How To Create a Security Token For Crypto Crowdfunding?

security token development

Over the past few years, most technologies like Artificial intelligence, Internet of things (IoT) are rising globally. Similar to these technologies, blockchain technology is becoming more popular and it has been incorporated into various industries. All the digital information can be stored securely in the blockchain. As all the blocks are connected in the blockchain, no data can be hacked and altered.  Analogous to digital information, all virtual currencies are referred to as cryptocurrencies. Cryptocurrencies work on blockchain technology. Crypto coins are developed under a self-reliant blockchain. It is considered the native currency of the blockchain. 

Crypto tokens are created under the token standards of the existing blockchain. For instance, ERC20 tokens are created under the ERC20 standard of Ethereum blockchain. There are various crypto tokens available in the crypto marketplace. Crypto tokens are generally divided into utility tokens and security tokens. Utility tokens are service-based tokens that provide the user access to the products. Utility tokens are used for crowdfunding. Now, a doubt may arise in your mind regarding the creation of a security token. The name itself explains that they are secured.

In this article, we’ll discuss the security tokens and creation process in detail.

Come, let us begin with…

What is a Security Token?

Security Tokens are the unique virtual assets that are ruling this digital world. These security tokens are considered to be completely secure since they pass the Howey test. Also, they are built in compliance with the country’s regulations. Security Tokens usually derive value from real-time assets. There are some real-time assets backed in security tokens, such as real estate, bonds, or any other real-time assets. Recently, these security tokens have earned the trust of potential investors in various projects. 

Security tokens are entirely used in STO’s. If you are new to, this you will have a question: what is an STO?. A Security Token Offerings is an alternate crowdfunding mechanism of ICO. Here entrepreneurs, startups, or business people sell their newly released tokens against tangible assets. This crowdfunding model acts as a secure investment channel. Also, it protects investors’ funds from scams and cyber attacks.  For the creation of security tokens, the local country’s regulations and SEC guidelines should be followed. 

Depending on the country, the regulations and conditions may vary. In the United States, they have Regulation A+, Regulation D, and Regulation S as the jurisdictions. Likewise, most crypto-friendly countries will have their own set of rules and regulations. Moreover, it is essential to know the various types of security tokens that are available in the crypto industry. Currently, there are three significant security token types in the crypto marketplace. They are

  • Debt token 
  • Equity token
  • Asset token

Now, let us discuss these types in detail.

Debt Token

Debt tokens represent real-estate and corporate bonds. These tokens are for interest-augmenting. It is similar to short-term loans with an interest rate equivalent to the amount lent to the company. Smart contracts that represent debt tokens should include repayment terms that indicate the dividend model and risky factors of that underlying debt.

Benefits Of Debt Token

  • Fractionalization
  • Larger market size
  • Dividends

Equity Token

Equity tokens are created by backing valuable shares of the company. For an equity token, ownership is recorded in the blockchain. Owning equity tokens will provide the investors with a part of the company’s profit and rights to vote. 

Benefits Of Equity Tokens

  • These tokens are a hugely preferred security token in the crypto industry.
  • Most proven security token.

Asset Token

These tokens represent the ownership of real-time assets like commodities, gold, artworks, etc. The equivalent value of asset-backed will be converted into security tokens and they are used for various purposes. Here, blockchain enables you to track your asset’s values transparently.

Benefits Of Asset tokens

  • Interchangeable
  • Divisible
  • Highly transparent

How to Create Your Own Security Token?

Security tokens are created under the Ethereum token standard named ERC1400. The ERC1400 standard is the combination of ERC20 and ERC777 standards. You should follow all the regulations of the local government and SEC guidelines. All the features of security tokens, assets backed and technical features should be incorporated in the smart contract.  

Polymath token studio is a security-token generating tool where security tokens are created by following the algorithms of the ERC1400 standard. Using polymath, tokens can be easily created and issued. In another case, you can stake some of the POLY tokens in the Polymath blockchain, and to store your tokens, you should connect your token address to the Metamask wallet.

Steps to be followed in Polymath Token studio

As discussed above, security tokens can be created in the polymath token studio. Generally, Security token creation occurs in the following stages. The first stage is creating a smart contract in the Ethereum blockchain. Then, using that smart contract address, create a security token using Polymath token studio. 

Here, I’ll list the steps to follow in Polymath token studio for creating security tokens. They are,

  • First, sign in to your Metamask wallet and you should hold some poly tokens.
  • A user-ID (Ethereum token address)  should be linked with Polymath.
  • You should reserve your new and unique token symbol to create your token name.
  • Check your token symbol with Etherscan for preventing duplication.
  • In Polymath, certain service providers will be listed. Choose any one of them for creating your security token.

Then, the last step is creating a security token. While creating a security token, you should include, 

  •   Your token’s name.
  •  Divisible or indivisible( Here, you should decide whether the assets values can be fractioned or not).
  •   Additional token information like a token burn, website, etc.
  •  Investors can be limited ( Number of investors should be limited according to the countries. For instance, In US regulatory compliance, there is a limit for equity token investors. Only up to 2000 investors are allowed for token creation).

By following these steps, you can successfully create your own security tokens and they can be utilized for crowdfunding.

Launch Your Own STO Platform

The newly created security tokens will be used for crowdfunding. The method of fundraising using security tokens is known as security token offering(STO). You should have your own STO website for launching an STO. STO platform can be launched in two ways, one is developing from scratch. If an STO website is created from scratch, then it will be started from the initial stage and it will cost more. The other best method of launching an STO platform is through an STO script.

STO script is a readymade script that has already incorporated all technical features within it. An STO website can be immediately launched using an STO script. You can add some additional features based on your business requirements. You can easily buy your STO script from a reputed security token service provider.

Market STO To Your Global Investors

This is the final step before taking your STO to all crypto investors. For marketing your STO platform, you should have a landing page and a social media account to reach as many people as possible. Many marketing strategies like content marketing and social media marketing can be followed.  Then, you must consider the Security token exchange you’re going to list.  Because it determines the reach and rate of success of your security tokens.

Where can I get the Best Security Token Development Service?

If you’re willing to create your own security token for your business, then the ideal solution is Icoclone.  Icoclone is an outstanding security token development service provider. We have vast experience in security token issuance. Here, we have more skilled and experienced blockchain developers. We will provide you with technical guidance for the successful creation of your security token. You can get excellent security token development services from Icoclone and also you can create your own security token within a few days at an affordable price. So, make a quick visit to Icoclone!!!

About About ICOclone

We are the group of blockchain developers who deals with ICO development software to build ICO platform ( Initial Coin Offering website designing, coding, and publication of business). We extend our services on complete blockchain business software solution and mainly to all your ICO business needs for it strives to give its customers the best ICO platform within a very short.

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