How To Invest in Security Tokens
As Originally Published on thetokenizer.com
Tokenization represents one of the most exciting use-cases of blockchain technology, promising to change the concept of ownership completely. Through the process of creating digital tokens from real-world assets like paintings, buildings or stocks, these become tradable and more liquid. As such, tokenization makes investments in traditional assets more efficient, global and, ultimately, more democratic. This article provides an extensive step-by-step guide from registering an account to investing in security tokens.
In the case of German Neufund – the issuance platform this article uses as an example – tokenization is about bringing “ownership back to the people,” and not only to the 2%, 5% or 7% of the wealthiest people who can comply with the requirements for investor accreditation.
This means that more people can participate in the investment opportunities featured at Neufund’s platform and reap the benefits of successful ventures.
Before diving into the process of investing in security tokens through the Neufund platform, it is important to understand the role of accredited versus non-accredited investors for security token investments.
Accredited versus non-accredited investors – what does it mean?
Security tokens have a reputation as being available only to a tiny, wealthy demographic, namely, the accredited investors. This is the case since issuers of security tokens acknowledge being subject to securities laws, now working within provisions of the Security Act of 1933 that allows limited issuance to accredited investors.
Accredited investors meet standards defined by the US Securities and Exchange Commission, including requirements for yearly income and net assets. The SEC web site contains the full definition. The UK and European equivalent of an Accredited Investor are called an “Experienced Investor,” but has similar requirements.
Up until this point in time, you would have had to be an accredited investor to access security token investment opportunities at platforms such as tZero, Harbor or Entoro; however, this is about to change. Recently, OpenFinance announced how it would allow non-accredited investors to access security tokens, with the BCAP and SPiCE tokens to be the first of several digital securities that will soon be tradeable.
If you – like most – are not an Accredited or Experienced Investor, this is great news; however, there are still ways for non-accredited investors to invest in security tokens. One way is to invest directly in security token projects such as Polymath or Ravencoin from an exchange. If you want to discover and invest in the newest upcoming security token projects, another option is to invest through issuance platforms such as Swarm or Neufund, where you do not have to be an accredited investor.
The remaining’s of this article demonstrates how to invest in security tokens from Neufund’s platform.
How to invest through Neufund’s platform
First of all, it should be noted that despite this article’s focus on Neufund, the basic steps and requirements will most likely be similar for all future trading platforms that will offer security tokens. Another option is to invest through a security token exchange like OpenFinance or tZero, and as a reader at the Tokenizer, you can expect a step-by-step guide to one of these, in a not too distant future.
Returning to Neufund, the following explains in three simple steps how to join the Neufund platform, including how to register, verifying your identity and how to invest.
Step 1 – Sign up and choose a wallet
Head to https://platform.neufund.org/register/ for starters and choose the wallet you want to register with. Three options emerge;
- A light wallet for users new to blockchain
- A browser wallet like MetaMask
- A hardware wallet like Ledger Nano
For better security of your funds, Neufund recommends using a hardware wallet.
Next, you will have to provide your email address and pick a password. Click register, and you are logged into the Neufund platform and can access your dashboard.
Step 2 – Verify your identity
Now that you’re logged in to your dashboard navigate to the profile section to verify your email address, backup your recovery phrase (for Light Wallet users) and complete Neufund’s built-in identity verification process. Once done, you’re ready to start investing.
Let’s go through the three parts!
Email Verification
The email verification is straightforward, simply find the field to fill in your email address. Once that’s done, Neufund will send you a link to verify your email address.
Recovery Phrase
If you chose a browser or hardware wallet, you can skip directly to the third step identity verification. For light wallet holders, however, this step teaches you how to recover your wallet. Your recovery phrase is your backup password, and hence, crucial to ensure the safety of your wallet. In this step, Neufund will provide a unique 24-word recovery phrase, that you should write down on a piece of paper and store in a safe place. You may use the recovery phrase if you ever lose your access link or forget your password.
Click the ‘Generate Recovery Phrase’-button and thoroughly go through the process. Once that’s done, move to the next step, identity verification.
Identity Verification
The final step before you can start investing is to verify your identity. Click the ‘Verify Identity’-button and start the process. In this, you will be asked to fill in your personal information, including your name, date of birth and address. Next, you will have to show Neufund your ID. This can be done manually or in an online video chat – your choice. Once Neufund has verified your identity, you will get a notification by email.
Step 3: Investing
Before investing – as always – make sure there is money in your wallet. Therefore, steer to the wallet section. You can send ether to your wallet using your public address or the QR code. For the QR code option, find the ‘Transfer’-button, click this and follow the process.
Now, you’re all set to invest. Move to your dashboard to see Neufunds’ current token offerings from the ‘Investment opportunities’-section. Two projects appear, the Greyp Bikes, and Neufund (Fifth Force). As for Greyp Bikes, this project is coming up, meaning you would be able to invest in this soon, in a not too distant future. As for Neufund (Fifth Force), this project recently closed, by the way, as the first ever public offering of equity on the blockchain, why this project is no longer an investment opportunity. As an investor, you should, therefore, keep your eyes on the Greyp Bikes project. Further investment opportunities at the Neufund platform coming soon include Air Profile, Emflux Motors, My Swoop, and NGRAVE.
By clicking on the logo or ‘More details’-button, you arrive on the company’s profile page, where you can see all the relevant information for their token offering, like term sheet, advisors, company mission, etc.
As this ETO is coming up, you cannot invest at the moment; however, it should be possible in a not too distant future.
Once this project goes live, it follows the process just described with the only alteration that an ‘invest now’ button on the project would appear.
For the remaining of this guide, an example of a fabricated ETO, LOAGOS follows;
Click the ‘Invest now’-button and choose the wallet you want to make the commitment from and enter the amount you want to invest. You will then be able to see how many tokens you will receive in return, and, of course, your NEU reward. Also, keep in mind, you will pay a small transaction fee.
Then, a summary of the investment you are about to make appears. If you are good to go, click confirm and you’ve successfully invested. You will be notified by an email once your new tokens have arrived in your wallet.
On the portfolio page you can see an overview of your tokens, like the one illustrated below;
Hopefully, this guide allowed you as a reader to familiarize yourself with the process of buying security tokens, from the basis of Neufund’s platform. However, as noted earlier, current and future trading platforms offering security tokens will most likely consist of the same steps and requirements.
The information contained in this article is provided for informational purposes only and should not be construed as financial advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal, financial or other professional advice.
