Jan 26, 2019 09:30 UTC
Jan 26, 2019 at 09:30 UTC
Will Security Token Offerings (STOs) Dominate in 2019?
Are you wondering if Security Token Offerings will dominate in 2019? In this article, we tell you all about what STOs are and if they are going to trump ICOs as the preferred method of funding.
Till now, Blockchain-based projects have been funded through ICOs. Initial Coin Offering is an innovative crowdfunding method that enables people from all over the world to invest in any project by purchasing the project’s specialised crypto coin. Do you ICOs are quite different from IPOs? Do read our article titled Major Differences Between ICOs and IPOs to further your understanding.
Even though during their heydays, ICOs were able to raise massive amounts of money, however, the number of scams that were run in the name of Initial Coin Offering eventually led many people to lose their hard earned money.
Consequently, to protect the general public from such scams, the regulators around the world decided to enforce regulatory frameworks around ICOs.
In today’s world full of false promises and abandoned projects, STOs come as a breath of fresh air.
Will STOs be the next crowdfunding method that will take the Blockchain industry to new heights? Let’s see.
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How are STOs different from ICOs?
An STO encompasses financial securities that are issued as digital assets. These digital assets represent proprietary rights in a firm.
How this is different from Initial Coin Offering is that the tokens offered in an ICO are utility tokens. These tokens do not represent any stake in the firm, and they are only usable once a project is executed successfully to its launch.
How are STOs better than ICOs?
While fundraising through ICO’s focused on bringing in the necessary investment, however, what it did not take into account was if the funds collected were actually being deployed into the development of the proposed business model.
This is where STOs fix the loophole. By complying with the regulations laid out by regulatory bodies, Security Token Offerings ensure that the securities offered are not only transparent and transferable but also liquid.
You may also read: 10 Differences Between Ethereum And Ethereum Classic
What is a good example of STO?
Kinesis.money is backed by precious metals as security. The tokens issued are based on silver and gold. The allocation ratio is 1:1. Here 1 token equals 1 billion.
When you purchase a Kinesis token, you are allocated a silver or gold bullion. These bullions are stored in secure third-party vaults all across the world to eliminate ant counterparty risk.
You may also read: 10 Reasons To Buy Bitcoins In 2018
When it comes to investments in crypto, STOs are low risk. It is because of the fact that in comparison to ICOs STOs have more diversity in the tokens.
While STOs are definitely an enhanced version of ICOs, however not everyone will find them to be the best way to raise funds.
Since the STO market is still emerging, hence we do not really have insights or historical trends to forecast how they will fare in the future.
Another issue with STOs is that since the market is not completely decentralized, hence regulators have the potential to influence markets with their decisions.
Let’s wait and see what the future has in store for STOs and if they will be able to live upto the expectations of the community after the ICO debacle.
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