What is security token offering?

 An initial coin offering (ICO) is offered to the investors who help raise money for capital which can be then invested in start-up companies. As start-ups offer lucrative returns for the investments done in them, some companies offer ICO instead of IPO to their investors.

However, due to the crash in the market which led to a huge chunk of wealth getting wiped off in the crash, the SEC stopped ICO and this led to the creation of security token offerings. The ICO weren’t compliant with regulations, which led to the birth of STO. Given below are the types of STOs:

1. Equity tokens

This type of token is an alternative to the traditional form of stock that you get when you invest your money in the market. The advantage of STO is that it is transferred to the buyer after they invest their money. The token is also stored in a blockchain network which helps in maintaining a proper record.

2. Debt tokens

Debts are offered for a short-term duration with higher ROI by investors to a company or a start-up. This loan is signified in the form of a debt token. This token can be saved in the blockchain, which is a form of a ledger that creates a record.

3. Asset tokens

Investors or companies that invest in firms are given asset tokens which signify their ownership stake in that firm. These tokens are stored with the investor in the digital ledger known as blockchain. This helps in keeping a track record of the transactions in case a fraud takes place.

This is all the information related to STO. If you are interested in purchasing STO, you should discuss it with your investment manager to get an idea about the what’s and how’s related to it.

Source :- What is security token offering?

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