In 2017, ICOs generated a staggering $6 billion to fuel start-ups. Some investors went crazy over ICOs and were hoping to make bags full of money. Whilst some did, others were not so lucky. This is mainly due to the instability and risk associated with ICOs. This year, the crypto industry welcomes the new ICO, namely Security Token Offerings (STO).
What are Security Token Offerings?
A Security Token Offering (STO) is a new fundraising model for cryptocurrency companies. They are safer than ICOs due to the fact that they are backed by actual assets of the company for example assets, revenue, profits, equity, commodities, shares, etc.
It all started when the Securities and Exchange Commission (SEC) flagged ICOs as a fraudulent fundraising process. Since then investors have been paying more attention to these security tokens.
Even CEO of Overstock, Patrick Byrne is excited about these tokens. Overstock is an American based online retailer. Byrne was recently quoted in the media saying that these tokens are a safer way to fundraise.
It should be mentioned that Overstock will make use of an STO when launching its tZERO trading platform. This follows the SEC placing the prototype under review in February 2018.
In the case of an STO, investors would be buying digital tokens during a pre-sale, as is the case with ICOs. The biggest difference is that STOs have to be backed by tangible assets. It’s like buying shares in a company that is built on a blockchain.
STOs are subject to federal security regulations. This makes their fundraising activities more transparent.
The future of STOs
According to various media outlets, the second half of 2018 going into 2019, will see an increase in the use of STOs. They may eventually overtake the popularity of ICOs. Reason being is due to its ability to give investors more security. There is less risk of fraud associated with STOs than with ICOs.
In conclusion, institutional money, as well as mainstream adoption, is of extreme importance for cryptocurrencies this year. Every day there are new stories of major companies adopting blockchain technology or at least looking into the possibility. Even JP Morgan, one of cryptos hardest critics, is filing for blockchain patents. Keep an eye open for the next golden STO opportunity.