What is STO (Security Token Offering)? Is it an alternate to ICO?

What is STO (Security Token Offering)? Is it an alternate to ICO? | Colan Infotech Private Limited

What is STO (Security Token Offering)? Is it an alternate to ICO?

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What is STO?

Raise of FinTech products

The way how people used to handle money is getting diversified. Unlike in late 90s transactions were carried out on papers, both as a currency mode & cheque. Once the Internet bloomed like anything entrepreneurs’ idea of investment started driving the world into a new age of transaction.

Succeeding new invasions allowed businesses to achieve substantial growth with online payments for direct goods selling.

That let to step into a new era where blockchain radically caused individuals to engage with concealed commerce transactions via cryptocurrencies. This has also evolved the way how traditional IPO into ICO operated by ventures with regulations.

Unlike the beginning hype for ICO, the present scenario is getting worse and most entrepreneurs lost millions without seeing ROI. Yet STO could be a compromising investment to those business owners seeking for cryptocurrency based investments.

What is STO?

STO technically stands for Security Token Offering, which is very similar to ICO (Initial Coin Offering). In ICO an investor is issued with a cryptocurrency to claim his investment.

Dissimilar to ICO, STO denotes an investment contract on behalf of assert on which the investment is made. And that assert could be a stock, funds & even real estate investment that is recorded on blockchain.

Why STO found?

ICO don't have to comply with the regulatory bodies and the coins purchased through ICO become utility tokens using which users get access to certain platforms and/or DApps for specific accomplishments.

This indeed clarifies that ICOs are just to utilize and not a perfect investment.

Whereas STO is quite difficult to float; as a purpose is to invest somehow covering security laws and have to strictly comply with regulations upfront.

Most importantly it's utterly impossible to utilize these tokens as did with ICOs and funds are collected from only authorized investors who have passed all eligibilities. Thus STO is more legitimate and attains investors trust.

Is it an alternate to ICO?

Comparable to ICOs STOs seems to be,

  • Negligible or very low risk
  • Enforces transparency & accountability
  • Easy to access true value of token
  • Simply cheaper as no middleman involved
  • Reduced paperwork with blockchain
  • Additional liquidity with 24*7 trading

These reasons define the reason to choose STO over ICO

Final words

Though STO has numerous benefits within, it becomes biggest demanding podium to step in. The administrative challenge to ensure whether investors satisfy security law in the entire process is seen as a burden as it involves Custodianship, ownership tracking, approving exchanges, KYC update, AML and lot more.

Compared to traditional IPOs, fixed costs involved in upfront work makes it costlier and creates roadblocks for entries as seen in ICOs.

If your motto is to get handsome ROI through FinTech investments, STO could be your next option if your ICO results are failed.

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