Security tokens are being hailed as the sober use-case for blockchain technology, whether or not this be true, what is conclusive is that the number of security token offerings are picking up pace this past month(source) as the market recuperates from the ‘crypto winter’. So why are STOs picking up the pace? And which industry sectors are leading the space? Let’s look at the data.
Surprisingly, the nascent Energy sector has emerged a dominant player in terms of number of STOs, overtaking more mature sectors like Financial services. On top of this, the number of STOs in the Healthcare sector, which is also a relatively young sector in the crypto space, was on par with Trading and investing sector.
The top four industry sectors like Energy, Financial Services, Healthcare and Trading & Investing account for as much as 42% of the total number of STOs observed in February.
Energy sector alone accounted for as much as 14% of the STOs, which is unprecedented.
In the wake of the dramatic downfall of Initial Coin Offerings, entrepreneurs and investors alike were actively seeking a replacement for it, forced by the stringent ICO sales regulations imposed by regulatory authorities.
STOs are regulatory compliant token offerings, which grants investors ownership rights over the company’s tangible assets, which meant investors are protected by law. On top of this, STOs also allow investors to buy tokenized securities, which means previously low-liquidity assets like Real estate can now be traded using tokens.
With the Energy sector spearheading the STO landscape, let’s explore the possible use-cases for security tokens in this industry.
Unlike several scores of industries that are leveraging blockchain technology to augment their efficiency and transparency, the Energy sector has been cumbersome to realise the potential use-cases for the technology.
To digress, blockchain is not the first technology to revolutionize the energy space though, in retrospect, advances in solar panels and battery technology is gradually shifting the sector towards more renewable sources of energy.
Blockchain-based power grid?
The most popular idea being explored by dozens of startups is how blockchain technology could help create a peer-to-peer energy trading platform. Primarily, small scale energy producers, like farms or houses, can sell their excess energy directly to other consumers. Many of these startups have started pilot programs where the idea is being tested on a smaller scale.
Further, a blockchain enabled energy meter could automatically track the flow of electricity and smart contracts execute when electricity is delivered which triggers payment. Traditionally the energy sector has been heavily centralized, either by governments or huge companies. The combination of cheap solar cells and batteries with that of a blockchain based power grid could help the sector leapfrog into a new era of democratized power that is sustainable.
Pilot programmes for this idea have been carried out In New York and Australia, where residents successfully traded energy using an Ethereum blockchain platform.
The concept of a blockchain based powered grid, enabling users to send and buy power directly from peers, is an exciting thought and could be a glimpse into the future of the energy sector. But the problem with this idea currently is scalability as the pilot programs that were tested out only managed to send a few Kilowatt hours, for perspective, the per capita energy consumption in the US is over 12,000 kWh.
Although the blockchain technology could potentially revolutionize the Energy sector, current prototypes are a far cry from achieving this goal.