How does equity token work?

The use of blockchain technology also provides equity token holders with a high level of transparency and traceability. All transactions involving the tokens are recorded on the blockchain ledger, making it easy to track the movement of ownership and ensure that all rules and regulations are being followed.

Equity tokens represent a new and innovative way of managing ownership rights and corporate governance through the utilization of blockchain technology. These tokens operate via smart contracts, which are essentially self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.

One of the fundamental aspects of equity tokens is tokenization, which involves converting traditional ownership shares into digital tokens that reside on a blockchain ledger. This process allows for the fractionalization of ownership, making it more accessible and affordable for a wider range of investors.

The smart contracts underlying equity tokens encode ownership rights, dividend policies, voting mechanisms, and other governance parameters. This ensures that the terms of the agreement are transparent, secure, and enforceable, reducing the risk of fraud or manipulation.

Additionally, the decentralized nature of blockchain technology eliminates the need for intermediaries, such as banks or brokers, in the equity token market. This can lead to cost savings and increased efficiency, as well as faster transaction speeds and improved liquidity.