What is STO?

Have you ever wonder what is STO (Security Token Offering). STO is a form of raising capital through the sale of tokens to investors. 

This form is somewhat similar to ICO (Initial Coin Offering). But it is different in that, in ICO or IEO, the coin/token does not represent any property or stock (tangible) of the project.

In STOs, tokens are security tokens (or security tokens). It can represent stocks, bonds, funds, real estate … of that project or company. Based on the amount of security tokens held, investors will receive dividends (dividends), profits (from the company’s operations), shares, or any other activity that generates profits of the company. judgment.

Thus, STO is somewhat similar to the traditional IPO, but tokens are issued by Blockchain, so it also has the advantages of Blockchain & Smart Contract, creating an advantage over both ICO and IPO.

What is a security token (security token)?

Security tokens or security tokens are tokens issued through the form of STO.

Security tokens are usually issued by specialized platforms (projects) that issue STOs like Swarm, Securitize, Lition, Own, Polymath.

A token is called a security token when the following conditions are met:

• The token must be a financial investment product.
• Investments must be brought to the company or organization.
• Investors expect to own that token for profit.
• Expected returns generated by a third party.

Features of STO

First, I want to talk about the problems of ICO:

• One of the drawbacks of the ICO form, or IEO The tokens sold are not tied to any value of the company.
• There are no binding provisions on projects calling for capital to be accountable to investors.
• Holders of multiple ICO tokens, or projects, can sell off, or push token prices without control or responsibility.
• It is also important that in the form of ICOs, investors are hardly protected by law. Typically, some ICO projects raise capital to flee the team, or brearish dump their token prices, causing damage to investors but no one takes the initiative.
  For example: Onecoin, GRX, Bitconnect, Regalcoin …

Therefore, STO was born to solve these problems.

Advantages of STO

STOs benefit both investors and platforms that issue STOs.

With investors (Investors)

• Minimize risks for investors:

Projects and companies issuing via STO must comply with the provisions of law. We can consider this as the first filter to eliminate fraud and scam projects.

Projects that issue STOs that fail to complete the Roadmap roadmap may be legally distributed.

Eg Blockstack is a project that has been approved by the SEC (US Securities Commission) to sell tokens under A + regulations (this level is just below the IPO).

• Voice of investors:

Owning a Security Token means that you own part of the project or company.

Therefore, it also represents the voice of investors, the more tokens they hold, the greater the influence of investors.

• Many investors can participate:

The traditional stock investment will limit the number of participants in different countries, as well as the minimum capital requirements required to get started.

But with the STO barrier, the distance, the geographical position will be removed. And it allows investors in many places with a small minimum capital to participate in various STO projects.

• Reduce intermediate costs, operating costs:

Because tokens are issued on Blockchain and use Smart Contract, it significantly eliminates intermediaries such as brokers, banks, as well as law parties.

• Increase liquidity:

Due to the elimination of the gap as well as the conditions for investment participation, many investors can access and trade. Therefore, create high liquidity for this market.

With the STO release platform:

• There is a standard framework for designing the foundation on which to develop suitable STO products. For example, Lition is a basic STO project that complies with the GDPR (General Data Protection Regulations) standard that the EU parliament has issued.
• Security Token will also bring the advantages of Blockchain but can be programmed through Smart Contract. This is superior to stocks, or traditional bonds.