Explore the Security Token Offering list (best STO’s) and find the latest and best projects you can invest your money in. In this article, we're going to talk about everything you need to know about Security Token Offerings. You'll learn what a security token offering is, the differences between STO vs ICO, plus get a list of the best security token offerings. Later, we’re going to reveal the top three traits that every winning Security Token Offerings needs to have to be a good investment.
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Many people are saying that security token offerings (STOs) are going to replace the more popular initial-coin offerings (ICOs) in the crypto world soon. According to data analysis from Inwara, Security Token Offerings have increased by 130% during the first quarter of 2019 compared to 2018.
The total funds raised in Q1 2019 were $122 million. These figures pale in comparison to the $7 billion raised through Initial Coin Offering ICOs in 2018. However, due to regulatory pressures, this trend is about to change more in favor of the Security Token Offering STO.
If you want to learn how to buy a crypto ICO you can read how to HERE.
Now let's learn the differences between an STO vs ICO.
What is a Security Token Offering (STO)?
Let’s start by looking at what is a security token offering is.
Security tokens are the intersection of blockchain technology and traditional assets.
This is supposed to be the next big trend in the crypto space.
They are easy to understand and are probably the most simple thing you’ll encounter in the blockchain space.
To better understand them, let’s assume you want to buy shares within a company (the process can be done online). The receipt of your ownership of that share will either be stored on paper or in a PDF and then you trade the share on a stock exchange.
The only difference between this and the Security Token Offering (STO) is that instead, we create a token which represents that share and then we trade the token.
For example, if Apple decides to issue security tokens which represent their shares. With every share they have, they’re going to have one security token. Instead of trading the shares, we simply trade those security tokens.
Many companies use security tokens so they can raise capital from investors to fund other parts of their business.
Let’s move on and discuss why it’s important for us to understand how they could impact the crypto market. In about 5 to 10 years, it’s very likely to see security tokens dominating the market. ICOs may still be around, but they’ll have a smaller portion than its current market cap.
If they are so simple, how can STOs be that revolutionary?
To answer this question, we’re going to run through the advantages of STOs and see the benefits of having an STO vs ICO.
STO vs ICO - What's the Difference?
The main difference between an SCO and an ICO is that SCOs are security, and ICOs are a utility. How does a utility token compare to security tokens?
Many projects in the past have tried to sell utility tokens. In return, they give future access to platforms or Dapp. In this case, the purpose of this token is for usage, not for investment purposes. In the past, most cryptocurrencies started as an ICO (Initial Coin Offering).
On the other hand, the Security Token Offering STOs are similar to an investment contract. STOs represent equity in a company, profit sharing, and even voting rights.
The advantage of security tokens is that they are governed by security laws. In this sense, security laws are stricter in order to offer these security tokens. That’s another reason why many companies are switching to utility tokens.
The transition will happen very fast because ICOs have a bad reputation as a result of scams that exist.
Most ICOs are utility tokens, so it makes sense to take a look at the differences between a utility token vs a security token:
Ownership of Asset vs. Access to the Protocol
When you buy a security token, you actually have ownership of assets. However, when you buy a utility token, you only have access to the protocol.
Basically, with an STO, you’re buying shares of the project as opposed to ICO where you’re buying a native token that will give you access to their platform.
Investors (expecting profit) vs Purchasers
Security Token Offering (STO) sells shares to its investors in return for a profit. As an investor, you are lending them money for their project. In return, as the project grows, you can grow with the security token and expect a return in profit.
Of course, no one can guarantee a profit for anything in the investing world.
On the other hand, when you buy an ICO, you’re not an investor but a purchaser. You’re not buying in for investment; you’re buying into the actual product or project. You’re buying a stake into the ICO by owning that utility token.
Regulated Offerings vs Unregulated Crowdsales
STOs are regulated offerings that require going through a certain protocol – KYC (Know Your Customer). The security token offering is actual financial securities backed by something tangible like assets or the revenue of the company.
STO offers a layer of protection against fraud that you don’t get with an ICO.
On the other hand, utility tokens are unregulated crowdsales, which don't provide the buyer with very much protection.
Now, let’s see if buying a Security Token Offering is the right thing for you.
Who Should Invest in Security Token Offering
Retail crypto investors should invest in Security Token Offerings. STOs are considered to not only be an ICO killer, but also the next big thing in the crypto space. However, investing your money in STOs is a new venture which can be risky. So, you need to educate yourself on the topic.
The associated market opportunities make STOs a very attractive investment for the retail crowd.
What you need to know is that there is also some limitation with who can invest in security tokens. If you live in a jurisdiction with strict regulations, you might not be eligible to buy security tokens.
Due to US registration requirements by the CFTC and the SEC, US investors are not allowed to invest in security tokens offering that occur outside the U.S.
As a U.S. citizen, you may be limited to only buying STOs that takes place inside the USA.
How to Invest in Security Token Offering
Learning how to invest in security tokens requires the following three key principles. Every successful STO needs to adhere to these three tenets. STOs are high-risk, high-reward types of investments, so before you go and pull the trigger, be sure that your preferred STO can adhere to the following criteria:
- Scalability and Market Adoption
- Reliable Team Behind the Project
Scalability can help the STO project gain a market edge. However, in order for an STO project to gain mass adoption, we need a compelling idea that solves an urgent problem.
How large is the opportunity?
This depends on how large the industry the STO wants to tackle is. The bigger the industry, the bigger the opportunity for an STO to succeed. Last but not least, their blockchain technology needs to be unique and stand out from its competition.
However, a good idea without a professional team to run it can be worthless. A talented team is the life force of any business, and the same is true in the crypto space.
That’s why the second critical element suggests that the potential of an STO is based on the team behind the project. Ideally, an experienced team will display strong expertise in their respective industries. This is the hallmark of a successful Security Token Offering.
A team with a strong track record in launching successful blockchain projects will ensure that these people are capable to bring life to the STO project.
It goes without saying that a blockchain project without a plan is just a wish.
The execution of the STO project will ensure the success or failure of the Security Token Offering.
There needs to be some proof that the STO has a working prototype. Otherwise, it's just a “smart idea” written on fuzzy white paper.
Are you looking for the best list of STO to invest in 2019?
Below, we have composed the top security token offering list (best STO’s):
Security Token Offering List (Best STO’s)
The market opportunities that currently exist as a result of this upcoming trend are enormous. This is why we put together the complete and curated list of the leading security token offering STO that you can invest in 2019.
BlockEstate is a security token that is set to transform the real estate industry. Homeownership among millennials is near an all-time low because many can’t afford the down payment. Buying your first house can be difficult as financing is tough.
The solution to this problem is BlockEstate which enables property investment- even for first-time buyers. BlockEstate is a US-based real estate fund that uses Ethereum and blockchain technology to tokenize the housing market.
The advantage of using BlockEstate is that it will reduce the costs associated with the sale and purchase of the house. As an investor, you’ll benefit from capital growth in the housing market and realize an immediate rental income return.
Polymath is one of the best security tokens to invest in 2019. Polymath is one of the most successful STOs as it has raised more than $207 million. Polymath is a security token platform that serves two main purposes:
- Enables securities to migrate on the Blockchain as cryptocurrencies.
- Enables the ability to create security tokens.
Basically, Polymath wants to introduce a system where a cryptocurrency can sell security tokens to the public without having to worry about running into problems with existing laws. The potential market for this is huge.
Securities have been around for many years, and institutional money is much more likely to invest in STOs. On top of that, a token that allows investors to own a part of the company and claim profits is going to be valued at a higher price.
Blockchain Capital (BCAP) was founded in 2013 with the primary purpose of helping entrepreneurs build projects based on blockchain technology. So far, BCAP has financed over 75 companies and projects. So, if you invest in this security token, you invest in its entire current portfolio.
Blockchain Capital, in a broad sense, is like an investment fund or a venture capital firm.
Conclusion – STO vs ICO
To summarize, it’s important to understand the fundamental differences between STO vs ICO. STO edge over ICO remains to be a safer instrument, as it has strict regulations. Security tokens are becoming big and our security token offering list (best STO’s) gives you a glimpse into what the best STOs you can invest your money in 2019.
As an investment philosophy, we recommend to invest in trends and pick the outliers. The projects that perform best in the market usually have the biggest market and efficiency. It’s very easy to make mistakes when picking the best security token offering STO.
By investing in a trend even if you’re wrong about the STO project, you’re much more likely to get a positive return on investment.
Thank you for reading!
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