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The Future of Security Token Offerings

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  • The Future of Security Token Offerings

    Any innovation in any field is bound to go to its ups and downs. When blockchain technology made its entry into the world of investments, it had to experience its crests and troughs. They were the different manifestations of blockchain-powered investments. The first and the most famous among those methods of raising investments was the Initial Coin Offering, commonly abbreviated as ICO.

    ICO - A Brief History:

    MasterCoin conducted the first ICO in June 2013. Ever since then, a lot of ICOs have been successfully conducted, including Ethereum, which raised $2.3 million in a span of a few hours.

    By 2017, ICOs had become a buzzword in the world of investments and cryptocurrencies. In May 2017, the Brave browser generated about 35 million dollars in under 30 seconds, showing the power of ICOs. There were 18 different websites dedicated to tracking ICOs in 2017.

    The ICO boom had triggered the introduction of a lot of new tokens in the market. Some of the tokens were accepted universally while some of them were not. This element of ambiguity on the validity and value of the tokens was one of the many factors that contributed to the intensity of the need for another method of crypto fundraising.

    The increased instances of scams had shattered the image and the growth possibilities of ICOs. Some of the projects funded by ICOs - such as the world's largest aquarium - did not make any business sense.

    Despite all of this, ICOs had heralded a new method of fundraising, which did not require any intermediaries but was secure at the same time.

    Enter Security Token Offering

    Security Token Offering or STO, as it is commonly abbreviated, represented the new way of raising funds. ICOs offered utility tokens that entitled the user to access a product or service. However, STOs offered security tokens but were backed by actual real-world assets.

    The tokens offered in an STO entitles the user to voting rights or a share in the company. ICOs are conducted with utility tokens and Initial Public Offerings (IPOs) with securities. STO is a combination of both. In short, STO did to the world of crypto investments what iTunes did to the world of digital music.

    STOs brought to the world of cryptocurrency investments, the orderliness, and the compliance associated with regulations.

    The Rocky Beginnings of STO

    While the advantages brought about by STO looked promising, it wasn't a great beginning for them. It is often said that something that tries to be both ends up being none of both! This is what precisely happened with the STO. The United States Securities and Exchange Commission (SEC) had made it quite clear that any functional utility token sold with the expectation of profits was a security offering. This might look like a welcome move, but the International Security Regulators made it impossible for the security tokens to be listed on crypto exchanges.

    As the SEC started to uncover the frauds associated with ICOs owing to non-compliance, STOs presented themselves as amazing opportunities that create a perfect convergence of traditional securities and the advantages of blockchain. STOs are considered an important milestone in the history of both crypto tokens and Investments.

    The vestiges of resistance for STOs can be found even today! A lot of old school cryptocurrency pundits believe that anything to do with crypto has to be decentralized and should be outside the control of the government.

    The Advantages That STOs Bring

    STOs have opened new avenues for companies to find investments. It has contributed to the liquidity and tradability of the invested company. They provide the liquidity benefits of cryptocurrency and the protection of investor interest similar to traditional security.

    For companies seeking to raise investments, this is an amazing avenue. If you intend to establish a large capital, a Security Token Offering could be the best path for you to take.

    STO is best for your organization if you:
    • Desire enhanced liquidity for your investors.
    • Generate revenue of more than 10 million dollars annually.
    • Are an elevated growth company.
    • Are operating your business globally.
    • Are issuing a transferable asset.

    As discussed earlier, STOs offer a better value than ICOs because the investors receive actual stakes in the business or the project or the assets. STOs not only focus on bringing in funds but also on productively utilizing the capital by getting a consensus system up and running. STOs, ensure that they are in compliance with regulatory bodies and bring in an element of assured transparency.

    Before you dive...

    STOs present a lot of advantages, yes, but they might not be the best fundraising options for everyone. Creating an STO is an arduous process and it involves partnering with a trusted company to create your security tokens.

    In spite of all of this, it is only believed that come 2019, STOs will be the order of the day when it comes to crypto Investments. It is only for time to answer the intensity of the success of STOs, although success is assured.

    If your company stands to benefit from STOs and would like to launch your own STO, just drop in a line to Blockchain App Factory. Our experts will take care to create a perfect security token that is in line with your asset and with the regulatory requirements.