Previously, it would be very difficult to raise capital for a certain project, which is to go through detailed appraisal, evaluation of the project, go through capital raising rounds with many difficulties and when investors feel. If this is a good project, then the capital review will take place. Since the advent of cryptocurrency, raising capital for the project becomes easier, when investors (investors) sharks or individual investors through cryptocurrencies such as BTC, ETH, ... to invest in the project. judgment and this is called ICO
Research shows that the amount of mobilization in 2017 and 2018 from ICOs amounted to more than 13,7 billion USD, but nearly 90% of them were failed projects, including many virtual projects, massively selling oranges. extremely large, and lead to the loss of billions of dollars of investors. Although this is a very small number compared to traditional businesses, it has shown the very rapid development of the cryptocurrency industry.
Going back to the title, what is an STO (Security Token Offering)? What is the Difference Between an STO and an ICO? Is STO a new investment trend in late 2018 and early 2019?
What is STO?
STO, short for Security Token Offer called Security Token, which, according to investment funds, STO can be a new form of IPO when it has some similarities with traditional enterprises through a initial public offering (IPO). However, with the IPO, it is very difficult to do that because of the rules of the stock exchange. For example, when Bitmain prepares an IPO, they can prepare for a long time up to 2-3 years but it is unlikely to be accepted. With the ICO, the Investor can buy tokens during the offering (PriSale, Pre-Sale, Public Sale) and such tokens can be traded, sold or held. As for STO, the company will issue Security Token to investors, where these Security Tokens are secured by company assets, and are considered as legally binding investment contracts that allow investors to access shares. corporate share, monthly dividends or have a say in business decision-making.
Advantages of STO
To be more clear on the features of STOs, Blogtienao Please introduce the advantages and disadvantages of STO to help readers better understand it and help shape and calculate the possibility of future investments.
- Investors receive a token guaranteed by the asset, as it is the property of the company, is considered as a share, is dividends or has a voice in the company (just like stocks).
- STO will eliminate the disadvantages of ICO because it is strictly regulated and compliant with the law for securities assets.
- If the investor fails to comply with the committed schedule, he / she will be fined according to the provisions of the securities asset
- Improved, more flexible than the traditional financial business model when building on the blockchain helps reduce management costs, transparency and clarity.
- More easily accessible to investors, raising capital will be easier, and worldwide investors can buy and access projects more.
- The application of blockchain will help STO to reduce operating costs, management, ... thereby reducing the role of financial intermediary services to save significant costs for the project. Besides, due to the operation on Smart Contract (smart contract), the intermediary role of judging who is right and wrong, for example, legal services will gradually decrease, saving costs and time. (Maybe you should read it again What is blockchain If you do not understand Blockchain and Smart Contract properly)
You should pay attention to this section, because in addition to the advantages, the above disadvantages can be fatal knives if you do not understand STO, everything has its two sides, there are good ones also have The bad thing and sometimes because it has the good points is the bad point (understanding this is a little hard, hehe)
- At present, there are not any clear standards for assessing security tokens and the issuance of security tokens. Standards are defined by individual organizations, not by government agencies. So the protection of investors is very difficult. However, the SEC now has the first regulations on STOs.
- The intermediaries were removed to minimize costs but also increased the pressure so investors and investors alike.
- Because it is a security token, complying with securities regulations will reduce the development ability of Security Token.
- The benefits from Security Token are huge: Guaranteed by company assets, receiving monthly and quarterly dividends, ... Is the key for bad guys to circumvent the law, or build up Ma projects, Virtual project with a high interest rate, safe, ... attracts investors to sell oranges with the number of hundred pieces ... This is also the Blogtienao most afraid when there will be many new projects built to deceive investors.
The Difference Between STO Token and ICO Token
And here are the differences between STOs and ICOs:
- Narrow the gap between crowdfunding and regulation in blockchain.
- STOs are registered with the Securities and Exchange Commission (SEC) and they take advantage of the stock price exemptions and discounts as standard Reg A +. Therefore, they have many similarities with stocks. For example, the token provided in the STO gives investors some rights over the company or its issuer.
- Registering with the SEC is one of the ways that STO promises to bring more security to investors. This is due to the registration with fraudulent personal incentives, thus only allowing legitimate and serious projects on their pursuit. The registration process is similar to the registration process for initial public offerings (IPOs) and this is not only a positive step for investors, but also eliminates the main concerns. covered.
- Market experts are very confident in STOs and they believe the market capitalization will reach more than US $ 10 trillion by 2020. Compared to last year, ICOs have increased by nearly US $ 4 billion. ICOs may have dominated the crowdfunding market in 2017 but this year, the concept of STOs is expected to take place in a huge way by providing investors with safe investment opportunities. Many believe that it could eventually be the most sought-after solution to crowdfunding through the cryptocurrency market.
We already know what STO is, and the advantages and disadvantages of STO, as well as the difference between ICO and STO, to make this topic even hotter, if you are interested, I will introduce you to By the way, the reason for the appearance of STO, you guys read this section and just let know.
I will share with you an introduction video about STO, specific examples to help you better understand Security Token (Video Made by Moonradius)
The company behind the STO idea
The idea of ICO was launched around by one Startup Blockchain Is called Polymath headed by Trevor Koverko. This concept is expected to grow and grow rapidly because the crowdfunding market is looking for a better solution, and STO overcomes ICO-related issues. It also highlights the ongoing trend that regulators have been working with companies in the blockchain cryptocurrency market to create solutions that bring more order.
Regulations in this area are expected to encourage more investors to jump into such projects, thereby increasing the potential of many successful blockchain projects. Capital mobilization is often the major barrier standing in the way of success for many blockchain startchain. The STO concept is one of the best ideas to ensure that the blockchain community is self-regulating with government regulations. It's still a bit early to say but STO can be a highly anticipated solution that will end the conflict between regulators and the blockchain community.
Polymath is currently working on a decentralized protocol that will help companies to bring out their own stock tokens. The protocol verifies every encrypted address to ensure that investors meet the requirements necessary to invest in a particular security offer. Such restrictions will allow projects to be confident that their STOs will be held by serious and authorized investors.
Thanks to the advantages we have evaluated above that can be said STO (Security Token Offer) is likely to be a new trend in cryptocurrency investment in 2019Understanding the advantages and disadvantages is essential to understand when you are investing in a security token. In the near future, we will have more articles to evaluate in more detail about Security Token issuance projects as well as analysis, evaluation and comparison of Security Token in the cryptocurrency market. We wish the readers always support Blogtienao by sharing, or a like to encourage us more. Thank you!