ICOs and STOs

With ICOs, companies have been able to collect a lot of money for a long time. But this time is over. Although ICOs are still taking place and they can be successful, but the future clearly belongs to the STOs.

What are ICOs?

At ICOs (Initial Coin Offering), companies issue Utility Token and get the money to fund their project. Utility Token are not financial investments. The owners of a Utility Token can use these token on the platform of the project. For example, the token can be used to unlock special features or to offer services and products on the platform. The token are mostly traded on exchanges. A dividend for the token will not be paid. The benefit is only to use the tokens on the platform.

But this leads to a fundamental problem:
The owners of the token have two options: they can use them on the platform or they can speculate on price gains and trade them. But exactly here is the problem, because the owners usually have no interest or also not the opportunity to use the token on the platform. Imagine, anyone who buys a Daimler or Tesla Utility Token also has to use it and need to buy a product from these companies. This example shows the basic mistake of many Utility Token. Therefore the Utility Token become pure speculation objects on the exchanges, but not a real, long-term investment.

Although there are also useful Utility Token and platforms that have perfectly integrated them. However, these are in the minority.

What are STOs?

At an STO, (Security Token Offering) token are issued again, to fund the projects of the issuer. However, the so-called Security Token have not the benefit to use them on the platform of the project. These token are in principle classical investments. The Security Token give the owners certain rights which the issuer determined. The most reasonable is a dividend, because this provides the owners of the Security Token along-term and constant income. Security Token thus gives the owner the benefits of a stock. And that’s exactly how to look at an STO: it’s like an IPO based on token. The issuer can determine the rights of the owners themselves.

What will come?

In the long term, Security Token and the Security Token Offering will be an opportunity for companies to raise money for their project and for investors to invest in projects that pay dividends. ICOs and Utility Token will continue to exist, they will not die painfully. However, they will play a minor role in the future when it comes to a project´s financing. ICOs exist longer than the STOs, and experiences with ICOs and Utility Token were important for the STOs. In this sense STOs are a further development thanks to an intelligent market.