From the day one of cryptocurrency invention, the entire system often volatiles and diverges into many frames. If you were residing in this industry for a long while you may realize the changes. The invention of cryptocurrency has rolled out a new financial eco-system, which resulted in an unexpected growth of cryptocurrency exchanges. By this way, people get trained to convert their money into digital forms and especially in encrypted form.
This dramatic growth of cryptocurrency trading and exchanges , pulled business freaks to check out what is ? and some business greeks started to utilized this ever-growing decentralized fund transaction assets for their business growth...Hence ICO invented (Initial coin offerings)
To give life to this digital crowdfunding model, ethereum were injected into the cryptocurrency industry with a separate Blockchain mechanism (which was entirely different from the Blockchain technology underlies by bitcoin).ICO Initial coin offering
ICO is just similar to IPO. ICO’s are invented to collect fund for startup and Blockchain projects. Here Investors are considered as shareholders, whereas they have been shared with digital tokens, through which they can claim their rewards for what they invest. ICO platforms have restricted the investor with a unique rule,(i.e) anyone who wants to take in part of the token sale has to pay with ethereum alone. This cause the ethereum market to gain gigantic growth, hence it becomes a heavy competition for bitcoin in a very short period. Ethereuem were played two vital roles, one as a “cryptocurrency”, and another one as a “Token”
Notably, the person or the company who launches their ICO has to properly deliver white paper which will completely describe the aim of ICO, and how they will handle after the success of ICO. Many ICO's have fulfilled all these basic norms, and have satisfied their investors with proper distribution of shares. But there were some exceptions!!!.
This exceptional ICO scammers where failed to prove the promise that they have said during the launch of ICO, and have absconded without properly distributing the share value of the tokens purchased by investors.
This continues to grow inside the industry…
And finally, people have miss understand that ICO’s are not a proper way to collect funds. Then ICO were locked into the black box of cryptocurrency industry.
To bring back ICO, there were many R& D processes were done by techies and Blockchain entrepreneurs. Finally, they got a clue. (ie.) Security TokensWhat are security Tokens?
After smart contracts, ethereum, and utility tokens the crown of cryptocurrency now powered with one more star called security tokens
Security tokens are considered to be the best remedy for wounds caused for ICO. What is actually a security token?
Tokens got split up and categorized into two.
1. Utility tokens
2. Security Tokens
A token that pays share profits, pay dividends and let the investor invest in other tokens are considered to be the security token. This kind of tokens will act as digital shares which are backed with tangible like assets, profits, and revenue of the firm.Why Security Tokens?
In the case of ICO, the entire crowdfunding model runs based on smart contract system, whereas the investor has to sign in an agreement before participating in the ICO. Many ICO’s will not clearly declare whether their tokens are utility tokens or security tokens, and finally, they could tell “ they were not sold security tokens, so you can’t claim this particular entity or profit.” To avoid these ICO’s have to clearly define in their smart contract, that the tokens sell are security tokens and so that the investor can claim for their shares.What are security token offerings?
As we said above it is just similar to ICO, But this is kind of crowd-funding model provides high-level protection for investors rights and reduce risks of issuers in regulating the token distribution. This is achieved by selling the Security Tokens.
Though the Two crowdfunding models are look alike, there are some significant differences.STO Vs ICO - The Difference In STO The issuer must comply with higher costs Because the this is a type of crowdfunding model which involves the placement of securities. Whereas ICO, Is just a crowdfunding model, which doesn’t require any security involvements. In STO Only professional investors can participate. Because the nature of STO is considering the investors as business partners. STO Sells Security Tokens, Whereas ICO Sells Utility Tokens Investors of STO have rights to claim the share of profits, But whereas in ICO, Investors can claim only the product or services after the launch. ICO’s are not regulated But STO’s are regulated. How STO's have gained more value than ICO's?
This is just achieved by its nature and the token entity which it sods during the crowdfunding. As we already discussed, STO Tokens have more security than ICO Tokens(I.e) The investors don’t have to provide any security, but the issuer must provide security in terms of profit, physical asset or with business shares.
If anything happens negatively for the investor during the crowd sale, Then he can claim it legally. But In the case of ICO, we could not claim anything if any scam occurred. Thus the STO favors solely to the investor's side, It gained more value than ICO among investors.How to launch STO?
As far as now, we have discussed STO from an end user (investors) point of view, which have covered the introduction of ICO, utility tokens, Security tokens, What are security tokens offerings, Difference between STO and ICO, and how STO have become top of the market. Right?
The remaining section of this article is gonna discuss Security token offerings from a business (issuer) point of views. The first thing is how to launch STOSteps to launch STO
1.Deriving the Strategies and Plan For STO
2.Focusing on what to do and what not to do
3.Compromising the regulatory issues
4.Deciding who can participate and who can’t participate
5.Backing up the costs for security placements
7.Fixing the issues faced by investors immediatelySTO Business Plan
It is not a simple task as you do like in ICO, Launching an STO will involve the gradual implementation of sequential processes. First and foremost, the issuer must know what he/she are going to do, How is going to approach the entire process. The issuer must define the right strategy before launching the STO.Write up what you are going to do with your STO, and make it as a document, finally wrap it up as a white paper. Before releasing the white paper, you must have complete some mandatory things. Which involves understanding the security laws which