We are all invested in a project in some way, is it time, money, effort or all of these. Within the cryptocurrency industry, investing is all you do. You pick the project that seems right for you and purchase your desired amount of coins that match your portfolio. As most people know, it’s all about finding the right moment to purchase and eventually finding the right moment to sell. One of these moments can be before the project is listed on any exchanges. Lately, we have been exploring ICO and IEO territory but there is one more form of investing in projects prior to exchange listings. The STO, short for ‘Security token offering’. In the same way as the ICO or the IEO, the investor is issued a coin or token that represent your investment. The difference here is that a security token represents an underlying investment asset. These assets can range from stocks, bonds and funds to real-estate investment trusts. Wherewith IEO and ICO an investment is purely speculative and represents nothing more than the issued currency, the STO is, in fact, a more secure way of investing.
As the more regulated version of a token offering, the STO might remind some investors of the IPO, the Initial Public Offering. The more mainstream offerings that allow investors to purchase stocks, certificates and others of private companies. We have seen this happening by Start-ups like Facebook, Twitter, Uber and many others. The big difference here is the elimination of the middleman in the process of the offering. With an IPO, there’s usually a big amount of fees to be paid to the listing broker or stock market. This broker is the same party that the interested person needs to utilize to become an investor. The STO takes out the middleman and allows anyone to directly utilize the STO platform that’s built on a blockchain and perform their desired investment. The more decentralized way of investing.
What kind of STO are there?
With ICO and IEO, all the offerings in the past are blockchain orientated and the investment strategy is solely focused on those already active within the industry. With STO this is fairly different. The STO approach a marketing strategy that aims for those not aware of the benefits of the decentralized technology. It’s aiming for the people that want to get in on an investment opportunity without having to deal with all the hassle of brokers and complicated exchanges. In general, STO are fairly simple; you put in the cash and you did the investment. This allows all sorts of assets to be ‘tokenized’ and up for offering for the public to invest in. After doing a quick search it’s evident that the STO reach through every industry that’s out there. A quick overview:
- Real estate
- Lottery companies
- Investment funds/Venture capitalists
- Cryptocurrency mining company
- Start-up Incubators
What are the reasons for investing in these STO?
The most logical answer is of course; money. Same as any other investment opportunity, the biggest incentive is to increase your capital. The thing with STO is that the act of holding tokens brings the token holder some rights. Think off sharing in the profits in forms of receiving dividends or simply acquiring pieces of the profit that’s paid out to the token holders. Another right that’s brought to token holders it a voice within the company. You receive the right to vote for certain decisions or voice your opinion during general shareholder meetings. This system allows investors to have an insight into the company they have invested in and gain control of their investment at the same time.
What are some off the success stories?
Let’s zoom in on some of the success stories in the STO industry. We have seen the enormous amounts of money raised during the ICO hype in 2017 and more recently some IEO that have raised a ton of cash. With STO it’s no different.
Nexo – Raised $52 Million USD
One of the more known and in a sense traditional STO, Nexo. The world’s first instant crypto overdrafts. Nexo allows you to use your cryptocurrency as collateral for a loan, receive cash in return and still benefit from the potential profits that your crypto might bring you. The STO was held back in 2018 and sold out in no-time. The tokens were sold for 0.10 USD a piece and at the end, 52 million USD was raised by the company. Currently, the company has been up and running for a while. The most recent news included the statement they have recently paid out $2,409,574.87 to the NEXO token holders with an annual dividend rate of 12.73%, impressive to say the least.
It’s safe to say Nexo has put their funds to good use. The raised capital has allowed them to create a sustainable and profitable company that’s there to stay.
tZERO – Raised $134 million USD
As ironic as it may sound, the tZERO STO has allowed tZERO to become a platform that allows STO to happen. With their own STO being the first STO that they offered, they’re currently focusing on tokenizing digital assets through blockchain technology. T-Zero is making it possible to raise capital for any party and any non-accredited investor to invest in these parties that are raising capital. Next to their STO platform, they have created the ‘Crypto App’ which is basically a crypto wallet that allows you to store Bitcoin, Ethereum and surprisingly, Ravencoin.
Something different from the more traditional IEO/ICO, the STO do not share any roadmaps or future plans whatsoever. Because of this, it’s hard to tell what the recent plans are surrounding tZERO. They have the capital for a long lasting future, let’s see if their plans become reality.
If you are looking for a more secure way of investing in the digital economy, STO might just be your way. It’s an easy and effective way of investment for investors of any kind. Note that the examples given above are the success stories. With any type of investment, there are tons of companies that fail to succeed and do not live up to their promises. Always do your own research and never blindly invest in any asset, whether it has any underlying asset to back up your investment. That’s probably the most valuable lesson, always do your own research!