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Security Token Offerings: STOs Replacing ICOs?

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Security tokens offerings (STOs) are a regulated one and could possibly be the next big thing to be used as a tool to raise funds from the public.

The term initial coin offerings (ICOs) have become a synonym with mostly unregulated cryptocurrency market. As a result, there is skepticism that it is not a regulated one thus posing increasing risks. On the other hand, security tokens offerings (STOs) are a regulated one and could possibly be the next big thing to be used as a tool to raise funds from the public. The startups have always looked for funding from different segments such as angel investors, Crowdfunding and venture capitalists for their businesses.

 

New Method

In the last three years, a fresh method of funding has come into force, and different startups have even used a whitepaper in certain cases to raise funds. This was called as an ICO. The last three-year period has seen the ICO market generating $13 billion of money. Significantly, half of them came in the current year alone after the cryptocurrency market has hit dizzy heights in December 2017 when nearly all the coins have touched their life-time highs.

However, even the amount raised in 2018 is only a small piece for digital coins if the conventional stock markets are taken into consideration. At the same time, the ICO market is growing at a rapid pace since the blockchain-based startup could easily raise money simply by demonstrating a white paper before investors. These promoters supply tokens instead of shares to investors as they are launched from platforms such as EOS, NEO and Ethereum. The primary gains of using the distributed ledger technology (DLT) platform is the potential of including smart contract to execute terms.

 

Exchange for Products

The ICOs issuing tokens meant that investor will not get any equity or another form of asset. On the other hand, any digital coins or tokens issued would be exchanged for any future products or services from the company. There are some countries that are identified as preferred destinations for launching ICOs due to the favorable atmosphere. They are mostly either dApp or utility tokens only.

Despite significant fundraising exercising from the ICOs in 2018, the overall cryptocurrency market is in doldrums in the absence of clarity on regulations and treatment of it. The weak and continuous drop in sentiments on the virtual assets has only led to massive losses to investors. Significantly, 99 percent of the ICOs witnessed a loss after their highs.

 

STOs Backed By Asset

As investors started realizing the gamble of investing in ICOs, a fresh form of fundraising through STO has emerged for startups. There are some similarities with that of a conventional business launching an initial public offering (ICO). STOs, which is normally approved by the Securities and Exchange Commission (SEC), is backed by assets and legally binding investment contracts. As a result, it offers investors access to the company’s share of voice in the decision-making process.

The primary difference between the ICO and STOs are that while the former has failed to provide any rights to investors, the latter provides enough rights that are much similar to IPOs. In short, the misgivings that exist in ICOs will be removed from the STOs. On top of this, it removes any scam projects since it needed to comply with the regulations. Because of the surveillance, STOs are better served for investors compared to ICOs.

#Ethereum

Which Ethereum Testnet To Use?

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An Ethereum testnet is used by developers to test and run their dApps or contracts on the Ethereum network, before making them live.

An Ethereum testnet is used by developers to test and run their dApps or contracts on the Ethereum network, before making them live on the original Ethereum chain. We will explore different testnets available on Ethereum.

Be careful when connecting to a testnet, as any address or token working on Ethereum will also work on the testnet.
If you don’t pay attention, you can accidentally send tokens or real Ethereum to a testnet.

Ganache & Infura

Ganache is your personal Ethereum blockchain, which is useful for testing and interaction with your contracts during development.
Infura by ConsenSys is an infrastructure that provides access to several Ethereum networks and IPFS.
Infura can be used to distribute smart contracts to the mainnet, as well as Ropsten, Rinkeby, and Kovan.

Ropsten supports both Geth and Parity, two types of Ethereum node software implementation, allowing developers to create two different angles of the project they are testing.

Infura allows you to send signed Ethereum transactions over the Internet to the Rinkeby testnet, and the implementation of contracts is just another type of Ethereum transaction.
You can also use your Ethereum address to get a list of all the transactions you have sent.
Ethereum’s addresses can contain very, very large amounts of money and their private keys must be kept in place.

Geth is a CLI ( CLI ) command line interface that communicates with the Ethereum and acts as a connection between your computer, hardware, and other Ethereum or networked computers.
Mining in the real or Main Ethereum blockchain is quite difficult and requires specialized equipment such as special GPUs.

In principle, many languages can be compiled up to the byte code used by the Ethereum VM, but in practice, almost all intelligent contracts are written in the “Ethereum – indigenous” language called Solidity.
Reminder: “the web frame called a Node” and “an ethereal Node” are two completely different uses of the same word.

If you want additional security by running two different implementations in parallel or if you are serious about extracting the GPU, then the C ++ “ETH” client is for you.

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#Explained

ICO vs STO, Are Security Token Offerings Different?

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STOs are becoming more and more convincing for investors and companies to raise capital.  Securities can offer many financial rights to investors.

The initial coin offering ( ICO ) is the first, most frequently used and fastest way to finance a blockchain project without intermediary, at least in 2017 – 2018.
The STO can be compared to the IPO, where the tokens are treated as real securities.
With the increasing number of fraudsters in the ICO universe, as well as the strong desire of governments to control Israel’s deregulated crowdfunding campaigns, regulators such as Securities and Exchange Committee ( SEC ) were unhappy, and they could not leave aside.

Such smart contracts also allow for the production of nonfungible tokens ( such as ICO tokens ) or non – fungible tokens ( such as cryptocurrencies ) on the durable, battle-tested blockchain of Ethereum.
In contrast to ICOs, STO tokens are usually supported by a known element, such as assets, shares, income or profits.
In addition to the high initial legal and compliance costs, the other major drawback of STO tokens is that large cryptocurrency exchanges such as Binance do not yet support them.

 

STOs are more transparent than ICOs

One result of the need for change is the increase in sales of collateral tokens ( STOs ), a more transparent investment vehicle.
Primarily, a security sign represents an electronically packaged interest or a share in a private interest or company – and can be extended to assets such as real estate, trusts, LLC, fine arts, etc.
Often, securities are given the right to a form of equity or ownership of a particular asset, whether fractional or whole and to expect profits through income, dividends or favorable price movements.
Companies can offer digital security tokens for a variety of assets that are otherwise illiquid, while investors can buy lower – risk securities in their preferred investments.

 

Utility Tokens and Security Tokens

In contrast to Utility tokens, Security tokens can be backed by corporate assets such as shares, voting rights or other rights to a real asset.
For example, if company X, which turns out to be a very successful mutual fund, moves 5 million dollars into a free chain STO, the resulting hype about buying and investing would be unprecedented.
Not only is it illegal to manipulate the market, but it also discourages institutional investors, such as Company X, from investing in such projects, because their total investment will be readily visible to the public.

Companies that register an STO will have to submit documents that are publicly available through the SEC EDGAR database.
Sto’s security tokens are based on Alternative Trading Systems ( ATS ) with intermediaries registered with the SEC and monitored by the FINRA.
More and more people will understand what the stock of the blockchain is, and security tokens will become an integral part of the global financial system.

Elsewhere in Europe, the financial industry, traditionally focused on fiat, is beginning to support cryptocurrencies as securities.
Regulators, the financial industry and many cryptocurrencies are slowly developing a common understanding of what blockchain security should look like.

 

STOs are more secure for Investors

STO has achieved this level of security, which IPO has, as well as the relative simplicity and accessibility that is inherent to ICO.
To have a convenient opportunity to view the list of all current ICOs in one place, particular aggregator sites have been created, called ICO trackers.
The following data is analyzed to create an estimate of this parameter: advertising of the development team, White Paper, the availability of a work test product, the reputation of consultants and partners, etc.
Detailed information on ICO projects can be found on larger sites, and some services can easily publish WP by linking to the official project source.
There are a lot of fraudsters on the ICO market, which you can find on specialized services – ICO trackers.
In short, and simply put, the definition of a hard fork is a significant upgrade of an existing cryptocurrency in which a new currency is created.

 

STOs offer more rights to the Investors

In theory, the symbolic economy can improve network effects by rewarding user involvement and even better governance by giving the most active users a more significant influence on future protocol decisions.
Some traders earn their living by doing so with the public market share, and the behavior of investing is one of the driving forces behind the current cryptocurrency market.
Stos are usually granted an exemption called D 506 ( c ), which is a public offering of securities to accredited investors ( each person with net worth 1 million dollars plus or annual income of 200, 000 or more dollars over the last two years – 300, 00.

STOs are becoming more and more convincing for investors and companies to raise capital.
Securities can offer many financial rights to investors, including shares, dividends, income shares, profit shares, voting rights, and other financial instruments.

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Adoption

ICO: Microsoft helping Initial Coin Offerings

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A cloud computing service which is created by Microsoft, called as Microsoft Azure has recently listed ‘Stratis’ in its product's section.

For those who don’t know what is ICO, It is an Initial Coin Offering, which is also referred to as an ICO. It is a fundraising mechanism in which exchange for Bitcoin, Ethereum or any other cryptocurrency is done by the new projects to sell their underlying crypto tokens. Which is also alike to an Initial Public Offering (IPO) in which investors purchase shares of a company. It has also become a dominant and a hot topic to be discussed upon.

But the popularity of ICOs somewhat decreased, this doesn’t mean that they are dead or are vanished especially not when one of the world’s biggest and largest technological corporation is bringing it up. Yes. It is none other than THE MICROSOFT.

A cloud computing service which is created by Microsoft, called as Microsoft Azure has recently listed ‘Stratis’ in its product’s section. Stratos Group, which is based in London has created a platform that offers a web-based application which enables initial coin offering projects to manage the distribution of the tokens. It also facilitates a secure and flexible payment route that participants use to purchase ICO tokens ahead of the initial allocation. They pay with either Bitcoin or Strat, which is Strati’s native token.

This additional service allows and helps ICO participants to convert their fiat money or cryptocurrencies into Strat smoothly.

 

Easy Management:

When Microsoft came into the industry of ICO, it slowed down the growth in the sector of cryptocurrency. Late in the year of 2017, when the crypto was at its boom period, ICO projects were raising billions of dollars at their ideation stages. People started to buy tokens and started to believe that ICO would become the next Bitcoin or Ethereum. In spite of this, most of the ICO projects failed to turn up to a practical business model and at the very same time, many of them disappeared with investors’ money.

 

The managers of the ICO all over the world took major steps to limit scammers’ access to potential investors. The US Securities and Exchange Commission has started its most serious suppression against the startups that were selling tokens illegally. Similarly, in South Korea, the Financial Services Commission (FSC), banned the ICOs.

 

In spite of this, with Stratis, it seems like Microsoft is serious with regard to the scammy nature of ICO.

 

In the due course, Microsoft Azure should be looking to draw into more professional ICO market.

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