Steemit Crypto Academy Contest / S6W6 - Security Token Offerings (STO)

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Hello everyone, how are you doing, I wish everyone a Happy new year and I hope everyone is doing great, I welcome you to week 6 season 6 of the engagement challenge, and here I shall be participating in the contest discussion of "Security Token Offerings STO".

This has familiarity with Initial coin offering, but STO is a better version of ICO, as this is more protected and more reliable than ICO and it is backed by the authority which means more safety, let's dive on!!

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

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STO otherwise known as Security Token offering is a digital token that uses blockchain technology, it is the same as Cryptocurrency but they are built on a different aim, STO is a token raised through investment funding but this token is made aware by government regulation which means it is more secure and comply with the authority, they are fungible token with real assets value as well.

STO are cryptocurrencies that are backed by real-world investment, for instance, we can see the likes of gold or stock investment being backed by STO, STO offers more security which means these assets are backed by the token value promoting cryptocurrency into stocks assets.

STOs work in a way that they are similar to stocks, they are the digital representation of this stocks assets, and they are issued the same certificate similar to stocks, stocks are backed by authorities and this is similar to STOs as well, this is promoting cryptocurrency into more world assets, they are transparent and recorded on the blockchain as well, so this is a fungible asset as well like ICO, but more secured and it has the government authority which made it safe from scams.

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

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I would prefer to use the word "simplicity" and "Security", so yes, STOs bring simplicity and protection to cryptocurrencies and the traditional financial market.

Most issues with cryptocurrency are trust, the fear for cryptocurrency investment has always been to avoid scams or in rather the case of pump and dump, but with STO which offers more security after going through regulations by the SEC, we could say STO brings more trust of investment to cryptocurrency.

Any project that wants to undergo STO need pure proof and they are being scrutinized by the government authority which means it has to be solid and more reliable which brings reliability and transparency.

We could as well see the simplicity this brings to the traditional financial market, with STOs, stocks can then have the digital representation of their assets easily, and this will bring more investors and more adoption of cryptocurrency around world assets at large.

The stock market holds a large influence in the Financial market, but with the adoption of cryptocurrency proofing more safety, we can then conclude that STOs are the new beginning of cryptocurrency and blockchain technology as well, sometimes I do refer to blockchain technology as the new world, its adoption is moving vast to each part of the world, and it is transparent as it records on an open ledger, so this brings more transparency and simplicity to the finance market.

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

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The major difference between ICO and STO is its security, they are both tokens raised through funding before launching, but STO is more secure as it has undergone government authority and it is also created to be a stable investment with low volatility as they are based on real assets unlike we saw in ICO.

Security Token Offering	Initial Coin Offering
More legal obligations	Fewer Obligations
Made for Utility and Investment	Made for investment only
Backed by the authority	Not backed by the authority
Based on real investment	Doesn't base on real value investment
Well regulated and reliable	Less regulated and risky.

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IPO also known as an Initial public offering, is the funding process that works in a way that private company issues some shares of the investment to the public before going live, they served the purpose of private exchange by releasing some part of the assets to the early investors, but this is done differently than IEO, whereby the investors receive a document to represent their investment, but in IEO, this is done through a cryptocurrency exchange, it can be DEX or CEX, where the user offers some of there assets and stake on the funding project to participate as an early investor and get some shares of investment before going live.

Initial Public Offering	Initial Exchange Offering
Private Organisation offering shares to the public	Cryptocurrency exchange offering fungible tokes at a stake level before going live.
Backed by real assets	based on cryptocurrency projects
More security: as they have undergone regulations	Less security and less reliable than IPO
Assets based on Private investments	Assets based on cryptocurrency investment.

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List and explain some types of security tokens.

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The security tokens are of three types which are Equity tokens, Assets-backed tokens, and debt tokens as well.

Equity Token - These are the security tokens that represent shares in a real financial company, this is done in a way that the equity token holders also have the same entitlement to the company's ups and down, which means they get to participate in the company profits and share their loss, and also extended to the part where they get to participate in decisions making in the respective company they had invested on.

Equity token also has their information recorded on the blockchain whereby the investors get to see the development of their assets, and this is one of the different types of security tokens.

Asset-Backed Tokens - Assets-backed tokens are the digital token representation of real financial assets, for instance, estates and art, but this asset uses blockchain technology to secure the investment and also use the blockchain technology for record of their transactions.

These tokens are more secure since they use blockchain and store information on the open ledger and this made them a more transparent mode of investment.

Debt Tokens - This is more like a loan agreement between investors and a company, but these loans are given on a short-term agreement, These contracts are created on the blockchain network and act as a security, the loan interest is dependent on the company dividend and the risk involved in the loan.

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

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Yes, the previous explanations I have given regarding security token has proven these tokens to be more secure and reliable, These are token backed by real assets, and the fact that they are being scrutinized by the authority makes them more reliable and they are based on real-world assets as well.

The security tokens can be a digital representation of stock assets or a digital representation of real estate or arts, these are financial institutions that hold a large part in the money realm and these are safe investments as they are certified by the authority, they are transparent and recorded on an open ledger meaning there could be no scam undergoing background without anyone being aware of, so it is safe to say they are a safe investment.

Participating in a Security token is equally easy as well, You can participate as an investor or rather as the project builder, the first requirement is the use of Blockchain Technology.

The use of blockchain is to guarantee the safety of the network, whereby transactions have to be recorded on a safe and open ledger.

KYC - Know Your Customer, this is also a vital part of the Security token, the identity has to be made aware to the public to avoid any scams on the network.

AML - Anti Money Laundering, this is also a part to scrutinize and ensure the money invested into the assets is a real asset and not an organization's funds that had recently been stolen.

These are a few steps required before participating as an investor in the Security tokens.

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Conclusion

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Security Token offering is the digital token of real-world assets, this is tokens that comply with the authorities and are a more secure and reliable mode of investment, these are digitization representation of assets like gold, stocks, and estates but uses blockchain technology.

There are three types of security tokens, such as Equity, Debt, and Asset-Backed Tokens, this all varies in their several modes of investment but offers more safety and credibility than ICO.

Thank you everyone for coming, I hereby invite @solexybaba, @josepha, and @Sahmie to participate in the contest as well.