those in the stock exchange.

Now that we understand a little more about the benefits of tokens over actions, let’s dig deeper into the overall benefits of tokenization.

What are the advantages of tokenization?

If you’re still wondering why invest in tokens, know that company share is just one example of assets that can be tokenized .

Tokenization is nothing more than turn a real asset into digital parts so that they can be traded more easily .

This means that when investing in real asset tokens, you have the possibility to generate returns from assets you would never have access by the stock exchange.

Also, there are 5 features that demonstrate how you can take tokenization advantages :

  • Access : tokenization makes it easier for anyone to invest in high-performance assets and the liquidity for the owners of these assets is much greater.
  • Protection : as previously mentioned, blockchain and smart contracts confirm the safety of investments in asset tokens.
  • Transparency : all token trading records are saved in the blockchain and can be consulted by participants at any time.
  • Efficiency : by reducing the number of intermediaries in the process, tokenization reduces the costs of operations and makes them more agile and less bureaucratic.
  • Divisibility : tokens are always small fractions of assets, this allows you to invest in unusual assets so far and for small amounts.

Due to the many benefits that tokenization has, there are several sectors that already tokenize .

If so far you have not been convinced of the advantages of tokenization, let’s explain a little more about the technological and legal security of tokens.

Why is investing in tokens technologically secure?

As you saw earlier, tokenization is made in extremely well-protected technologies .

Now, let’s better describe each of the security modalities so you can understand why investing in tokens is safe.

Blockchain

To understand why investing in real asset tokens is technologically secure, you only need to know one word: blockchain !

The blockchain is also called trust protocol , because that’s where they are registered all information related to transactions : senders, recipients, dates, token quantities, etc.

Regularly, a block of information is formed and dated. These blocks are coupled together forming a chain that indicates which transactions have already taken place and When were realized.

all this in a way encrypted , that is, through complex codes .

These data only form these blocks after being validated and approved by the participants in the transaction.

What makes the blockchain extremely secure is the fact that blocks are interdependent. So an attempt to change in any of them becomes impossible , as it would be necessary to decode all the other blocks.

In this way, all data related to tokens are registered and protected by this technology, which is decentralized (they are not stored on just one server).

Due to the blockchain, it is virtually zero chance of any invasion or tampering during asset tokenization.

But, in case that wasn’t enough, investing in tokens is even safer from the technology of Smart Contracts.

Smart Contracts

Smart Contracts do the work of a traditional contract, but optimally , cheapest and safer . They are the ones define the clauses of tokenized rights.

They are prepared during the Issuance step of the tokenization process and load all previously defined rules in the legal field.

You Smart Contracts are also immutable, as are blockchain data, and there is no possibility of fraud . For being pre-programmed , they are activated quickly and conveniently through clicks.

These digital contracts ensure that the rules , which are always very well described and accessible for the parties interested in the negotiation, will be respected .

So far, you’ve managed to understand a little more about why investing in tokens is safe. Now, let’s talk about the risks associated with investing.

What are the main risks when investing in tokens?

Investing in tokens carries the same risks as any other type of investment. .

In fact, many types of tokens can have lower risks than those related to the stock market, but let’s focus on the risks of all tokens.

The first main risk for investors is the market . It is associated with uncertainties that can generate value variations in the market, such as interest curves, exchange rates and volatility.

Also enter into market risk issues relating to legislation and taxation countries, especially when it comes to changes in these rules.

The second main risk is the credit , which are present in the tokens that represent debts and act as prepayment of receivables. In this case, the risk is the non-payment by the debtor.

Finally, the third main risk is the liquidity , but in this case, he is often lower than traditional investments , since tokenization facilitates the liquidation of assets.

Anyway, it’s still possible for you to find difficulties in selling your tokens or just find buyers offering values below your expectation .

As you can see, all the main risks of investing in tokens are present in other types of investments, but can be mitigated with some practical attitudes, such as:

  • know the right that you are acquiring
  • Do long term strategies
  • Conduct research about the asset and the issuer of the token
  • Read and understand the terms and conditions

Finally, it is not possible to understand why investing in tokens is a good idea without talking about the transformation that this modality is generating in the financial market.

Why does investing in tokens change the Financial Market?

In view of the current scenario in the world, which requires ever faster information and operations, it is important that the financial market modernizes and offer safer and more agile solutions for all processes.

All of this can be accomplished by tokenizing due to the blockchain.

In addition, it is essential that more and more the access to investments is democratic . And not just some, but different types of investments, including those that until then they did not reach small investors .

This is one more change that tokenization offers.

It is also necessary that there is data protection , transparency , cost savings and agility in transfers and operations.

Again, these are elements that investment in tokens offers by facilitating processes such as custody, settlement, clearing and by reducing intermediaries between investors and asset owners.

But the main way the tokenization will change the current financial market is in the behavior .

After all, tokenization makes it easier for investors to have custody of their assets in the form of tokens and have greater control over their own capital .

Tokens are already present on the market and can further diversify your investment portfolio !

There is no reason to abandon the stock market, but it is very worthwhile expand your access to assets and return opportunities .

How to diversify your investment portfolio with tokens?

Tokens are a new opportunity for investment diversification , after all, they expand the possibilities of assets with which you can earn rewards.

But not only that!

The best part of tokenization is power. diversify your portfolio with different types of tokens , which work in completely different ways.

Some tokenized assets provide more conservative investments and insurance , others provide high risk investments , but with higher chances of returns.

That way, you have a whole new range of options to add to your stock and cryptocurrency applications.

We prepared this article for you to know everything about investment diversification with tokens.

Come on?

What is diversifying investments?

Investment diversification is a strategy to mitigate risks and limit exposure to possible losses .

Anyone who is more familiar with the world of the stock exchange and cryptocurrencies knows this concept well.

Portfolio diversification means allocating your money into different types of investments both fixed income and variable income. While you maintain a emergency reserve .

The idea here is keep an open mind and don’t just focus on a few specific products . Betting on varieties, you have more chances that when a certain investment is down, another is up.

To diversify your investment portfolio, you need, then, organize your money and apply it to varied assets and sectors .

And it is necessary to keep in mind that the chosen assets are framed in your profile of investor and in your goals .

Why is investment diversification important?

One of the reasons to diversify your portfolio is not lose touch with other types of investments that can grow and present advantageous returns for you.

It’s no use being a great specialist in just one aspect of the financial market and turning a blind eye both to other opportunities that already exist and to new models that may arise.

Another reason to diversify is avoid the risk of ruin , which means losing everything.

If all your money is allocated to the same asset, the same sector or the same type of investment, you are more apt to suffer major impacts if something unforeseen occurs .

Investment diversification allows you to have more flexibility to move your money between assets and enjoy the best moments .

It is exactly from this premise that you can use tokens to diversify investments.

How do tokens help diversify investments?

Tokens are a Recent opportunity to diversify your investments .

they open a new portfolio to add to the stock Exchange and at the cryptocurrencies . Therefore, investing in tokens is not the same as investing in other cryptoactives.

Tokenization opens unprecedented possibilities for diversification , which is already a great reason to invest in tokens.

And this happens by two main reasons .

Reduced costs and greater access to assets

The first one is the chance to access traditional assets , such as participation of companies or debt securities, distributed more efficiently .

This makes the same assets you are used to can become more profitable , as they often include less intermediaries and less costs that could reduce the return on investment.

Here, diversification with tokens follows the same precepts of other modalities financial market, but with the advantages of tokenization.

Access to innovative assets

The second reason is the fact that tokens enable the access to assets that until then were not subject to investment and that generate pay in very different ways .

These innovative tokenized assets include athlete or artist rights, real estate projects, artwork, receivables, small business participation and much more.

In this way, investment diversification can become even more plural.

That’s because it starts to involve a asset variety that were not accessible before and that can mitigate risks for offering returns not associated with other financial products traditional ones.

How to diversify investments with tokens?

To diversify investments with tokens, you must follow some of the same strategies that other modalities use.

That means that you can include tokens in your wallet :

  • of different assets;
  • from varied economic sectors;
  • whose remunerations operate in different ways;
  • that balance lower risks and higher risks;
  • that remunerate from currencies with different valuations.

This can be carried out in practice very simply .

You can start by purchasing solidarity engine tokens, for example. Then you can choose receivables tokens that pose lower risk, then choose company equity tokens, and so on.

You may build your wallet little by little , then, there is no reason for anxiety.

The diversification of your investments in tokens will depend so much on the your goals how much of the own market and of the offers you have access to .

also remember diversify within token types , that is, try to buy tokens from more than one company or startup, more than one football club and more than one receivable.

Finally, it is worth repeating: a diversified investment portfolio is built over time! The most important thing is to know the strategy and apply it whenever possible.

How to get the information of a token in Blockchain?

THE Blockchain is well known by those in the investment market, especially when we talk about asset tokenization . After all, it is she who concentrates all information related to the transactions carried out.

However, one of the doubts that many people have is how to get token information in the Blockchain .

That’s why we’ve prepared this article with everything you need to know about this subject!

Good reading!

What is Blockchain and how does it work?

Did you know that it was from bitcoin in 2008 that Blockchain technology was first implemented? Due to this event, the year was marked as the one in which it appeared.

But it is important to note that Blockchain is not only an single technology made to solve all problems related to the market. It incorporates diverse technologies and studies focused on the most diverse areas, such as:

  • key encryption;
  • hashing numbers;
  • authentications;
  • among many others!

We can say that Blockchain works as a ledger . It is where all the information related to the transactions carried out will be concentrated, such as, for example, the amount of tokens transacted, who sent and received them, the date of transactions and much more !

The information is stored in blocks that have date and time and, from time to time, new blocks are formed and join those that already exist. That’s why the name, which, translated into Portuguese, means “block chain ”. And this chain is immutable !

Before being inserted into the chain, all information is validated and need to be approved . Once the process is completed, they get a code made up of letters and numbers that will be the new “ identity ” of each of the information.

Thus, we can easily conclude that one of the main amounts of Blockchain is to maintain registered all transactions and ensure security of the data present in them.

How can you get the information for a token on the Blockchain?

To answer this question, we first need to briefly explain the concept of wallets . They allow you to perform transactions, monitoring and storing tokens.

However, the wallets only served as a control and access interface for their cryptoactives. All records (dates of transactions, who are the holders of the tokens, the amount each one has) are registered in the Blockchain.

In order for you to interact with a token in the Blockchain, you must have the necessary key. And that’s where wallets come in.

the wallets communicate with Blockchain and manage the public/private key pairs related to her address. And only the person who has the private key can access the tokens.

If the token represents an asset, the owner can initiate the transfer of the tokens by signing with their private key, which in turn generates a fingerprint or digital signature.

If the token represents an access right to something that someone else has, the owner of that token can initiate access by signing with their private key, thus creating a fingerprint.

But if the token represents a vote, the owner of that token can vote by signing their private key, creating a digital signature.

And that’s not the only way to find information about a token on the blockchain!

Each token also has an address on the blockchain on which it was issued. And you can access this address to have access to information, including that which is present in the Smart Contract.

It’s that simple! Just access your wallet or blockchain token address and you can read all the related information.

After all, is it safe?

Understand that an important fact about Blockchain is that it is fully decentralized . This means that it does not have a central data storage server, but rather several servers connected to each other.

They use cloud computing to process, gather and store all data blocks and are spread all over the world. with this decentralization , there is greater protection for everything contained in the Blockchain and data intrusions become more difficult.

Investing in tokens through Blockchain is safe , since the data cannot be changed. Furthermore, because of their decentralized processing, organization and storage, you will avoid headaches involving the information theft .

In order to guarantee that all transactions are duly fulfilled by the agreed parties, Blockchain also uses Smart Contracts technology.

What are the main risks when investing in tokens?

We need to talk about the risks of investing in tokens! As tokenization is a recent topic in Brazil, it is still there are many doubts about the topic.

To explain in the best possible way, let’s talk here about the 3 main types of risks that stay in the minds of those who want to invest in tokens:

  • Technological Risk
  • Legal Risk
  • Asset Risks

In addition, we’ll indicate some processes you can do yourself before investing to mitigate risks in the section: caution when investing in a token .

To advance the matter, it is worth noting that there are almost no risks in the technological and legal sphere , which we are going to develop further on.

From an asset perspective, the risks are the same as for any other type of investment.

Stay with us, we’ll explain everything!

Come on?

Token Investment Risk: Technological

When we talk about technological risks in token investments, one word is essential: blockchain , also known as “trust protocol” .

The blockchain’s function is to act as a log book of all key data for transactions, such as sender, recipient, date and quantity of tokens sent or received.

This data is recorded in a block with a date and time. Constantly, a new block is joined to the previous one , saving the new information and setting up this “block chain” .

All data are validated and, obligatorily, approved before being included in the blockchain. And when they become part of the chain, they are complexly encoded by letters and numbers.

All blocks are interdependent. That way, if someone tried to hack into the system, they would be forced to unravel all the countless codes present in jail.

The main function of the blockchain is ensure data protection and recording , which brings security to the investment in asset tokens and to other sectors that tokenize.

That is why, the network is decentralized , there is no central server, but several interconnected servers. This property makes any possibility of attack even more difficult. .

On the technological side, the risks of investments in tokens are practically nil. And, to add to that, the blockchain can still have Smart Contracts so that all clauses are followed.

So, we come to the legal issue.

Token Investment Risk: Legal

In the legal field, the Smart Contracts are one of the precautions when investing in tokens that issuers or the tokenizing company prepare for the security of negotiations .

Smart Contracts operate in the same way as a physical contract: regulate obligations and benefits for all parties. In addition to occasional penalties that may fall in case of breaches of contract .

These smart contracts also incorporate certain terms that have been pre-programmed into the blockchain, making virtually automatic validation , which happens through clicks.

Also, they are immutable , that is, cannot be cheated . And all clauses must be explicit so that interpretations do not differ.

From a legal perspective, Smart Contracts mitigate most of the risks of investments in tokens.

So, is there any risk to this type of investment?

Not quite, the main uncertainties have to do with assets, as we will see below.

Token Investment Risks: Assets

The main risks for tokens are the same as for any investment .

This means that the investor is, in general, subject to risks market , credit and liquidity .

Let’s explore this subject further.

market risks

One of the main risks of token investments is derived from the market itself .

After all, there are different aspects that can generate uncertainty depending on your token type.

Some elements that establish market risks they are:

  • interest curves
  • commodity fluctuations
  • volatility
  • exchange rates

Also, there are external issues that also integrate market risk, such as changes in country regulations or taxation .

Understanding these risks is even more important for investors interested in security tokens or making high-risk investments.

Credit Risks

As there are debt tokens and prepayment of receivables, one of the risks of investing in tokens is the credit .

It basically comes down to the possibility that the party who must make the payment do not fulfill your obligations .

Both cases of do not pay as the cases of recurring payment delays are called default .

Liquidity Risks

One of the advantages of tokenization is that it offers greater liquidity for assets that used to be more difficult to trade. However, the liquidity risk it is still a possibility in token investments.

liquidity is turn an asset into cash , usually from the sale of it.

Therefore, the risk is not being able to sell your tokens , whether by the absence of buyers or by predetermined duration time his.

There is also the possibility of there being buyers, but only willing to pay very low values . This is also an example of liquidity risk.

Now that you know the main risks, it’s worth knowing some practices you can adopt to decrease them.

Cautions when investing in a token

In investments in tokens, there are almost no risks regarding legal certainty or digitized information . All these processes have exceptional protections.

Apart from them, as with any type of investment, there is no magic formula to avoid risks. After all, the higher the risk, the greater the return.

However, there are certain attitudes that you can take to mitigate these risks .

Know the acquired right

Every token represents the right to a certain asset.

So whenever investing in tokens, make a point of knowing which right you are acquiring .

think long term

Always keep in mind that investments are long-term operations.

When choosing a token to invest, consider if it can generate future profitability what if tends to be valued .

Search on your own

The best tokenizers pre-select assets that become offers on their platforms, taking into account their profitability potential.

Even so, it’s critical that you know which tokens make sense with the your investor profile .

Also, it is important to do some research. about the company owner of the tokenized asset and about the characteristics and risks inherent to the market of which she is a part.

Still in doubt? See our FAQ

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Welcome to the present and future of money. Make your pre-registration and you will soon receive an invitation to open an account and access the best investment offers.