Steemit Crypto Academy Contest / S6W6 - Security Token Offerings STO

Hello everyone!

Security tokens are the new revolutionary things in the crypto era as well as in the traditional financial system. These are more secure than the other offerings.

_{Image designed by me by} ^Canva

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

STO stands for security token offerings, it is likely the shares or contracts of a company. As we have heard about, a person is buying the shares of a company and someone is investing in that company making a contract or investing in their shares. And while buying those shares of the companies there occurs an agreement between the stakeholders which is written in PDF form or on some paper to keep the record. It means these are some physical contracts.

Security Token Offerings play the same role where the shares and Investments are done through the blockchain technology and through the smart contracts. Security tokens represent real life assets such as prizes, bonds, stocks and even people use security tokens for the gold representation as well. These contracts are made publicly where anyone can see these contracts and it has more transparency. Security tokens are the digital assets which represent the share the token of the holders. And these contracts are irreversible and the data of these contracts is saved on the blockchain ledger where it can be found at any time.

Security tokens are the digital assets like the crypto currencies but these are the unique tokens which cannot be exchanged like other crypto currencies at different exchanges. And these tokens are the regulated tokens which are approved by passing the lawsuits and legal framework of the government. So there are less chances of scam.

Security Token Offerings are the open sales just like the initial coin offerings and initial exchange offerings which are run to raise funds for the foundation. And anyone can participate in this offerings. And the foundation rewards the buyers after the proper launch and benefits are given to the holders.
So it is how security tokens are used and these play roles.

---

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

STOs are the new evolutions to the world of cryptocurrencies as well as to the traditional financial world. It is the unique and only thing which connects the crypto as well as the real world assets at the same time. STOs had already changed the traditional contracts of investments in different assets into the digital and smart contracts where all the data is stored on the blockchain ledger. More amazing impacts of STOs to the crypto and the traditional financial system are given as follows:

Scam Protection

STOs are the best evolution to the crypto world and these are the most protected version of the ICOs as in the ICOs the owners do not abide by the government laws and they can sell the tokens by their own first and then the other holders do not find that price. But STOs are followed by the legal frameworks and these are more secure.

Transparency

STOs bring transparency to the crypto world. The smart contracts are irreversible and this data is stored on the blockchain ledger where anyone can access this data and view the transactions or contract.

Security

As STOs are followed by the government lawsuits and legal frameworks so these are more secure than any other crypto assets where holders are given the proper protection with the government laws.

Reliability

STOs bring reliability to the crypto era due to the involvement of the blockchain technology. The investors can easily rely on these offerings rather than the ICOs where there is no record of our transactions and the owner can run away getting the money from the investors. So in this regard STOs are more reliable and secure.

Digitalization

STOs are bringing the traditional financial world to the digital world where the data is stored in the digital contracts. Due to this digitalization the records are also safe and sound and can be accessed at any time from anywhere. There is no need to hold the hard papers with you as proof.

Bridge between Crypto and Real World

STOs are playing an important role in connecting the crypto world to the traditional financial world. As in STOs as a security of the real life assets digital security tokens are distributed which have specific values. So STO is the thing which is connecting the crypto world as well as the traditional financial world while making it more secure, reliable and transparent.

Low Fee Infrastructure

Another biggest advantage of STOs is less fee because of the involvement of the blockchain and crypto technology. As in the traditional financial system there are some third parties which charges us along with the company as well. But in the cryptocurrencies we do P2P transactions where there is no any central authority or any third party.

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

These are the schemes and offers through which the organizations raise funds. But these are little different from each other so let's see how these offerings works and how are these different from each other?

STO and ICO

As explained earlier that STOs are the security token offerings. And ICOs are the initial coin offerings. Both are the same things but different from their workings, lawsuits and legal frameworks. ICOs are easy to enter with no lawsuits. STOs require proper rules and regulations. More differences given below:

STOs	ICOs
Regulated	Unregulated
More Secure	No secure
Transparent	No transparency
Represent Real World assets	Digital assets
Actual ownership is given	Crypto tokens are distributed
More reliable	No reliability
Government involvement	No government involvement

---

IPO and IEO

IPO stands for the initial public offerings , as it is also used to raise funds so the companies give their shares to the public and raise funds by allocating them an ownership document. This is most likely the traditional financial system. These are open for the public.

IEO stands for the initial exchange offerings where the exchange raises funds for their projects by giving users cryptocurrencies which can be exchanged at the crypto exchanges. This record of transactions is stored in the blockchain. Users should have account at that exchange if they want to participate in the IEO.

IPO	IEO
Public sale	Sale for the exchange users
Ownership documents	Ownership crypto tokens
Transaction on paper	Transaction on blockchain
High fee	Low fee
Complex procedure	Easy procedure
Company rules	Exchange rules
Involvement of legal frameworks	No legal frameworks
High profitable	Low profitable

So it is all about the different types of the initial offerings.

---

List and explain some types of security tokens?

As security tokens are making their space everywhere and security tokens are being used in different forms. Types of security tokens are given below:

• Equity Tokens
• Debt Tokens
• Real Asset Tokens

Equity Tokens

Equity Tokens are those tokens which represent the share in the company. Equity tokens make eligible the holders to have share in the profit of the company. These tokens make the holders able to vote for the proposals. And the record of equity tokens is recorded on the blockchain where it is public and irreversible.

Example:-

Documo is a company which is launching the first equity token offerings to raise funds by allocating shares of the company to the investors. There will be no involvement of paper documents while it will be recorded on the blockchain ledger and DCMO token of the company represents the share of the investors in the company.

Debt Tokens

As from the name it is the clear that these are those tokens which are used to take debts. These debt tokens represent the real estate mortgages. Smart contracts created for the debt tokens remain at the blockchain and these contracts represent the security for the loan. So these security tokens are used to take short term loans. The price of debt tokens depends upon the dividend model by the company.

Real Asset Tokens

These are those security tokens which represent the ownership of the particular assets including real estate and commodities. These tokens can also represent an art. The record of these tokens is securely saved by the blockchain technology. Due to the involvement of the blockchain technology these assets make the secure transactions. And these tokens have their own specific worth and real asset tokens work itself as an asset.

---

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

First of all before investing in any project dive into that project, collect information about the project, and DYOR (do your own research). Keeping in view the whole discussion we can easily conclude that STOs are more secure and reliable than other coin offerings such as ICOs, IPOs, IEOs. Because STOs are launched by passing the rules and regulations, lawsuits and legal frameworks of the government. And on the other hand the data is stored on the blockchain where it cannot be removed or changed.

If an STO breaks the lawsuits it the legal frameworks then it has to face the consequences being offender of the laws of government. So we can easily say that these have more security layers and more secure and reliable. And if I get a chance to invest in these coins then I will invest in an STO as these are backed up by the real world assets.

How to participate?

There are a few requirements to participate in an STO, and these are given below:

• Firstly find your interest for your investment and find a company who is offering an STO as required by you.

• Then check the rules and regulations and some other required legal frameworks of the company which is offering STO.

• Beware that you do complete research to find out if the company is real and your investment cannot be stolen by any fake contracts.

• Then after doing the basic research in order to participate we should make an account on that platform where STO is going on.

• Always use your true details because due to lawsuits these companies may require to verify your identity.

• Then complete your KYC if required by the platform to ensure your identity.

• After the approval of the account we will be able to participate in the STO and can buy these real life assets.

• In order to make a purchase we have to use the supported wallet and to pay gas fees there should be some extra money.

---

It is not fixed that every platform will use the same procedure but it may be different depending upon the platform.

---

Conclusion

In the final thoughts I can conclude that security tokens are more secure than other tokens as these are backed up by the real world assets. STOs are more transparent because of blockchain technology. STOs are more secure because of legal frameworks and lawsuits followed by the government. STOs are easy to invest in the projects with the low fees and without the involvement of any third party. STOs are working like a bridge to connect the crypto world and the traditional financial world.

---

Thanks for reading

---