Securitize, a platform that facilitates the issuance and lifecycle management of security tokens by its customers, announced today the launch of the Digital Securities (DS) Protocol, an open source protocol built on Ethereum which will support third-party apps.
The DS Protocol is designed to resolve liquidity and compliance issues facing issued security tokens for the entire token lifecycle, as they are traded on public and private exchanges.
DS Services will provide the following capabilities to all stakeholders:
- Trust Service: Enables authorization of different constituencies (i.e. exchanges) and DS Apps to be used for an existing issuance
- Registry Service: An on-chain register that makes available KYC information during various interactions in the digital security lifecycle
- Compliance Service: Implements specific compliance rules applicable to a DS Token regarding ownership and trades
- Communications Service: Notifies token holders (investors) about relevant events via the token itself
Current (and future) liquidity and compliance issues for security tokens will be specifically addressed via applications (DS Apps) on the DS Protocol that manage the relevant events associated with security token ownership and management, including the economic rights of the security token. These DS Apps are designed to eliminate existing (and future) liquidity, management, and compliance issues at the security token level related to trading security tokens privately, and on exchanges. Security token issuers, token holders (investors), and exchanges will be the beneficiaries of the DS Protocol, which has been designed to foster an ecosystem in which developers can help expand the value that security tokens provide to stakeholders.
DS service elements will be governed by the DS architecture – a set of interfaces that will enable third parties (developers) to extend and improve the DS ecosystem. The whole structure will enable the following interactions between DS Tokens and DS Apps:
- DS Tokens: A basic representation of digital ownership on the blockchain which will be implemented by an ERC20 extension. It will improve basic token mechanisms with specific behaviors required for the new ecosystem (like controlling transfers within a regulated environment) while maintaining compatibility with existing ERC20 token infrastructure (wallets, custodian, exchanges, etc.).
- DS Apps: Applications that provide the functionality required during each stage in the digital security lifecycle – from issuance or trading to cap-table generation, governance events, or required pay-outs.
Securitize will provide a reference implementation of this protocol on its own DS issuance platform, which will also be supported by the real-world issuance of tokens for Securitize’s customer base.
“Our DS Protocol enables the developing security token industry to open up in the way we’ve always imagined and expected it to. Security tokens are now a reality, and this new DS Protocol facilitates dynamic and open participation across all actors in the ecosystem,” said Carlos Domingo, CEO of Securitize. “DS is open source, and we hope developers beyond just Securitize will utilize the platform to provide valuable tools for investors to manage every element of a full digital security lifecycle on the Ethereum blockchain.”
“Security tokens are going to positively disrupt the global capital markets by bringing efficiency, liquidity, and transparency. And as the first company ever to create and issue a security token, the BCAP, we have deep experience in all aspects of this emerging industry”, said Brad Stephens, Founder and Managing Partner of Blockchain Capital. “We are excited to support and work with Securitize. Their Digital Securities Protocol solves the critical missing piece of the liquidity puzzle to enable multiple exchanges to come online.”
“Issuers staying compliant throughout the lifetime of a digital security is fundamental to having a working secondary market,” said Anthony Pompliano, Founder and Partner at Morgan Creek Digital Assets. “Securitize has solved this through their DS Protocol and continues to be a leader in the real world of tokenized securities.”
“The DS Protocol, first and foremost, will facilitate issuance of tokenized securities in a compliant fashion,” said Juan Hernandez, CEO of OpenFinance Network. “OFN shares Securitize’s commitment to compliance and innovation, these being the cornerstones of our partnership.”
