‘Security’ and ‘Token’, the crypto space tried to keep these two terms far away from each other for a long time but the situation is changing day by day. The previous algorithm for generating tokens, ICO was spotted by SEC and SEC i.e. socio-economic classification clarifies that most of the projects of ICOs were similar to the securities, therefore, these projects must follow the regulations. This statement was the foundation of the beginning of another token offering algorithm, known as STO i.e. Security Token Offerings.
In this article, we will discuss what is a security token, how it works. We will also discuss security token platforms and how to launch an STO.
In simple words, security tokens can be defined as the cryptographic blockchain technology based tokens, which can represent real0time financial values like shares, bonds, warrants etc. You own a part of the company by having the security token even though you are not actually taking any possession of the company. In terms of difference with ICO, we can say that STOs are the next generation of ICOs. They are basically the combination of some modification of ICOs plus the additional security. STOs are bounded by the regulations, hence more are trustable. Several organizations utilize security token to increase values for several investors using these STOs.
The main aim of security tokens is to increase the money for the related organization, no matter a startup or a well-settled company. In this competitive world, no of companies evolving day by day is very high. If there are so many new companies, how the internal financial market would be capable of investing in them. This was the case for which earlier ICOs were evolved. Similarly, security tokens also work in the same fashion. They can also be used to tokenize the real financial assets. With the evolving crypto space, the scope of security tokens has also increased significantly.
In upcoming days, security token offerings i.e. (STOs) would completely replace its competitor. There is more fluidity in the security tokens as compared to ICOs. There are a lot of security token platforms which assist in investing or launching a new STO which we are going to discuss later.
It is not easy for a person individually to set up and launch an STO. The decentralized exchanges of the crypto world make it much difficult. To avoid these kinds of problems, there are various security token platforms which assist in this field. A security token platform helps in the problems related to ease and stability with which a security token could be sold or purchased in the crypto space. Currently, this problem of liquidity is the main problem which is restricting a huge mass to adopt security tokens.
These platforms erase the complexations of the process of issuing of the security tokens. A security token platform would help you in issuing these tokens and also assist in completing all the legal regulations that are required to be approved by SEC in order to use the security tokens. They would also assist in the process of selection of a proper provider of KYC for your security tokens.
There are various security token platforms available in the market such as Polymath, tZero, Swarm, Harbor, Securrency, and Securitize.
People are often confused about the steps that need to be taken in order to launch an STO. In this section, we tell you the process of launching an STO.
Create a document which includes all the important point related to your business such as the idea, targeted technology etc. It is an essential document in launching an STO. This document is used to get the details of your product by the investors.
Go through and understand the legal regulations of STOs: Before proceeding, you must understand the legal regulation of the security token. You must understand whether your project and product are compatible with these rules or not. If yes, you could continue to further steps.
The next step is selecting the market exchange for your STO. The exchange would assist you in knowing whether you are capable of launching a specific security token or not. They would also validate some of the regulations of investment in STO.
Use a cryptosecurity token platform to set up your STO. As mentioned earlier in this article, there are various platforms which help you in the issuance of the security tokens as well as all the legal paperwork for your STO, you can choose either of them. Polymath is one of the popular such platforms to set up your STO.
The last step is marketing your STO. Although it is not a part of investing in an STO, you should always look at the ways to create the buzz regarding your invested STO. It is relatively easy to market an STO as compared to an ICO.