Security Token Offering (STO)- The Resurrection Of ICO
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 Tokens
What 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.
Crowdfunding platform that involves security tokens is considered to be the STO’s.
Hope you now got basic ideas about Security tokens. Let’s tighten the security of ICO’s with security token offerings.