Proposal of a smart contract-based security token management system

Abstract

The blockchain was designed as a management system of cryptocurrencies in cyberspace. Its use cases spread to “Tokenization,” which transforms various assets in the real world into digitally represented ones. Tokenization removes physical restrictions and allows its users to enjoy benefits such as online completed ownership transfer and sharing of ownership of a high-value asset such as real estate. One use case for tokenization is a security token offering (STO), a popular usage among investors. Still, ordinary tokenization methods could not convince most investors to participate in an STO by achieving secure asset transfer only. In this paper, we design the operational model of security tokens from the analysis of given use cases to clarify the potential functionalities for improving coverage of smart contracts in STOs. We also propose the smart contract-based security token management system based on an extended smart contract system interworking with multiple blockchain ledgers.