An STO is a Security Token Offering, similar to a stock offering but represented by tokens on a blockchain rather than certificates in a traditional market. The water is still murky, as government officials scramble to understand what the blockchain is, but even though it is like finding a needle in a haystack there is such a path.
Blockchain developers keep their fingers crossed, hoping that government’s do not move with a heavy hand in regulation, potentially squandering innovation.
The STO technology could be a big step towards getting traditional financial assets onto the blockchain. Platforms like INX are working on making this technology available for institutions bridging into crypto.
What Are STOs and How Do They Work?
The key aspect to understand is an STO represents a stake in an underlying security. Whether that security is profits, bonds, shares, or revenue depends on the token.
The STO came after the initial ICO craze. Both are used to fundraise projects or companies, but the ICO is far less regulated. The fear of an unregulated path holds companies back from choosing it, though they shouldn’t dismiss this option because one company is already working under SEC regulations: INX
This could come to benefit investors as there is improved clarity on what it is they are purchasing; the ICO has been plagued with many scams and rug pulls. This could help rid the crypto space of grifters and bad actors who look to take advantage of investors for a quick dollar.
Benefits of STOs
There are a couple of benefits of STOs; they are:
- Improved clarity on what is being purchased
- Clearer regulation
- Increased difficulty for scams to take place
While there are clear benefits, there are many in the space who do not like the STO. This is because it is a step back from the old system. The original purpose of crypto, at least with Bitcoin, was unregulated money out of the hands or control of government corruption. An STO returns power to these forces.
This blockchain…
