Steemit Crypto Academy Contest / S6W6 - Security Token Offerings STO

Hi steemians,
Welcome to my blog today. I will be presenting my seventh entry in the steemit engagement challenge today. This is the last week of the steemit engagement challenge for season 6 and the topic of discussion for the week is "Security Token Offerings STO". Without further ado, let's look at the topic by answering the questions below.

When we talk about security token offering (STO), we are referring to a digital token that is completely supported by a form of technology called blockchain technology. Here, due to blockchain technology, the security token offering (STO) gives room for digital funding and at the same time, it is overseen by the laid down regulation by the government.

These government regulations keep some checks on the STO and for that reason, it is not allowed to be traded on some most populous crypto exchanges. It is important to mention here that the STO is similar to ICO because they are all fungible tokens. This simply means that they all have a monetary value attached to them.

I have said earlier, that the government puts some checks on STOs and this is a result of the ugly incident that took place in 2018 where the crypto market cap experienced a drastic fall of over $750 billion in an ICO. That was a big blow in the crypto space hence some regulatory bodies seek ways to ensure that this doesn't happen again by coming up with the STO. So in other to avoid this ugly incident STO was created to abide by certain rules and regulations.

As we have earlier established, security token offering (STO) works via blockchain technology but in this case, it has some regulatory bodies that have kept some checks on it I.e the regulation to keep the token in check by the government or appropriate authority.

Now, since STO has a regulation that keeps it in check, the investors also receive shares only from companies which have been deployed to work based on the blockchain following all the laydown rules and regulations of the government or any authority in charge.

Due to the laws and regulations of STO, tokens here are considered more secure though there is not much flexibility as it is in ICO for the safety of your asset, STO is the best. ICO is flexible but also very risky because like my illustration of the event in 2018, billions of dollars can be lost in ICO investment within a blink of an eye but that is not possible with STO based on the rules put in place.

Indeed, STO has brought many good things to the world of cryptocurrencies and the world of traditional finance and in the paragraph below, I will explain a few of them.

Investment Trust:You will agree with me that STO has brought crypto investment trust to its users. As we know, STO is backed with prices of a real-world asset and also has some regulations that control the asset. Whenever an investor is coming, he/she will be certain about the investment he/she is entering based on the security and regulations guiding it.

Adoption of Cryptocurrency: STO uses blockchain technology and for that reason, companies and investors are travelling the line of cryptocurrency for their investment purposes. This help to make crypto more popular to the world at large.

Transparency: We know that STO is based on blockchain technology and one of the characteristics of blockchain is its transparency. Here Investors and Companies are very much satisfied as they can see information about the happenings anytime and anywhere they find their selves.

Lesser Risk: Since the STO has government regulations guiding it, it has less or no risk attached to it, unlike the ICO. The asset in STO is not much volatile since it has some regulations guiding them. For that reason, the risk attached to investing in it is quite very low.

The major difference between a security token offering and an initial coin offering is the security attached to STO. Here, STO has regulations which make it not flexible as the ICO. The table below is a few notable differences between STO and ICO.

On the other hand, the difference between IPO and IEO can also be seen in the table below but before we proceed, let me give an overview of what both of them are.

IPO which stands for Initial Public Offering is a funding process where a company give out some of their shares to some members of the public who will, in turn, acts as a shareholder because both will sign an agreement before the company will bring the asset to the entire public. At this stage, the first persons who have signed this agreement are already stakeholders and they will be holding much of the token.

In the case of IEO which means initial exchange offering, this is done in a cryptocurrency exchange platform be it centralized or decentralized in nature. Here users stake a few assets to get the new asset that wants to be launched. You can get this asset by staking the required token before it officially comes to the market.

There are three types of security tokens namely Equity tokens, asset-backed tokens and debt tokens. Let's look at them one after the other to see their differences.

Equity tokens: This is one of the types of security tokens which they represent shares in a company. This type of token holder has full rights to the company just like the shareholders as they can participate fully in the happenings in the company. Here, it is important to mention that even the details of the equity token holders are recorded in the blockchain.

Asset-Backed Tokens: This is another type of security token which represents real-world assets. A good example of these types of real-world assets includes art, real estate etc. These assets are securely recorded on the blockchain for maximum security. Based on blockchain usage to store data, is more reliable because blockchain is immutable. Since they are also stored on the blockchain, they act as digital assets.

Debt Tokens: The number three type of security token is the debt token. Here, this type of security token works like a loan given by an investor to a company. The loan is created on a contract in the blockchain to act as a security. The interest in this type of loan is largely dependent on the risk involved and the dividend of the company under consideration.

Yes, I think that this type of token is secure and reliable. From the explanation, I have given above, we have established that the token uses blockchain technology which means data stores are immutable and can be seen by all since blockchain is an open ledger. Another thing I mentioned earlier is that the STO has government regulations controlling it.

More also, we have established that STO is backed by real-world assets such as art, real estate etc. And these assets are recorded on the blockchain which means that it will be difficult to manipulate things easily. Transparency and security are the watchdogs since it operates on blockchain technology.

With these few points, I consider these types of tokens secure and reliable enough to invest in it as a trader. The government has your backing already with the rules they have put in place to protect your entire interest.

To participate in security tokens, you first need to be familiar with blockchain technology since every record or data is stored on the blockchain for security and transparency seek.

KYC: KYC stands for knowing your customers, before participating in the security token, you must ensure you know the real identity of those involved because without knowing their true identity you may be scammed if you know, you will be able to know where to channel your problem when things go wrong.

Aim of the project: The main aim of the project should be stated crystal. Investors need to know the exact aim that the project is driving and where they tend to take the project in the nearest future. A roadmap of the entire project should be made known and ways to achieve the set goal as well.

Security token offering (STO) will go a long way in making cryptocurrency more famous in the world based on the security measure and the regulatory measure put in place by blockchain technology and the authorities under consideration. Based on these, the rate of scams in the crypto space will reduce drastically because of the government backing of any of these projects. I want to invite a few friends to also join this contest today @lhorgic, @harferri, @suboohi, and @heriadi to also join the contest.