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The Ultimate Guide to Security Token Offering
Learn what is security token?, who’s using it, and the future of the security token offering platform and benefits STO.
Table of Content
Learn what is security token?, who’s using it, and the future of the security token offering platform and benefits STO.
What is a security token?
In simple term, security tokens can be explained as the cryptographic blockchain technology based tokens, which can express on-time economic values like preferred stock, shares, bonds, warrants etc. You own a part of the company by buying the relevant security token although you are not actually taking any ownership of the company. In terms of difference with ICO, we can say that STOs are the next generation of ICOs. They are mostly the combination of some change of ICOs plus the increased security. STOs are defined by the regulations, hence more are trustable. Most of the companies utilize security token to increase business values for numerous investors using these STOs.
Organizations that register an STO will have to submit documents that are publicly usable through the SEC (Securities and Exchange Commission) EDGAR(Electronic Data Gathering, Analysis, and Retrieval) database.
security tokens are based on Alternative Trading Systems (ATS) with mediator registered with the SEC and monitored by the FINRA(Financial Industry Regulatory Authority).
Most of the folks like investors, traders, business people will understand what the stock of the blockchain is, and security tokens will become an integral part of the global financial system.
STO are more secure for Investors
Token standards are uniform across various regions, which means tokens can be efficiently bought and traded by investors across the world. As such, STOs aim to appeal to a slightly different investor profile than stock markets. They often attract improvement from global investors looking to make a good return with greater liquidity, helping raise large sums quickly and to spread awareness of your business around the world.
STOs provide more rights to the Investors/traders
STOs are becoming more and more convincing for investors and companies to raise capital. It can offer many financial rights to investors, including shares, dividends, income shares, profit shares, voting rights, and other financial instruments.
STO Vs ICO - The Difference
In STO The issuer must comply with higher costs Because the this is a type of crowdfunding model which involves the placement of securities. Whereas ICO, Is just a crowdfunding model, which doesn’t require any security involvements.
In STO Only professional investors can participate. Because the nature of STO is considering the investors as business partners.
STO Sells Security Tokens, Whereas ICO Sells Utility Tokens
Investors of STO have rights to claim the share of profits, But whereas in ICO, Investors can claim only the product or services after the launch.
ICO’s are not regulated But STO’s are regulated.
HOW STO'S HAVE GAINED MORE VALUE THAN ICO'S?
This is just achieved by its nature and the token entity which it sods during the crowd-funding. As we already discussed, STO Tokens have more security than ICO Tokens(I.e) The investors don’t have to provide any security, but the issuer must provide security in terms of profit, physical asset or with business shares.
If anything happens negatively for the investor during the crowd sale, Then he can claim it legally. But In the case of ICO, we could not claim anything if any scam occurred. Thus the STO favors solely to the investor's side, It gained more value than ICO among investors.
Benefits of STOs
There are three main benefits provided by STOs as follows:
- Preferable liquidity options
- Reduced cost against IPOs
- Segmented ownership
Preferable Liquidity Options
Fully licensed exchange platforms will now soon be available for security token trading. This will automatically increase trading confidence because of the added credibility. Since a real-world asset can be represented via security tokens, it will enable investors to liquidate security tokens against any product.
Reduced Costs Against IPOs
In the non-crypto world, only a few of companies go public because that progress needs a lot of money in the first place. As such, investors have the option of buying the shares of a very few companies.
However, STOs, on the other option, can be started right away since they are a lot cheaper than public companies. They reduce costs by completely removing all the inter mediators. Also, having more STOs will allow more folks to invest in the shares of more companies.
Segmented Ownership
Security tokens will make high-priced assets a lot more accessible for the normal people. Security tokens can easily segment an asset into smaller sub-divisions making it possible for an investor to own a fraction of the asset instead of the complete product.
For now, the crypto space continues to grow as the benefits of blockchain technology continue to be better understood by traditional investment companies.
If you want to launch your own STO, then get free consultation from our STO experts.
