@ChrissCrypto
What are STOs?
In the Universe of Fundraising, in the world of Cryptocurrencies, it is more than necessary to differentiate ***3 Types of Fundraising***: **ICO** - ***Initial Coin Offering*** https://bitcoinmeister.eu/what-are-icos/ **STO** - ***Security Token Offering*** **IEO** - ***Initial Exchange Offering*** In this article, let's focus on what **STO** (***Security Token Offering***) are, and compare them to **ICO (Initial COin Offering)** https://bitcoinmeister.eu/what-are-icos/
**To simplify the comparison, here is how we can differentiate them** **ICOs**: https://bitcoinmeister.eu/what-are-icos/ ***Decentralized Application (dApp) or Projects present on a Public*** ***Blockchain*** https://bitcoinmeister.eu/what-is-blockchain/ ***Fundraising for*** ***ICOs*** ***is essential to the functioning of the network*** (based on a **Blockchain**) https://bitcoinmeister.eu/what-are-icos/ https://bitcoinmeister.eu/what-is-blockchain/ ***Utility Tokens are not created to be an investment*** ***Few or no regulations*** ***ICOs*** ***allow the purchase of 'Utility Tokens' that only allow the use of services that will be developed after the fundraising*** (discounts, premium features, advantages on the services offered ..) https://bitcoinmeister.eu/what-are-icos/ **STOs**: ***Any type of business - Using*** ***Blockchain*** ***and*** ***Smart Contracts*** ***for the automation of transactions*** https://bitcoinmeister.eu/what-is-blockchain/ https://bitcoinmeister.eu/what-are-smart-contracts-introduction/ ***Fundraising is not essential in the operation of the network*** ***STO Tokens provide legal, financial and other rights.*** ***They correspond to a share of the capital of the company, or investment fund .*** ***Very regulated, as for companies that organize IPO to sell shares/part of the company to raise funds*** Or, even more simply: **ICOs** ***are Chaos***, no regulation, no guarantee of success (with *nearly 98% of projects not succeeding*, or not living more than a few weeks/months) https://bitcoinmeister.eu/what-are-icos/ ***STOs are Credibility***, because they respect a strict set of rules allowing to establish (or restore) a certain credibility. Concretely it is easier to launch an **ICO**, than to launch a **STO**, but as far as investors are concerned, institutional or private, they will have **more confidence in a STO**, because it provides much more guarantee, security and profit on the short, medium and long term. https://bitcoinmeister.eu/what-are-icos/ **STO**s, '***Tokenized Financial Assets***' ***on a*** ***Blockchain***, appeared and **became popular** after the failure of **ICOs** (too many projects turned out to be scams, or never saw the light of day, and from a legal point of view, if a project owner decides to leave with 100% of the funds raised at the end of the **ICO**, the investors are all losers, and the only winner is the owner of the Project) https://bitcoinmeister.eu/what-is-blockchain/ https://bitcoinmeister.eu/what-are-icos/ **In Security Token, there is the word 'Security', and what does it mean?** These '**Financial Securities**' are '**Financial Tokens similar to financial instruments**'. The **SEC in the United States**, uses (not systematically) the '**Howey Test**' (*established in 1946 by the Supreme Court of the United States*) to define if a Token is a 'Security' or not. https://www.investopedia.com/terms/h/howey-test.asp To pass this test and **become a 'Security'**, a Token must meet 4 defined criteria, which are: ***Be an investment of money*** ***The investment is in a common enterprise*** (in which investors use their funds to finance a project) ***With the expectation of profit*** ***For the purpose of receiving profits only from the efforts of others.***
Security Tokens can take many forms or functions: ***Shares - a security conferring shares in the company's capital*** ***Bonds*** ***Management rights - Voting rights*** ***Dividends*** But they are not limited only to companies, these Tokens can also be related to Real Estate, to Artistic Works .... **The main advantages of Security Tokens are:** ***Very strict regulations*** ***Projects for STOs are generally much more reliable and developed than those for*** ***ICOs*** https://bitcoinmeister.eu/what-are-icos/ ***STO's know a significant growth*** (while the **ICO** market is in decline) https://bitcoinmeister.eu/what-are-icos/ ***Security Tokens are traded on regulated platforms*** ***They are likely to be the next big thing in traditional finance*** ***Security Tokens are less subject to market manipulation or speculation*** But they also have drawbacks: ***It takes a lot of time and money to meet the requirements for regulatory approvals*** ***STOs can be limited to qualified investors (in the US), and sometimes require large amounts of money*** ***STOs can also have their own 'White List' limiting the number of investors and especially choosing them*** Globally, **anyone can participate in STOs**, but unlike **ICOs**, for which it is just necessary to own some Cryptocurrencies, for STOs, **it is essential to complete a** **KYC** (***Know Your Customer***), **and possibly an** **AML** (***Anti-Money Laundering***) https://bitcoinmeister.eu/what-are-icos/ https://knowyourcustomer.com/ **Some small information and figures about STO:** The very **first STO** ***took place on April 17, 2017***, launched by **Blockchain Capital**, which **raised $10 Million in a few hours** https://blockstate.com/global-sto-study-en/ https://blockchain.capital/ Since then, **124 STOs are listed** (**data published in 2020**), for a total of **$953,088,769 Raised**, with a **dominance of the Financial Sector market at 77%** of projects (followed by ***Real Estate 11%*** and ***Blockchain*** ***4%***). More than half of the funds raised were in North America ($579.8 million) https://blockstate.com/global-sto-study-en/ https://bitcoinmeister.eu/what-is-blockchain/ Of which the biggest fundraising is attributed to **tZERO with $134 Million reached** (out of the $250 Million Target Amount), followed by **Proxima Media which managed to reach its Target Amount of $100 Million**, the next 3 are : ***Bolton Coin: $67.83 Million*** (Target 100 Million) ***Nexo: $52.5 Million*** (Target 52.5 Million) ***Jinbi: $47.5 Million*** (Target $12.5 Million) A very **large majority of the STOs were made on the** **Ethereum** **Blockchain, 94%** (***1% NEO***, ***1% Stellar***, ***4% others***) https://ethereum.org/en/ Last but not least! *****Only invest what you can afford to lose, the price of Cryptocurrencies is extremely volatile so much so that you can gain a lot in a short time, but also lose everything even faster. Set limits for yourself that you don't want to exceed, for your own financial security*****. See you soon **Christophe WILHELM** **Bitcoin Meister** https://bitcoinmeister.eu/?ref=12 **© Bitcoin Meister** Source pics: **Google** http://www.google.com/ Resources https://bitcoinmeister.eu/ https://blockstate.com/global-sto-study-en/ https://www.investopedia.com
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