What is Tokenized Security?

A tokenized security is a cryptographic tokenized version of a traditional security or asset that is generally used to represent a stock, stablecoin, commodity, or various types of traditional assets. Tokenized securities are often used for blockchain-based derivatives trading and other related decentralized finance (DeFi) mechanisms. While the term 'security token' sounds similar to the term 'tokenized security', the two are in fact very different. Security tokens are a specialized category of tokenized cryptocurrency asset type that makes use of very strict regulatory and compliance parameters that are designed to protect investors by giving them guaranteed equity in a company and guaranteed share in future returns.