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Published Jun 16, 2022

[REPLAY] Stephen McKeon – Professor of Crypto Security Tokens (Capital Allocators, EP.69)

Stephen McKeon delves into the transformative power of security tokens and blockchain technology, offering insights on their potential to revolutionize asset interoperability, liquidity, and compliance while charting his path from the tech industry to a leading academic figure in crypto.
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Episode Highlights

  • Value Transfer

    Blockchain technology introduces a groundbreaking shift in how value is transferred, distinct from traditional protocols that primarily handle information. explains that while protocols like HTTP and IMAP facilitate data exchange, blockchain protocols are designed to move value, enabling digital wallets to hold various assets such as stocks, bonds, and real estate 1. This innovation allows for interoperability across different software, similar to how email clients work together.

    What blockchain offers us are protocols that are specifically built to move value.

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    The introduction of standards like ERC 20 ensures compatibility, making it easier for different digital wallets to interact seamlessly 1.

       

    Market Standards

    Blockchain technology is fostering a new era of market standardization and interoperability. highlights the challenges centralized entities face in creating widely adopted standards, as strategic interests often hinder cooperation 2. Public chains like Ethereum, with its ERC 20 standard, offer a decentralized solution that encourages widespread adoption due to its open nature.

    It's very hard for a for-profit corporation to create a standard that's going to be widely adopted.

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    This shift is expected to change the nature of securities, allowing for more flexible features like tenured voting, which could empower long-term shareholders and alter investment strategies 3.

       

    Trading Dynamics

    The advent of blockchain is poised to transform trading hours and liquidity dynamics. discusses the potential for 24/7 trading, although he notes that not all assets may benefit from such extended hours due to liquidity concerns 4. The concept of liquidity is redefined as the costliness of trade, rather than mere ability, with blockchain potentially expanding market depth by connecting a broader range of investors.

    You don't really want to spread the liquidity out over all of those hours.

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    By opening markets to a global audience, blockchain can reduce bid-ask spreads and enhance trading efficiency, much like how eBay expanded the market for collectibles 5.

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