Steemit Crypto Academy Contest / S6W6 - Security Token Offerings STO

Welcome here.

I hope that all of you will be good and happy and enjoying your precious health with the grace and blessings of Almighty Allah. Today, I am here to be a part of the week 6 contest in our beloved SteemitCryptoAcademy and the topic of discussion for this week is Security Token Offerings STO. So, stay tuned with me.

In your own words, define the STO by explaining its process (how does it work?).

STO actually stands for Security Token Offering. It is a new technique that is mostly used for the crowd fundraising or to grab the investors for a business or a company. As referred to by the name, it is a technique in which the security tokens are offered to the investors to ensure the worth of their investment in those projects or companies.

We all are well-aware about the term Initial Coin Offering. In that process, different tokens are given to the investors that are actually the surety of their investment and those tokens were later issued on different exchanges to trade and exchange with other crypto assets.

But, STO is not like that offering in which the tokens are given with no particular price of value. In STO, the security tokens that are given to the investors are actually backed by some real world assets to ensure that they have proper value and the investors could be satisfies with their investment in those projects. Thus, the process of tokenazation is involved here which is actually the digitalization of the real-world assets.

Conventionally, we know that whenever a company decided to open a fundraising scheme and grab the investors, it give shares to the investors that are the surety of their investment in that company. But, STO is much more than those conventional processes. In STO, the shares are actually the security tokens and the medium of trust is the blockchain technology.

Let me explain it in a simpler term. In STO, the investors are given with the security tokens that are backed up by the real world assets. And the blockchain technology is involved in the process of storing the details about the contract that has been done between the investors and the company.

These smart contracts are verifies by the governments and that's why the process is known as the Security Token Offering and the tokens are actually known as the security tokens having value equals to the particular real world assets. These smart contracts are secured highly with the cryptographic elements of the blockchain technology and are transparent, immutable and permanent.

What does STO bring to the world of cryptocurrencies and also to the traditional financial world?

The process of STO is a new technique in the digital world for the public fundraising with high securities and authentications. There are many innovations that came into view just die to the involvement of this technique in the financial realm. It has beautiful impacts on both cryptocurrency space and the traditional financial systems as well. Some important benefits that STO provides to these fields are as follows.

The most important impact of the STO technique is on the future of the cryptocurrency and the blockchain technology. We know that it is a process in which fundraising for the companies or projects is done with high securities and authentications. So, the investors are attracted towards these technologies and hence the can move towards crypto and blockchain technology easily.

Another impact of the STO on the financial field is that it makes the investment legally proved by the securities of a state and hence more investors are attracted to those projects or companies. The STOs can only initiated after verification and securities from the related government and hence they are more trustworthy for the investors as the government have already proved those companies.

The STO has proven itself very successful in attracting much more investors that those companies that work through the traditional systems. So, thing thing also attract more people to open new projects because they found the funraising process more effective through the STOs.

Another beautiful benefit of the STO is that the cryptocurrency adoption is affected much by this technique. The traditional companies and investors now look for the cryptocurrency investments and projects because their more effective and reliable nature.

As the STOs are based on the blockchain technology and it is the beautiful nature of the blockchain technology that it is highly transparent medium. So, investors feel much satisfies while adopting this method of investments because they can access the smart contracts anytime and anywhere without any restriction.

The STO has made the investments less risky for the investors because they own such security tokens that are pegged to the real world assets and they are not much volatile. Secondly, the projects or companies are proved by the government so they are less risky as compared to the other investments just like in the Initial Coin Offering.

One of the most important benefit of the STOs is that it is much affordable technique for the companies as there is no involvement of any central authority in the initiation, processing and completion of these fundraising systems. So, there is no need of any additional expense. That's why, it is less expensive than the traditional schemes.

What are the differences between STO and ICO, IPO and IEO?

Besides the STO, there are other many fundraising methods that has been adopted by different companies to raise their capitals. There are a few aspects that can be considering while drawing a difference between them. Others methods are ICO, IPO and IEO. Let me explain the features of these methods, one by one.

• In Initial Coin Offering, the investors are given with different utility tokens that are highly volatile.

• The tokens that are given to the investors are present of different exchanges after the crowd fundraising process completely.

• The value of these tokens are not backed by the real world assets so investors can feel insecure here.

• Initial Coin Offering is not verified and proved by the governments so there are high risks of frauds and scams.

• There is less transparency of the transactions or activities that are carried out in ICO.

• In IPO, the shares of the company are given to the investors and hence the process of public fundraising is carried out.

• They do not work on the blockchain technology and hence they are always at the risks.

• The activities are not transparent to the investors and hence, they can feel a bit unsatisfied with their investments.

• Shares that are given to the investors are initiated after complex verification and authentication systems.

• They are more expensive than STO because there is proper need of the paper works, and other physical methods.

• The investors and companies both have to follow the instructions of the government financial sectors.

• These fundraising schemes are initiated by the popular exchanges of the crypto space.

• Only the users of the exchange are able to take part in these type of fundraising processes.

• The participants of IEO have to abide by the rules of that exchange platform.

• The users have to trust the exchanges and there is no as such worry because most of the exchanges are already trustworthy.

• Initial listing fees is required by the exchanges to completely initiate the IEO fundraising schemes.

• The companies give the security tokens to the investors that are the according to the value of the investments.

• STOs are legally proved by the governments and thus they are more trustworthy than ICO and IEO.

• The security tokens are backed up by the value of real world assets and thus they are less risky.

• The agreement is based on the smart contracts that are immutable, transparent and much secure due to involvement of blockchain technology.

• The investors are much satisfied on their investments as they have the assets of real worth and companies are legally approved.

List and explain some types of security tokens?

There are basically different types of the security tokens that are actually based of their mode of working and their availability for the investors. These tokens are given to the investors to ensure their shares in that company. They are discussed below, one by one.

These are the security tokens that are actually backed up by the value of real world assets like the stocks, gold, diamond and other reserves. The investors feels satisfied as they know that they are holding those real world assets indirectly, but in their digital forms.

The second type of the security tokens is the equity tokens. These types of security tokens are actually the insurance for the investors of their investment because their investment is registered in the form of their percentage shares in the total capitals of the company including the stocks that the company have and many more. Thus, the investors have particular percentages in those items. Equity tokens gave the rights to participate in governance voting of the platform.

The third type of the security tokens is the debt based tokens. These type of security tokens are just like the loans or debt that the company takes from the investors and at the end, the company is bound to return the same amount but with some extra interests that could be of fixed or flexible value in nature. Thus the investors get their investment back with reasonable profits.

Another type of tokens that could be used in the STO process are the utility tokens. As referred to by the name, these tokens can be used to purchase or buy different services that are offered by that company. They can use that tokens to enjoy various services or goods or may be also used for trading purposes within or outside the platforms.

Do you think these types of tokens are secure and reliable? if you want to participate how does it work?

Yes, I strongly believe that the security tokens are much more effective and beneficial than the other tokens that are offered. The STO is the best way of crowd fundraising due to its trustworthy nature. The first thing that every investor wants is the high security of their investment and it is fulfilled in the case of STO.

Secondly, the investors always look such companies that are offering the things with very less risks. As we already discussed that STO has minimum risks attached to it because of the backing up of these security tokens by the real world assets and thus the investors are satisfied as they consider they are holding the real assets in digital formats.

Another important thing that could be considered here is that the STO are approved by the governments and thus there are very less risks of scams or frauds. So, I would like to say that STO is the best method of fundraising both for the companies and the investors as well.

There are a few important things that could be considered before launching your STO for your company or projects. Some of these things are as follow.

• You should have to careful look the type of assets that you are going to use as the back up asset for your security tokens.

• It is important to announce the interest rates or the type of interests that you are offering on your equity or debt tokens.

• For the proper security purposes, the security and verification systems like KYC and AML should be adopted.

• Your terms and conditions should completely follow all the rules and regulations of the respective financial sectors policies.

• Another important thing is the right choice of the platform for launching and tokenization of the assets. We should be very careful while launching STO.

The following steps could be helpful for launching an STO in the market.

• First of all, you have to make all the necessary arrangements for the launch of STO and decide every core detail that you are going to adopt.

• Second step starts after the completion of preparations of the STO. You must have to advertise the STO so that you could be able to get more and more investors in your company.

• Third step starts at the begin of the STO. You should be very active while this step and help the investors to solve the problems that they could face.

• Last step is at the end of the STO, you have to develop your projects accordingly and try best to make it user-friendly. Road map and core details of the team are very important things.

Conclusions

Security Token Offering is the method of public fundraising in which the investors are given with the security tokens. The main reason for STO is to gather more capitals for the company or project. The security tokens are those tokens that are backed by the real world assets and thus they are less risky.

It is the best method of fundraising for a company due to the involvement of blockchain technology. It helps to get the trust of the investors because the STO is already approved by the government and thus the investors feel satisfies while investing their money in those projects that run STO.

I would like to invite my friends @malikusman1, @simonnwigwe, @sachin08 and @faran-nabeel to take part in this beautiful contest.