Eavesdrop on any conversation between a group of traders, and you are bound to hear the words “token” thrown once or twice. A token refers to an asset or a unit of value that traders or investors exchange. Such assets are issued out when the company launches an Initial Coin Offering (ICO). Security tokens, in particular, have been a subject of debate in relation to crowdfunding. In today’s article, we take you through all you need to know about Security Tokens Offerings or otherwise known as STO Investment.
What are Security Tokens?
There are two variations of tokens – security tokens and utility tokens. The former refers to digital assets which derive their value from a tradable external asset. The latter refers to app coins that allow you future access to a company’s products and services. Securities tokens can be viewed as digital contracts for a part of tradable assets which already hold value to them, such as vehicles or real estate.
How do security tokens differ from Altcoins?
All coins and tokens are generally regarded as cryptocurrencies. However, not all coins function as a currency. For this reason, cryptocurrencies are categorized into either tokens or alternative cryptocurrency coins (Altcoins). A token is a tradable representation of an asset or security with an underlying value. It can be a representation of any tradable asset, including other cryptocurrencies.
Altcoins, on the other hand, are exchangeable currencies; a variant of Bitcoins. They refer to cryptocurrencies derived from the open-source protocol used by Bitcoins. Examples include Ethereum, Omni, and Ripple.
How do STOs differ from ICOs?
Security Token Offerings are today a viable alternative to Initial Coin Offerings for companies seeking a means for crowdfunding. Both STOs and ICOs work a similar way. They are a means by which an investor buys an investment in a particular firm and receives crypto coins or tokens which represent the value of the investment. However, they differ in the following ways:
- STOs are highly regulated crowdfunding vehicles while ICOs are unregulated.
- STOs are generally safer as they uphold the credibility of trading unlike ICOs, whose unregulated nature puts traders at risk.
- STOs are backed by the value of a real asset such as land or vehicles while ICOs hold no collateral value.
Benefits of investing in STO
- Cost reduction for investors
Conventional financial transactions are subjected to certain fees as deemed fit by intermediaries such as brokers and banks. Therefore, investors can invest in security tokens directly with traders, eliminating any intermediary fee.
2. Seamless trading
Investors need not use intermediaries to invest in security tokens. They trade directly with each other, resulting in a seamless trading system for investors.
Investing in security tokens is safe and secure as the SEC regulates it. It makes a great alternative for ICOs.
4. Market globalization
Overseas investments are subjected to political and international relationships between the involved countries. Because of this, investments can be strained. Security tokens trading is done via the internet, which is free from political influence and international boundaries.
Benefits of STOs to Crypto Exchanges
The core of cryptocurrency exchanges is tied to the trading of the main crypto coins in the market, such as Bitcoin, Litecoin, and Ethereum. This limits the number of options for investing in trading platforms.
STOs are promising assets that can be efficiently traded on Crypto Exchanges, and investors can enjoy the perks that come with STO trading. Additionally, trading of such coins is decentralized, which has been the stigma of cryptocurrency trading. Investing in security tokens is regulated by the SEC as a “sufficiently decentralized” asset, which increases investor’s confidence in cryptocurrency trading.
Security Token Offering is a safer, faster, and less expensive exchange. ROKKEX is an advanced cryptocurrency trading platform which offers military-grade security, programmed by cybersecurity engineering professionals for secure investments.
Besides, unlike ICOs, which are unregulated, ROKKEX offers investors more secure investment option – Security Token Offering with the target return with up to 15% + 5% fixed interest. All capital gained through STO investment is secured and regulated by the SEC, which increases the confidence of traders with regards to the cryptocurrency exchange.
While Security Token Offering is still a new investing opportunity in the market, it is essential to research the company before investing. Identifying the strong and weak sides of the project and what value can bring to an investor.