After the ICO boom in 2017, the term “token” is considered negative.
When we speak about Tokens,the idea of a useless digital token comes to our mind. This tokens created only for the purpose of making easy money through ICO crowfunding. The ICO is a great financing model, but it has been abused.
What is Security Token Offering (STO) and what is the difference between ICO?
Security Token Offering (STO) is an evolution of ICO (Initial Coin Offering).
In a traditional ICO, tokens are offered by companies for purchase as a form of crowdfunding. Purchasers can exchange their cryptocurrency for a specified quantity of the tokens on offer. It’s a little bit like buying shares.
When you buy tokens from ICO, you don’t get any of those rights or obligations. Your new “utility tokens” give you access to a specific network, platform, or service.
Participating in a Security Token Offering (STO) is same to participating in an ICO project. You can buy tokens during the offering that you can then trade, sell, or hold. However, since security tokens are actual financial securities, your tokens are backed by something tangible like the assets, profits, or revenue of the company.
Benefits for Investors and Founders
- Security tokens are regulated financial securities, the same way as stocks are. People dealing with securities don’t have to worry about transparency or regulations.
- Securitizing new assets is also one of the most important benefits. Tokens are unique in that that they can securitize various forms of assets including both tangible and intangible assets.
- Companies will be able to sell shares and profits through tokens, but without giving up special rights on the management of the company. This guarantee the founders greater control of the company.
- Private equity groups, funds and institutions are bound in scope to investing in regulated instruments, excluding them from the ICO market. Security token offerings due to their regulated nature are a natural entry point for traditional capital into the blockchain sector.
- Security token offerings as cryptographic tokens can be used to tokenise anything from debt to parking spaces, this flexibility permits smaller companies to raise significant amounts of funding from private capital markets at significantly lower up-front costs.
Security Token Offering, or STO is expected to grow up to 10$ trillion by 2020