What is an STO and how can investors participate?
The world of cryptocurrency is changing fast. New terms and offers keep hitting the market and the latest to join in the STO.
In this article, we’ll talk about the STO and explain what it’s all about.
Let’s get started.
What Is an STO?
Short for Security Token Offering, STO refers to the process of issuing a token or crypto coin to an investor. These tokens fall under securities and are linked to an asset just like stocks and bonds.
STO vs ICO – Understanding the Differences
An STO appears quite similar to an ICO. You cannot understand what is an STO without first getting an understanding of how ICOs work.
Technically speaking, the process is the same for both token sale models. However, the token characteristics are very different. STOs are fully backed and comply with relevant regulations. On the other hand, most ICOs present tokens as a utility coin that offers users access to decentralized apps or the native platform. Issuers argue than coins are for use and not investment. This is why ICO platforms are able to circumvent legal issues.
Here are some major differences:
- ICOs face fewer barriers to entry whereas, STOs can be tough to launch
- STO tokens are backed by assets but ICO tokens have no collateral
- STOs tend to be more cost-effective since they do not involve investment banking fees and brokerage charges
- Companies usually define a use case when they want to raise money through ICOs. There is no such need when it comes to STOs.
- ICOs do not give investors the right to gain or distribute profits like traditional shareholders. Whereas, STOs give investors the option to take part in voting and revenue distribution.
How can I participate in an STO?
It is quite easy to participate in an STO. Since there are many companies offering STOs:
- Decide which STO you wish to invest or participate in
- Find a regulated platform that offers the asset that you’re interested in.
- Make an account on the given platform using true details as you may be asked to verify your identity during or after the process.
- AML and KYC checks will be required in most cases.
- Once your account gets approved and verified, you will be able to go through the available options and make a purchase.
- You will need a compatible wallet in order to make purchases.
Note: The exact method may differ based on the platform you have selected.