Bitcoin Forum

Initial Coin Offering (ICO) has become a very popular method of crowdfunding recently. During a few years, a great number of funds were raised by means of ICO. It helped many startups, their teams and investors gained success and realized amazing ideas. But also participants of ICOs faced the risks connected with investments in scam projects. That’s why the new instrument such as the Security Token Offering (STO) appeared.

During the ICO the utility tokens are issued. By buying the utility tokens the investors acquire access to the products or services in the future and teams attract the funds for the finance of their blockchain developments. Utility tokens are purchased exclusively for internal calculations, the exchange between users, fees for the provided functions of the software, and so on. Investment is required to simplify the use of the service.

So what is Security Token Offering? STO means the emission of digital assets in accordance with requirements on securities legislation. In 2017 the SEC stated that security tokens fell under the regulation applicable to standard shares, i.e. the release of tokens must be registered mandatory. For one side, the security tokens provide a higher level of protection for investors and reduction of regulative risks for emitents. The holders of security tokens have the right on dividends or voting power. From the other side, security tokens require higher costs for the issuer, as STO is a type of private placement of securities, while ICO is only one type of crowdfunding.

The issuing of security tokens consider the range of requirements that should be met. First of all, the emitent must understand the legislation of the chosen jurisdiction. There are a set of documents issued by SEC regarding the STO. The only high professional lawyer can understand the difference between Regulation A or Regulation S and so on. The emitent should be ready for the higher costs on legal services, as well as compliance. The KYC / AML procedure with such type of placement will consist of several stages. All accredited exchanges strictly require these procedures during the placement of security tokens. Also, the SEC requires that every investor should be checked and has the status of the accredited investor. These aspects make the fundraising much more difficult compared with a similar process during ICO. STOs and ICOs target a different audience, as only professional investors can participate in such placements. So, STO and ICO are two different investment attraction mechanisms aimed for different situations.

One more fact is that the STO requires a different marketing strategy compared with the ICO. The marketing during the ICO is based on attracting and building the community in social media. While the participants of STO are a professional investor, that’s why the marketing should be more complicated as well as more expensive.

The infrastructure for listing the security tokens are not formed yet. There are few licensed trading platforms where the security tokens can be placed. That’ why the utility tokens issued during ICO are more liquid than security tokens.

STO guarantees a higher level of security for investors as such tokens must be registered in the SEC, so it avoids the possibility of scam projects. ICO can’t provide such guarantees for investors, but they have a low level of entry allowing investors with a different range of incomes take part in the projects. STO considers a higher level of entry that’s why the range of investors is less.

STO consider an opportunity for companies in the real sector of the economy, which are not connected with blockchain technology. Esspecialy STO can be attractive to the medium business that can not incur expenses on traditional bond issuing.

To sum up, ICO and STO have their advantages and disadvantages. The most sufficient differences between ICO and STO are:

• STO provides a higher level of security for investors than ICO;

• ICO allows attracting a wider range of investors as they have a lower level of entry;

• STO requires much more expenses for legal services. KYC/AML as well expenses on tokens issuing;

• The expenses for marketing are less during ICO than STO. Also, marketing strategy during STO is much more complicated.

STO can be an effective way of project development in the future as it is very reliable and needs the implementation of serious instruments. But nowadays it is very hard for teams to meet the SEC requirements and run the STO itself. The market of STO should form all necessary conditions for projects. ICO instruments are clearer and easier now, that’s why more teams still choose this way of crowdfunding for project development.

topic was already discuss a lot of time here in the forum and obviously the best choice if you are investor is STO. lots of ICO turns into scam now.

I should remind you that there was a lot of exchange sites have launched IOE for ICO and you can see that and try to create a comparison between ico like bittorrent, fet, zilliqa with overrated STO that always use shillers to create a bunch of shilling thread in here like NTS and Polymath

In short, whichever is good depends on the individual's own choice. If your biggest problem is not to losing money in scam projects, STO is the best. However, if decentralization is the most fundamental, you should turn to ICOs.

I believe that STOs are an improved version of ICO and this brings us back to the question of anonymity. I think that it is more important to protect investors and to reduce the number of scams, rather than anonymity.

Exchange DX.Exchange launched trading in security tokens

Estonian DX.Exchange has opened a secondary market for security tokens. This was reported in a press release published on March 14.

From now on, companies can list security tokens issued on other platforms, and institutional investors can acquire tokens for fiat currencies, bitcoins (BTC), Ethereum (ETH), Tether (USDT) and Ripple (XRP).

The new opportunity appeared due to the existing partnership agreement of the site with the Cyprus brokerage company MPS MarketPlace Securities Ltd, which will list the tokens and act as a counterparty in the trading.

There is a very big difference between STO and ICO, which today is formed solely because of the situation with the SEC. Supposedly STO will have securety tokens and ICO will have utility tokens. All this is the difference.

STO might be a better option to lots of people, most especially those who find it difficult to identify good ICO, but if you are able to invest in a good ICO, then you would know that ICO can sometimes be the best option.

Ex-chairman of the Bitcoin Foundation Brock Pierce expects the growth of the STO market. He stated this in an interview with Forbes.

Brock Pierce mentioned Security Token Offerings (STO), which are often considered a logical continuation of the ICO model, offering a more secure investment environment.

He stated that security tokens will be the beginning of a market for many billions of dollars.

Noting that ICO could not adequately protect market participants, he expressed the conviction that in this respect STO would provide investors with a better experience.

It's always been investors protection which ICO now cannot provide I am in favor of anything that will and can protect investors because I am an investor too, if STO is the next best thing then we investors and promoters should promote it this is what hinder people from investing in cryptocurrency.

But what's stopping a team from rebranding their project and making the STO tokens worthless?

Bitfence was one of the project which their tokens was considered Security tokens as they are registered in SEC, recently they announced of rebranding their project into BITRIX. The tokens are now worthless and they are refunding their investors so how does the law apply to them to be responsible?

Yeah I see a lot of people posting the obvious, but it's too early to tell if the STO is really investor friendly crowdfunding, in the ICO early days we can only see great project and we seldom see scam project, but now it's the other way around we seldom see great project only shit ones.

with the format I have not experienced,so I can't say what is better from what I thought was information,says that STO gives more protection for investorov than ISO!If this is so, then I agree it will be a new round of development of the industry,and advertising crypto projects in General,I can only wish success to this idea,let's see how it will manifest itself in the future!

You can search on the forum, such topics have already been, why create the same topics for conversations. It seems to me that this topic will soon be removed, but if not, then there is no particularly big difference.

it's important to be mindful of dodgy STO's taking advantage of ICO's bad rep...claiming to be completely safe because they are under that category. To be clear, I'm definitely not saying STO's are bad, just saying to be careful and don't enter into any investment blind.

My fears about STOs remain principally the fact that it will increase the level of centralization in the cryptospace, nothing much different from what we currently have with stocks and shares. Cryptos should be unique, decentralized and innovative. Too much interference from government may destroy that

From investor's perspective, STO is far better than ICO that don't really have any protection for investors. ICO model doesn't care much about investor's interest because there's no way we can make project developers to be accountable but with STO, the interest of investors is well protected and they also earn dividend from their investments.

In fact basically they don't have much of a difference. Since ICOs are often misused, a new name and a few different features have been added. I consider so.

Actually, they are actually the same. There are no different purpose of them rather than funding the project.

STO, I feel ICO is winding up, if not for the IEO and the influence of Binance in the space that seems to give life into this project by now no one will want to have anything to do with ICO. Just ask this sincere question what do they bring to the table nothing, I believe STO is the path forward and people should beginning to look into good STO projects now before the scam projects flood the space

No theres a big difference aside from collecting funds, STOs are more investor friendly than ICO you cannot start an STO without proper approvals from SEC or concerning bodies depends on every country, I suggest to read this good article about STO https://medium.com/@unitedcrowd/discerning-the-difference-between-security-and-utility-tokens-5ac25912a9b4  for you to understand how it really works and what is the big advantage on STO.  

If i should choose making investment between STO and ICO, i am prefer investing my money in STO. Security token is like we having stocks or we hold the asset.

There was a time when icos was good and successful, but there has been backlash in the ico since the first quarter of 2018 STOs which just started making waves is yet to have a test of time. STOs seems to be great but the market needs liquidity which is what we expect the the STOs to achieve

At present, crypto projects are mostly startups, they usually only have plans and ideas. Therefore, there is still a large demand for ICO projects, because not every company has a large profit and a long time of work, like STO projects.

Of course, STO is better than ICO. This is a further development of the market, or, more precisely, the cryptocurrency industry. We all remember a huge number of scams in the ICO market for 2017-2018. It seems to me that, at the moment, STO should replace ICO. And in the future, there will definitely appear some new tools. After all, we are still at the beginning of the development of the crypto era.

I can see that you're more in favor in STO, so I think you already know which is best between the two. For me STO is better.

In ico you are getting a token which is basically a currency in that Project nothing else. So even Project gets profit, it is not a must that token will get value.

But in sto, token means a share of profit. So if Project is gettin profit, you are getting the share.

Sto is better because of this.

maybe the differences betwen STO or ICO on profits share.usually we called it as devidend.but personally i am pessimist they could give us profit.basicly they didnt operate trading activity or business cycle.i am confuse from which part they will give us shares.meanwhile major and existing coins didn't give us shares.

STO and IEO are new trends at this time and may soon replace ICO in the coming time. The 2017-2018 period is a huge change of this market when ICO is always mentioned by everyone but in 2019 everything is the opposite and this will probably be the ending year for all scam ICO projects. I believe we are at a very good stage of the market and make sure STO and IEO will be the two most searched keywords this year.

agree. govt have been controling the fiats market for a long time.

BitGo's custodian added blockchain Capital security token support

BitGo custodial solutions provider added support for BCAP security tokens from Blockchain Capital, a venture capital firm. Now, service customers can store tokens and use a special multi-signature wallet for the ERC-20 standard in accordance with US law.

STO can really have some kind of impact on the ICO process which today is generally considered to be a completely normal procedure for collecting and implementing your ideas, but you understand that many states simply cannot stand aside and they come up with different situations to get taxes from this .

You have said it all in your write up, STO will give better guarantee than ICO, it is not that ICOS wouldn’t have been better because if we talk of decentralized market that does not involve the use of a third party, ICO would have typically represent that, ICO started well but gradually ending as a result of bad projects without proper verification and scammers, so with the invention of STO, a lot of these will be eliminated especially the aspect of having to invest in a scammer’s projects.

From the name STO means Security Token Offering, which means there are some proven dividends to benefit from the project, and for his, I will choose STO instead of ICO.