Iliya Zaki

@iliyazaki

Security Token Offerings (STO) is not as simple as ICOs

January 30th 2019

Security Token Offerings (STO) are not as Simple as ICOs

Disclaimer: The topics discussed in this article are written by a representative of Moonwhale Ventures. It is important to note the nature of the article is for educational purposes, written based on the experience and expertise of the writer.

Credits: https://www.richardcayne.com/richard-cayne-meyer/asset-backed-securities-an-introduction/

Bitcoin seems to be challenging fiat. Blockchain Technology is disrupting decade-old industries. Security Token Offerings (STO) are the new method of fundraising. Originally, ICOs were thought to be killers of the space but due to the number of scams, regulations were quick to address the issue. STO is, simply put, the legalized version of ICOs.

What are Security Token Offerings (STOs)?

Here is a detailed guide to everything you need to know about security token offerings.

But let’s try and understand it with a simple analogy: A factory.

Fundraising with Initial Coin Offerings (ICOs): Creating a utility token or a means to hold fiat value.

Investing in an ICO or utility tokens essentially means you are investing in the machinery or the idea of building a machine to build/pack/service whatever the company is doing.

What happens if the factory does not make its products? There isn’t any demand for the product. When the company that owns these machines (built using your money) goes out of business or decides to change direction and leave the machines, your money will be stuck in those machines unless the company finds a way to incorporate it into their next business idea.

Larger or more established crypto-companies such as Ethereum or Stellar Lumens have been in the game for a good number of years and have developed a successful business model which generates revenue. Ethereum has never been built to be a store of value so the volatility of ETH does not (or should not) matter.

Fundraising with Security Token Offering (STOs): Equity or Asset-backed tokens.

Investing in an STO or security token means you will be investing in the company that owns the machinery and factory.

Prior to fundraising, the company has to go through proper legal channels with governing entities. Ideally, should the company ended up closing, it would ultimately be a failed investment. And if said company were a scam, they can be traced and found by authorities.

There are no shortcuts to STOs

Company's plan to issue securities tokens blocked, after failing to fully comply with regulations

Referencing this news article from TodayOnline, companies issuing security tokens cannot afford to take a quick route to success. The company in question also found that “shilling” (also known as promoting) their project can lead to a warning from authorities.

Companies looking to expand through STO requires intense due diligence on the matter especially since each country has different laws and regulations.

BLOCKCHAIN BUSINESS CONSULTING

The majority of the world have an inkling what blockchain is but the next step seems to be the hardest — what’s next? who should we go to?

That is where you can consider engaging a blockchain consultancy firm.

Blockchain consultants are skilled individuals or group who can provide the necessary steps to move forward with an unknown industry. The main benefit of hiring consultants is the temporary expertise that they bring. Adopting a Pay-Per-Service philosophy, hiring consultants can be cost-effective in the long run as compared to hiring a full-time staff — employees’ benefits, human resource issues. Consultants are also expendable to some degree providing an easy way to remove deadwood.

Having a consultancy at your beck and call provide a great amount of value to the organization. A consultancy usually contains individuals from various backgrounds and expertise, allowing consultants to think objectively and develop innovative strategies purely for the hiring company’s business development and revenue growth. Consultants also may have the necessary business expertise and experience than the average employee.

A good blockchain consultant should have a good grasp of current regulatory and legal in the blockchain space. Due to the false-promises brought by various ICOs, authorities have finally started catching up with the hype and bringing new legislation and law that can only be good for the industry. It is paramount that your consultant keeps up with the ever-changing laws and regulations to ensure your journey with STO is as smooth as possible.

Perhaps you can consider giving Moonwhale a shot? ;)

The topic of Security Token Offering is still up for debate. But in theory, tokenization can pave the way to greater things just like how ICOs have been. Watching ICOs evolve into STO is the first step to disrupting the securities industry. There are

Hope you like this article! Please feel free to comment below. :)

About me:

Iliya Zaki is the Business Development and Marketing Officer for Moonwhale Ventures.

Moonwhale Ventures is a Blockchain Technology Consultancy and Investment Platform, helping businesses on Blockchain implementation, expansion/ new venture building, fundraising, go-to-market strategies.

For more information on how we can help you explore blockchain technology for your business: Blockchain Consulting

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