What is Equity in Cryptocurrency?
Crypto Knowledge

What is Equity in Cryptocurrency?

written by John Murphy | December 20, 2022

Cryptocurrency space is evolving; new ideas enter its frame daily and replace old ones. Therefore, existing and new investors look for new concepts and projects entering the crypto-verse to keep themselves updated. Equity in trade is not a new concept; however, when it comes to cryptocurrency, people look for answers as to what is equity in cryptocurrency.

Many companies have started issuing shares in crypto coins. For this purpose, these organizations issue digital tokens with backing shares. Thus, these digital tokens are known as crypto equity.

Since cryptocurrencies are revolutionizing the traditional financial system, corporations have also started looking for alternatives. So, they consider crypto equities the best option for raising funds.

However, many people need clarification about equity, which we will explore in detail in this article. So let us get started.

Crypto Equity      

The DeFi nature of cryptocurrency puts the control in the hands of users; thus, companies see it as an opportunity and attract investors by issuing crypto equity.

Companies issue crypto equity to the general public through ICO (initial coin offering). It works just like traditional equity raising through the issuance of an IPO (initial public offering). 

If you need to be better versed in these ideas, here are a few key points to identify ICO and IPO.

  • Consider crypto equity just like shares of a company. However, unlike shares, crypto equity does not have a physical presence but is digitally present in the form of tokens.
  • When you buy a listed company’s shares from a broker or through an initial public offering, these shares are deposited in your Demat account. Similarly, upon buying crypto equity – shares are deposited to your blockchain-hosted digital account as tokens.

However, issuing traditional shares is a complex procedure as companies must seek several approvals from controlling authorities. While crypto equity works DeFi, therefore it is a straightforward method.

So, what makes crypto equity a better option than traditional equity? Let us now understand the pros of crypto equity.

Pros of Crypto Equity

Unlike traditional equity, cryptos do not require the involvement of any third party, like banks, regulatory bodies, and stock exchange rules. It allows investors to purchase equity directly from the company’s founders without worrying about involving regulatory bodies. However, this leaves the investment at a highly risky level compared to traditional equities.

Here are the key benefits of crypto equity and why they are preferable to traditional equity.

  • Globalization: Since blockchain is an open-source network, anybody from anywhere can invest in it. You need an internet connection, and you can buy Bitcoin or Ethereum from your drawing room, sitting a million miles away from the epic center of crypto equity.
  • Decentralization: Crypto equity is easily and readily available without the involvement of any financial institution, banks, governments, or regulating authorities.
  • Transparency is one of the significant pluses of digital equity, as each user can see every transaction, which is impossible in traditional equity firms.

However, all that glitters is not gold; crypto equity has its fair share of cons. So, educate yourself before investing in a highly speculative and volatile market.

Crypto Equity Examples

Now let us look at a few examples of crypto equity; it will help us understand the concept better.

After disruptive blockchain hit the mainstream, businesses started raising funds through crypto equity. They offer shares in the form of tokenized equity.

For instance, Quadrant Biosciences Inc., a US-based biotechnology company, offered its shares in digital tokens. It is a perfect example of crypto equity, and the company raised a staggering 13 million dollars.

Like traditional share systems, crypto equities also offer dividends, voting rights, and other activities based on the number of tokens held. However, all these activities are carried out on blockchain technology. 

Additionally, many tech companies offer blockchain-based solutions to boost crypto equities. We will see a surge in crypto equity in the future as more and more businesses plan to raise funds through digital equity.

Why Should You Pay Attention to Crypto Equity?

It is clear from the discussion that crypto equity is the future. Since crypto equity has many advantages, including but not limited to transparency, decentralization, control, and usage. So, the future of crypto equity looks super bright.

However, since it is a relatively new concept, thus there is still a long way for it to grab the equity market fully. Additionally, crypto volatility is another con that will hinder its flourishment. But, cryptocurrency stakeholders will look to wipe these cons to improve investors’ attention to crypto equity.

Frequently Asked Questions

Will I get a dividend on equity in cryptocurrency?

Just like traditional equity, crypto equity also offers dividends to its holders. However, these dividends are in the form of cryptocurrency tokens.

Why were equity tokens created?

Equity tokens came to replace the traditional equity system. Its decentralized nature has attracted new investors and helped organizations with more funds through an alternate option.

What is crypto equity?

Crypto equity is similar to traditional share equity; the only difference is that it is in the form of digital tokens that are stored on the blockchain. Crypto equity does not have a physical presence.

How is crypto equity issued?

Crypto equity is issued through an initial coin offering (ICO), equivalent to traditional equity’s initial public offer (IPO).

Parting Thoughts

The world of cryptocurrency is ever-expanding, and new features enter its frame daily. Crypto equity is a new idea, and most people need to learn what equity is in cryptocurrency.

Crypto equity is an intangible share of an organization owned by investors and stored on a blockchain. As the investors are increasing their investment portfolio by adding cryptos to their buckets, organizations, too, have started offering equity in the form of digital tokens.

The idea has flourished over the past year as many companies have raised millions of dollars in crypto equity.

However, the advice of the moment is to always seek professional advice before putting eggs in such a highly volatile market. 

Please leave your thoughts about crypto equity in the comments section.