What is an Equity Token?
An equity token is a type of token that represents the equity in an associated asset, such as the stock of a company, where the terms and conditions are stored and recorded on a blockchain. Hence, it is also considered to be a form of security token since it resembles a traditional stock. Due to their characteristics, equity tokens are commonly treated and regulated as securities by the financial authorities.
Accordingly, these tokens contain the same information as the physical stocks or share certificates. Holders of equity tokens may be entitled to different rights such as voting rights, profit participation, and dividends, as is the case with traditional shares.
The tokens are issued through a process called Equity Token Offerings or ETO, where interested parties can buy them. By purchasing equity tokens, users can become shareholders in the company that issued the specific tokens.