Three Reasons why Security Token Offerings (STO) are Becoming Popular

To say that the cryptocurrency market experienced a torrid time last year would be an understatement. The bearish trend affected the prices of cryptocurrencies in 2018, with most of them losing over 80 percent of their value. The trend has crept into 2019, and the market is still looking bearish.

However, the cryptocurrency space recorded growth last year despite the decline in price. The rise in security tokens has breathed fresh air to the crypto space. ICOs have been the model for crypto companies to raise funds. However, the model was flawed, and it faced a lot of criticism from financial experts. The fund-raising process was banned in some countries due to the presence of con artists that scam investors of their funds.

Security token offerings an alternative to ICOs

Security token offerings (STOs) have become the new attractive alternative to ICOs. The process continues to experience growth, and with its numerous qualities, has attracted the attention of investors in the crypto space. Here are three major reasons why STOs will continue to become popular.

Tokens can be reissued

One of the primary fears of cryptocurrency investors is losing access to their digital wallets containing their funds. Some investors and traders have over the years lost funds after they lost access to their wallets or lose their wallets to hackers. Users have been unable to recover those funds, and that has presented a problem to the crypto space as it drove away potential investors.

STOs, however, don’t have that disadvantage. The security tokens can be reissued to shareholders in case access to wallet is lost or stolen. These benefits will be granted after appropriate checks and confirmations are done. Despite that, it is something the cryptocurrency space has taken favorably to.

Increased transparency

The transparency levels of STOs are higher compared to ICOs. There have been trust issues in the cryptocurrency world due to sparse information on development teams of most projects. STOs have solved these issues by enabling investors to obtain full information about issuers of security tokens. Investors will also be able to see all the tokens issued or promised and those restricted.

They have intrinsic value

Cryptocurrencies have often been accused of lacking intrinsic value. Security tokens are a shift from that. Security tokens give investors a lawful right to ownership of the permanent value of the issuing company. The holders, in this case, have more prominent incentives with reduced investment risk.

The interest of investors is protected via dividends, profit sharing, voting rights, and other benefits. This makes them different from utility tokens where issuers are promised future access to a product or service from the issuing company.

hassan

Hassan is a prolific writer of crypto currency news, forex updates and the stock exchange market.
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