With ICOs going through regulatory growing pains, with fraudulent feedback from the mainstream media and low success rate, we must strive to find more satisfactory means of funding blockchain innovation that are more legitimate.
We all know that the ICO space is huge. In fact, 2017 saw startups raise a massive $5.6 billion. That’s no small feat. However, considering that trillions of dollars worth of securities are stampeding towards the blockchain, $5.6 billion is a mere drop in the ocean.
The U.S. Securities and Exchange Commission (SEC) hearings are changing the future of how cryptocurrencies work at the intersection of more stringent regulations.
“Security token offerings aka STOs, are therefore the new kid on the crypto block.”
If ICOs inspite of a lack of regulation still fueled startups with a massive $5.6 billion, what’s next? Many believe it’s STOs. While for ICOs the way it usually works is tokens or coins are offered by companies for purchase as a form of crowdfunding, however with STOs it’s an upgrade whereby you can purchase tokens during the offering that you can then trade, sell, or hold. However, since security tokens are actual financial securities, your tokens are backed by something tangible like the assets, profits, or revenue of the company.
“In a world that’s becoming more decentralized Securities Token Offerings are the next step towards legitimizing investor offering schemes for digital asset initiatives.”
In the latter half of 2018 and in 2019 we are therefore going to see a huge rise in STOs, and they may eventually out-duel ICOs. The reason is there’s more security for potential investors, and thereby less chance of fraud.
To participate in a Security Token Offering is very similar to participating in an ICO. You can purchase tokens during the offering that you can then trade, sell, or hold. However, since security tokens are actual financial securities, your tokens are backed by something tangible like the assets, profits, or revenue of the company.
When companies release their Security Token Offerings on a platform like Polymath, they will have been guided through the complex legal and technological processes before issuance. The tokens released in this way are intended to be compliant with KYC/AML requirements, and securities laws in whatever jurisdictions they touch. Security tokens created using Polymath’s ST-20 standard are able to prevent trade between excluded persons through the use of robust smart contracts and our address whitelisting technology.