Security Token Offering (STO) is a fundraising method that involves the creation and distribution of security tokens to investors.
Security tokens represent ownership of a real-world asset, such as a share of a company, real estate property, or artwork. Unlike Initial Coin Offerings (ICO) that issue utility tokens that provide access to a platform or service, security tokens must comply with the regulations of security laws.
STOs are seen as a safer alternative to ICOs as they offer a more transparent and secure investment opportunity. Security tokens are backed by assets, which provides a level of protection for investors. Additionally, STOs are subject to regulations and restrictions, which prevent fraud and manipulation.
The process of STO begins with the creation of a security token, which is built on blockchain technology. This token is then sold to investors in exchange for funds, usually in cryptocurrency. The security token acts as a digital certificate of ownership, and its value is linked to the underlying asset.
