STO: Understanding Security Token Offering

What is a Security Token Offering?

It all starts with the Bitcoin revolution, and the idea of the Blockchain that distributes trust across the network and secures its transactions. The geeks are inspired by the new technology, whose alternative blockchains are emerging, offering new features. Everyone then goes for their own blockchain.

Initial Coin Offering

Initial Coin Offering (ICO) has emerged in 2018 as a credible and sustainable alternative to traditional fundraising .The Initial Coins Offering is an innovative model of crowdfunding that allows new businesses to bypass traditional investments. In 2017, ICOs raised over $ 4 billion in capital and completely baffled conventional finance. Due to the ICO’s fundraising model, new companies can raise capital by issuing crypto tokens on a blockchain, most often Ethereum, which they sell to investors who expect in return for greater value on their investment.  Unfortunately, some crooks have tried to take advantage of this fact by diverting this funding model. The market was quickly saturated with blockchain solutions with no added value, impacting public confidence and impacting quality projects.

The prices of almost all alternative coins and cryptocurrencies have miserably dropped, and their activity (number and volume of transactions) also, with no signal of a hope of coming back. Therefore, there have been too many devastating ICOs in which investors throw away their money without realizing that they are actually investing for nothing. And that by dint of lies and false promises, investors begin to be wary. Then now, we have STO.

Security Token Offering

STOs are cryptographic tokens that fully comply with the requirements of the securities laws, thus offering their holders rights to the issuing company. Indeed, it is in particular following the decisions and comments of the SEC (Securities and Exchange Commission), a US entity responsible for the regulation of the Stock Exchange in the United States, that various tokens have been compared to the classic securities. In other words, STOs are tokens that are backed by tangible assets in real time. These tokens are not traded on traditional trading platforms, but fully adhere to the regulatory framework defined by the SEC.

Does STO mean the end of ICOs utility tokens type?

Actually, it doesn’t, because ICOs remain an innovative means of raising funds and they will prove perfectly suitable for mature projects, supported by an experienced management team benefiting from an existing community.This market just remains immature and is in full structuring.

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