7 key benefits of STO for investors and traders
Financial discipline is one of the best virtues that one can learn. In that aspect, the investors and the traders are financially disciplined to put their hard-earned money and multiply them. In this digital world, all the transactions are happening online. So, it is wise to enter into the digital currency world.
On the digital investment front, Stocks and bonds are getting outdated. Investors look over digital assets and bonds to invest in. But investing in cryptocurrencies and making huge profits may take time.
So, the next viable opportunity is tokenization. The emergence of Security Token Offering is a gift for investors who thrive to earn profits. Before getting into the benefits of STO, we have to know “Why SCO?”, right?
STO — An introduction:
STO is the acronym of Security token Offering. The precursor of STO is ICO (Initial Coin Offering). ICO is one such initiative for the investors and startups to crowdfund the money they want to invest, without any collateral or external threats. But due to the increase of the scams in the industry, ICO cannot retain its stability in the digital crowdfunding platform.
STO, to be precise is an update to the ICO with a revamp in its operative ambiance. The STO creates an investment token in place of an asset or stock or bond. This is a trustable way to crowdfund cryptocurrencies for business. Moreover, it is a fungible token where both the investor and the holder can share the trust by trading on cryptocurrencies.
STO tend to carry the ownership information. For instance, if you invest in STO, you can buy tokens from the seller in exchange for cryptocurrencies. That is, Before investing, you can refer to the asset placed by the seller for producing tokens. After the confirmation and satisfaction, you can buy a share from that particular asset in the form of tokens in place for cryptocurrencies. The tokens will be listed on the trading platform. The token ownership relies upon the number of tokens the investor holds.
Also, each and every transaction that takes place in an STO is recorded in a blockchain framework. So, there is a meager chance that your tokens may let off as a scam.
Despite these clarifications, we can see many of them got tangled to differentiate between ICO and STO. Let us know the difference between the two of them.
Differentiation between ICO and STO:
When you talk about the variance, then you could not find much. Because ICO and STO are similarly the same concepts. The only things that stand as a difference in their regulation mechanism. ICO’s are generally decentralized applications and hence they are not managed by third-party regulatory sites. But STO is a fully regulated mechanism.
ICO’s do not comply with any of the strict regulatory mechanisms or any other legal compliance. So, it is easy for an individual or a company to initiate an ICO. But STO needs strict legal methodologies and is protected under the securities law.
ICO’ can draw investments from any traders or investors in the trading market. But STO’s do not work like that. They can receive investments only from those investors who are eligible. That means, if you want to invest in STO, then you should make yourself eligible on certain requirements to invest in an STO.
Another general difference between the ICO and STO investments is the necessity of collateral. There is no need for collateral to initiate an ICO. But for STO, your Token should be assisted by collateral or any kind of asset for security. You cannot expect any kind of airdrop or any incentives for buying STOs. This is a legal form of investment with a greater priority on both sides. If you want to sell your STO, then your initial investment should range from 50k Dollars to 250k dollars at least.
STO — 7 key benefits all you want to know:
There are certain benefits to starting the STO. They include
- Value holding — Other than normal digital tokens, which do not have any intrinsic value, the security tokens come with strong intrinsic value. Intrinsic value in the sense has operational and ownership value which lacks any kind of tokens. Also, they carry very less amount of risk for the holders. STOs are known to benefit the investors for the short term. They are not long term investment opportunities as they do not rely on the production or manufacturing process. The STO will last until the investment is live. If the investment target is satisfied, then the token sale will be put to an end and the profits will be shared with the investors in the prescribed time frame.
- Trustability — STO is trusted. But not ICOs. It is not like that all the ICO are scams. There are companies who want to legitimately crowdfund via ICO and return the profits to the investors. But the number of scam sites is higher. According to a survey conducted by the SEC, the number of scam ICO sites lie at 81%. STO’s are known for their trust as it is regulated and maintained effectively.
- Transparent in nature — You need not worry about the transparency if you are an investor in STO. STO investment comes with entire information disclosure. You can know about the company that introduced the STO along with other common information like risk assessment, market value, etc. So, naturally, the STO is transparent in nature crafted to earn the reputation of the investors and traders.
- Liquidity management- Higher the liquidity higher the reach of the token or website. Here, STO software is known for its impeccable liquidity management. If you are selling an asset, say artwork and if it costs 1000 dollars, then the artwork will be split into 100 or 500 tokens based on the demand of the artwork. Then the tokens will be sold to the investors for exchange of cryptocurrencies and after receiving a certain capital, the dividend will be shared with the investors.
- Recovering and returning ability — comparing to the cryptocurrencies that have the probability to get lost if it is sent to the wrong address. There is no such deterrence in STO because if it is properly programmed and managed. So, there are fewer chances of getting it lost. Also, if you have mistakenly sent the funds, with some complex process, you can redeem it.
- Gathering a global market — If you are a token holder in STO or an investor in STO, then you would have global exposure to all the digital coin traders. This will definitely enhance your market level both for the coin and for the company.
- Efficiency — With the help of the blockchain and smart contract, the STO software has maintained their efficiency through automatic KYC/AML norms and updates, no need of legal hassles. Also, they are efficient in the way they are manageable in terms of risk assessments. They also provide specific data related to the status of the investors and holders accordingly.
STO is more than a successor of ICO. Being painted with scam glue, ICO is not completely illegitimate. But the emergence of STO is completely focussed to regulate tokenization and help markets to improve in their business through digital finance. The above mentioned seven key points indicate the benefits of STO and how far it is more important and beneficial for those investors and traders to invest in this new initiative. So, investing in the STO script is one of the viable business opportunities in this current digital trend.