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This chapter synthesizes the economics, law, and technology of security tokens and security token offerings (STOs). Security tokens are an increasingly important instrument in decentralized finance (DeFi) markets. They are blockchain-based investment contracts that are subject to securities law. Interoperability, fractional ownership, market liquidity, and rapid settlement are the main reasons security tokens are a primary catalyst for digitizing finance. The chapter empirically compares STOs with initial exchange offerings (IEOs) and initial coin offerings (ICOs). STOs take longer and raise more funding. However, controlling for other factors, the amount raised in STOs and IEOs is lower than in utility-token ICOs. These findings suggest an avenue for future research. Moreover, both the law and the technology of security tokens need to address critical challenges related to the competent jurisdiction in multinational activities and blockchain interoperability, scalability, and natural resource degradation.

In this chapter, the authors study how cryptotoken issuance, also referred to as initial coin offerings and security token offerings, may disrupt funding markets such as venture capital, crowdfunding, and private equity. The authors discuss the necessary infrastructure to support this new asset class. The authors analyze the market evolution in terms of volatility, global reach, news events, and types of industries that are issuing or considering to issue tokens. The authors discuss some specific token offerings to highlight lessons learned. the authors summarize the regulatory landscape and challenges going forward. This market crashed in terms of market capitalization at the end of 2018. However, this new asset class along with the underlying technology holds great promise to disrupt various types of intermediaries if adequate financial and regulatory infrastructures are developed.

Cryptocurrencies are notoriously difficult to value from a fundamental perspective. This valuation challenge is rooted in various debated issues in academia and the investments industry. For example, do cryptocurrencies and other cryptoassets have intrinsic value in the conventional sense? Can one appropriately regard cryptocurrencies as digital fiat currencies? What distinguishes cryptocurrencies such as bitcoin and ether from precious metals like gold from a financial perspective? How do cryptocurrencies compare to other cryptoassets in terms of pricing and valuation? This chapter aims to provide responses to these questions, discuss approaches to cryptoasset valuation, and identify areas for future research.