Is 2021 the year of security tokens?

No wonder blockchain is one of the fastest growing technologies around the world. Moreover, one cannot ignore the fact that part of its popularity comes from cryptocurrencies. It has now been over a decade since cryptocurrencies have emerged, such as Bitcoin – the first cryptocurrency was launched in 2009. Since hundreds and thousands of cryptocurrencies have emerged and there was no turning back for them. In today’s world, it turns out that the word “cryptocurrency” is somewhat outdated. What is quite common to hear is the ICO – Initial Coin Offering – an unregulated means by which funds are raised for new cryptocurrency businesses. These ICO-generated coins are commonly referred to as “tokens”. On that note, what cannot go without mention is the rise of a special type of token, called the security token. It is a portable device that electronically authenticates a person’s identity by storing certain personal information.

Security tokens are liquid, digital contracts for fractions of any asset that is already of value. The asset can be anything, for example: real estate, a car, company shares, etc. Bluetooth tokens with programmable electronic key fobs. When using security tokens, investors can expect their stake to be preserved in the blockchain ledger. On a promising note, security tokens have the potential to upend traditional financial markets in favor of newer and more hybrid blockchain models.

Wondering how security tokens work? Well, a security token provides authentication for accessing a system. This is done through any device that generates a password. The device used generates a new password each time it is used. So, if the user wants to connect to a computer or a virtual private network, a security token can be used by typing the password generated by it. The technology is such that the device generates a random number, encrypts it and sends it to a server with the user’s credentials. The following returns the encrypted response which can only be decrypted by the device. Hacking is not a problem as the device is reused for each authentication, which means the server does not have to store username or password information.

No wonder usernames and passwords are the most widely used form of authentication. However, it cannot be denied that security tokens are a more secure option for protecting digital networks and systems. What is a weak point about user IDs and passwords is that they are not always secure. With a range of methods that hackers can use to crack passwords, the fact that passwords become vulnerable cannot be ignored.

The past two years have been nothing short of a roller coaster for cryptocurrencies. However, what remains consistent is that despite all this, there are projects that bring real added value to investors. Digital assets have always been meaningful applications for investors. Now what we have to look forward to – is 2021 the year of security tokens? Considering the benefits and security that a security token brings, its implementation is highly likely to peak in the years to come. Let’s be careful!

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