The initial coin offering ( ICO ) is the first, most frequently used and fastest way to finance a blockchain project without intermediary, at least in 2017 – 2018.
The STO can be compared to the IPO, where the tokens are treated as real securities.
With the increasing number of fraudsters in the ICO universe, as well as the strong desire of governments to control Israel’s deregulated crowdfunding campaigns, regulators such as Securities and Exchange Committee ( SEC ) were unhappy, and they could not leave aside.
Such smart contracts also allow for the production of nonfungible tokens ( such as ICO tokens ) or non – fungible tokens ( such as cryptocurrencies ) on the durable, battle-tested blockchain of Ethereum.
In contrast to ICOs, STO tokens are usually supported by a known element, such as assets, shares, income or profits.
In addition to the high initial legal and compliance costs, the other major drawback of STO tokens is that large cryptocurrency exchanges such as Binance do not yet support them.
STOs are more transparent than ICOs
One result of the need for change is the increase in sales of collateral tokens ( STOs ), a more transparent investment vehicle.
Primarily, a security sign represents an electronically packaged interest or a share in a private interest or company – and can be extended to assets such as real estate, trusts, LLC, fine arts, etc.
Often, securities are given the right to a form of equity or ownership of a particular asset, whether fractional or whole and to expect profits through income, dividends or favorable price movements.
Companies can offer digital security tokens for a variety of assets that are otherwise illiquid, while investors can buy lower – risk securities in their preferred investments.
Utility Tokens and Security Tokens
In contrast to Utility tokens, Security tokens can be backed by corporate assets such as shares, voting rights or other rights to a real asset.
For example, if company X, which turns out to be a very successful mutual fund, moves 5 million dollars into a free chain STO, the resulting hype about buying and investing would be unprecedented.
Not only is it illegal to manipulate the market, but it also discourages institutional investors, such as Company X, from investing in such projects, because their total investment will be readily visible to the public.
Companies that register an STO will have to submit documents that are publicly available through the SEC EDGAR database.
Sto’s security tokens are based on Alternative Trading Systems ( ATS ) with intermediaries registered with the SEC and monitored by the FINRA.
More and more people will understand what the stock of the blockchain is, and security tokens will become an integral part of the global financial system.
Elsewhere in Europe, the financial industry, traditionally focused on fiat, is beginning to support cryptocurrencies as securities.
Regulators, the financial industry and many cryptocurrencies are slowly developing a common understanding of what blockchain security should look like.
STOs are more secure for Investors
STO has achieved this level of security, which IPO has, as well as the relative simplicity and accessibility that is inherent to ICO.
To have a convenient opportunity to view the list of all current ICOs in one place, particular aggregator sites have been created, called ICO trackers.
The following data is analyzed to create an estimate of this parameter: advertising of the development team, White Paper, the availability of a work test product, the reputation of consultants and partners, etc.
Detailed information on ICO projects can be found on larger sites, and some services can easily publish WP by linking to the official project source.
There are a lot of fraudsters on the ICO market, which you can find on specialized services – ICO trackers.
In short, and simply put, the definition of a hard fork is a significant upgrade of an existing cryptocurrency in which a new currency is created.
STOs offer more rights to the Investors
In theory, the symbolic economy can improve network effects by rewarding user involvement and even better governance by giving the most active users a more significant influence on future protocol decisions.
Some traders earn their living by doing so with the public market share, and the behavior of investing is one of the driving forces behind the current cryptocurrency market.
Stos are usually granted an exemption called D 506 ( c ), which is a public offering of securities to accredited investors ( each person with net worth 1 million dollars plus or annual income of 200, 000 or more dollars over the last two years – 300, 00.
STOs are becoming more and more convincing for investors and companies to raise capital.
Securities can offer many financial rights to investors, including shares, dividends, income shares, profit shares, voting rights, and other financial instruments.