What is STO and Why Is It Going to Replace ICO in a Near Future
During the last couple years the crowdfunding market began to develop rapidly. ICO or initial coin offering – is not only a very convenient way of raising capital for further project’s development, but also a very profitable investment tool. But there are many troubles on this market, which need a solution. In this article we will talk about a new type of crowdfunding on the cryptocurrency market (STO), find out how it differs from the ICO and what is its future.
1. The main problems of ICOSo as it was mentioned before, the ICO reputation suffered during 2017 – 2018 years. The sad statistics indicates that the vast majority of cryptocurrency startups that conducted public ICO, failed. There are many scammers on this market, whose activities are aimed only at personal enrichment. In 2018 general investments in ICO amounted to more than 18 billion dollars, and by the end of the year all projects brought only losses and frustration to their investors. Because of this, the regulators began to actively monitor start-ups that raise their capital through crowdfunding. Users can purchase two types of digital assets in a process of participation during initial coin offering:
- Payment Tokens. They can be used to pay for different goods and services, offered by a company- issuer.
- Utility Tokens (or useful tokens). They allow using some specific services, offered by an issuing company.
2. What is STO?It worth noting, that there is one more type of tokens - Security Token. This variant of assets is very similar to traditional stocks, to which everyone has already managed to get used on stock markets. The main feature of this type is that their owners, in fact, have the right of ownership of a certain share of a company. Such kind of investment is fully protected by regulators. It means that company's failure to fulfill financial obligations to its investors will entail legal proceedings. Many experts note, that STO will replace ICO on the crowdfunding market. The matter is the best features of ICO and IPO were united in this investment tool. STO got that level of security, which IPO has, and also the relative simplicity and accessibility that is inherent to ICO.
3. Who can work with STOSEC has developed rules for investors who wish to participate in STO.
- An investor must have net worth of $1 million. It is worth noting that this amount does not include the market value of the investor`s real estate in which he lives.
- The investor should have net income of 200 thousand dollars a year. If we are talking about a married couple, their total annual income must be at least 300 thousand dollars a year.
- If we talk about an organization, its net assets must be at least $5 million in order to participate in STO. Also, all members of the company must be accredited investors.