Blockchain technology is a recent trend in today’s digital world. It is used to develop secured crypto-based products and stores digital information in a high-secured manner. It has changed many people’s life. This technology is used in lending, payment transactions, gambling, investment, healthcare, supply management, and other industries.
Tokenization was also developed using blockchain. It also changed the life of many investors in the blockchain industry. So this tokenization brought a new world to investors by offering investment opportunities for many digital assets and commodities. In recent years, we can see the steady evolution of fundraising platforms. Such as Initial coin offering(ICO), Initial Exchange Offering(IEO), and more recently STO’s(security token offering).
Many startups and entrepreneurs launched their unique Security Token Offering(STO) website by using STO software. But still, a few people don’t know about tokenization and security token offering. In this blog let us figure out what is tokenization and STO are. Also, how it changes the investment world.
What is Tokenization?
Tokenization is the process of converting asset ownership or rights to digitalized tokens by using blockchain technology. This concept applies to the financial instruments that are part of regulated traditional assets. Such as stocks and bonds. This tokenization also applies to tangible assets. such as real estate, artwork, copyrights, or precious metals.
These types of tokens can be mostly stored, moved, or recorded on a blockchain. Experts in the crypto space say that tokenization can change this investment world. As tokenization is adopted globally. The Liechtenstein government became one of the first governing bodies to implement official regulatory laws on tokenization.
What is STO?
Security Token Offering is one of the best crowdfunding platforms where security token sales will take place. STO came into the marketplace to replace the Initial Coin Offering websites. In ICO websites and the IEO module, only utility tokens will be present. But in STO, only the security token will be sold to various users across the globe. You can use only the security tokens in security token offering websites.
In this Security token offering, security tokens are backed with real-time assets. It must undergo KYC and AML verifications. It contains the ownership information of the investor. All these pieces of digital information and data will be first recorded digitally in the blockchain. Also, you should do all these things by the SEC rules and native government rules. This crowdfunding model offers a high level of protection to investors. So that it reduces the risks of token issuers.
As I already mentioned that security tokens are backed with real-world assets. so there will be no possibility of scammed tokens and fraudulent activities. Experts in the crypto community say that STO is a trusted and more secure crowdfunding model. Also, STO is more effective for long-term investment. So most of the startups or entrepreneurs prefer STO for raising their funds in a secure manner.
How does STO Differ from Other Crowdfunding Models?
Trust is crucial for every business. Here STO has more trust compared to ICO and IEO. because STO has to comply with some regulations. Also, it should satisfy some rules and conditions. ICOs just offer new coins but STO can be used as a long-term investment. In ICO and IEO, there will be only utility tokens which means that there will be no real-time backed assets. But in STO, only security tokens will be present and backed with any real-time assets. Such as bonds, funds, stocks, or real estate.
Here transaction happens only on the STO website. But in IEO, the transaction happens in the cryptocurrency exchange platforms. Whereas in ICO, transactions are done on token issuers’ websites. When coming to security and liquidity, STO will be high compared to ICO and IEO crowdfunding models.
In Security Token Offering, fundraising costs will be high compared to other crowdfunding platforms. Complex to launch the website when you launch on your own. So you can use the premium STO software, which makes you launch the STO website in a hassle-free manner. But in STO due to strict government regulations, cross-border payment is a little bit difficult. Like ICO tokens buyers have to wait for the token to list in the crypto exchange platform for trading.
Why Tokenization is Good for Investors?
Currently, asset tokenization is becoming more popular among people. Also, it has become a recent trend for startups, entrepreneurs, and business people. But it is based on some key factors. Such as
- Broader investment base
- Faster settlements
- Robust security
- Increased security
Broader investment base
In real-time assets, there is a limit to everything. If that asset is tokenized then the limitations will be automatically eliminated. It makes to buy or sell the tokens that represent a fraction of ownership. So this allows more investors to participate in the purchase.
The availability of 24/7 trading makes the tokenization to reduce the transactions time. Smart contracts help to complete the transactions automatically and reduce settlement times. So tokenization reduces the risk and limits the possibility of trading breaks.
As for now, developers are developing regulatory tokenization frameworks in the marketplace. These tokenization frameworks will increase the levels of security and transparency for investors. It is due to the immutability of information or data stored in blockchain technology.
Tokenization allows investors to buy shares in assets that are not liquid. For instance, if the land is tokenized, then it can be purchased by a group of small investors. So it allows investors to expand the market by increasing liquidity.
Why is Security Token Offering Good for Investors?
A versatile range of investment opportunities
Before ICO and STO, investors choose stocks from the market. But the stock market offers only limited investment opportunities to investors. because only a few companies can go public. STO allows smaller companies with financials and solid business foundations to get investment. So investors don’t need to wait for the IPO announcements.
STO allows investors to eliminate third parties or middlemen. Because before STO, one can buy stocks through the intermediate or broker. But in STO, you can avoid those interventions. So that you can save your money by not paying multiple advisors.
STOs are increasing successfully
Currently, most startups and entrepreneurs emerge towards security token offerings. Because they feel STO is suitable to increase their funds in a secure manner. This made many people start STO websites using STO software. Also, security token development has become a recent trend in the blockchain industry.
Currently, blockchain technology is evolving around the globe. It is mostly used in all industries to reduce their work and increase their trust. Tokenization and Security token offerings will be the future for investors. If you are planning to launch a Security token offering then you can use Icoclone’s bug-free premium STO software. You can easily modify or customize it according to your business requirements. So that you can launch your own STO website within a few days. Icoclone also offers security token development with advanced blockchain technologies.