Clear DefinitionsDigital Security
1 min read
Pronunciation
[di-ji-tl si-kyoor-i-tee]
Analogy
Like a stock certificate or bond coupon—but issued and managed entirely through digital tokens on a blockchain.
Definition
A blockchain token or instrument that represents an investment contract, share, or debt—subject to securities laws—providing rights such as profit share, dividends, or governance.
Key Points Intro
Digital securities merge traditional financial instruments with blockchain features.
Key Points
Regulated: Must comply with securities regulations (e.g. SEC, MiFID).
Programmable: Automates corporate actions in smart contracts.
Custody: Held in regulated wallets or custodial services.
Transfer restrictions: Enforced via on‑chain compliance modules.
Example
A real estate fund issues digital security tokens representing property shares; investors trade tokens on a regulated ATS.
Technical Deep Dive
Tokens adhere to ERC‑1404 or ERC‑1400, embedding transfer validators that query on‑chain investor accreditation status. Corporate actions (dividends, buybacks) executed by `issueByPartition()` and `redeemByPartition()`.
Security Warning
Noncompliant issuance can trigger regulatory enforcement and token freezes.
Caveat
Token design must balance regulatory requirements with on‑chain efficiency.
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