Benefits of Replacing ICOs with STOs
A study by financial research firm Autonomous Research has revealed that investments in initial coin offering (ICO) have declined by 90 per cent since January 2018. The decline can be attributed to the pressure from SEC and several ICO fraud cases including high profile ones. Security token offering (STO) is a more secure, simple, and legitimate alternative to ICO. Here’s how –
STO based crowdsale is insured by smart contracts, cryptography or distribution registry to ensure secure transactions
Issuers and investors have to allocate limited time and money to fulfil STO requirements
The legitimacy of indulging in STOs is established due to the fact that issuing entities have to be registered with the SEC
STOs have therefore risen steadily in popularity.
Blockchain platform polymath experts concluded that investment volume in security tokens will reach $10 trillion by 2020.
Our blockchain team at Oodles Technologies provide STO solutions as per ERC-20, 721, and ST-20 tokenization standards to empower investors by providing financial rights including dividends, equity, or buy-back. Our blockchain experts are proficient at using technologies like EOS, Ethereum, and Stellar to develop STO solutions.
Let’s explore the key benefits STOs can provide to businesses –
1: Intrinsic Value
Utility tokens do not have a value of their own. They are only designed for accessing a product service in a blockchain platform. Whereas security tokens are digital certificates, providing access to
Company’s share or property
Direct or indirect participation in the management of the company
Physical or virtual assets: oil, money, cocoa beans etc,
A company’s profit share
All the above-mentioned assets have an intrinsic value for their holders and are easily marketed without involving provider or issuer to participate in the process of generating profit. Security tokens hold a great significance in offering investment benefit to their holders. These assets are efficient and do not blind a useful resource.
2. 24/7 Liquidity
Security token makes liquidity of traditionally illiquid assets possible. Current securities required few days for settlement and can be traded only on weekdays from 9-5. Blockchain technology divides the assets into thousands or millions of digital certificates, enabling quick and easy settlement of the utility tokens. On contrary to traditional investments, investors receive full liquidity on their assets when utility tokens are exchanged in the secondary market.
3.Fully Traceable and Transparent
Security tokens are designed and offered with regulatory compliance. STO’s are registered under the SEC and give investors access to company information like management structure, assets state, risk of investors, and financial results. Investors can conduct their own investigation to verify the fairness, professionalism, and efficiency of the issuing company. Conducting an investigation will provide the following benefits:
Sensible capital accumulation
Preventing investors from frauds and inefficient companies
Security tokens offer transparency to stakeholders and markets by giving them access to trace who and for how long they owned the tokens.
4. Fractional Ownership
Fractional ownership reduces the risk of investors by divesting their money to multiple properties. With security token offering, investors can fractionally own a small part of a building in one area and another part in a different area. Making the investments highly liquid, give investors other options to invest securely.
Investors can feel confident to invest with STO because of the high level of security they provide. Whereas the market for ICO is expected to disappear owing to the risks associated with them.
Moreover, STO’s liquidity is high as compared to ICO, giving investors a quick and easy settlement of their tokens. Investors receive full liquidity on their assets when utility tokens are exchanged in the secondary market.
Are you planning to get security tokens developed for your business? We are a security token offering development company that develops highly secure utility token using blockchain technology. We enable entrepreneurial businesses to raise capital with our secure and legally compliant STO development services. Get in touch with our blockchain team to get highly secured tokens which augment fundraising activities.