March 20, 2019, | AtoZ Markets - In 2017, Initial Coin Offerings (ICOs) have gained public attention from fundraisers, raising around $13 million per project on average. While ICOs flourished in number and size, people started to realize its shortcomings. Over 90% of ICO projects were not feasible, failed or were just scam. With the sluggishness of ICOs, people have started to move to Security Token Offerings (STO). Some experts call STOs the next significant crypto trend. In this article, we’ll cover how to create an STO with a step-by-step guide and what key factors make up a successful offering.
How to create an STO?
Before we proceed towards the main context, you must know the basic difference between STOs and ICOs. And is STO right for you? Before we dive deep into it, you should know ‘what is an STO?’ - STO represents the ownership and the rights entitled with securities. Security holders are entitled to a right including equity, dividends, profit sharing, voting rights, etc. By using Blockchain technology, these rights are embedded into a smart-contract and traded as a token. These tokens are usually supported by real assets and comply with regulations.
First, we have to understand the difference between IPOs, ICOs, and STOs so as to answer the question “Why should we launch an STO?” IPOs are the most conventional and mature way of raising funds. Compared with ICOs and STOs, IPOs are more regulated and difficult to launch. The financial cost can be huge and listing processes can be more complicated.
Starting an STO makes sense for a wide range of industries and is much easier as compared with IPO. Thus, it is possible for a firm to first launches an STO and then go for an IPO. STOs are especially suitable for companies that have innovative ideas and have resources in the crypto industry. However, don’t consider starting an STO just because of the buzzword blockchain and STO associated with it.
5 simple steps to create an STO
Create a document which includes all the important point related to your project such as the idea, targeted technology, etc. It is always an essential document in launching an STO. This document can be used to get the specifics of your product by the investors.
Go through and understand the legal regulations of STOs before proceeding, you must understand the legal regulation of the STO. Also, understanding whether your project and product are compatible with these rules or not. If yes, you could continue to further steps.
The next step is selecting the market exchange for your STO. The exchange would guide you in knowing whether you can launch a specific STO or not. They would also confirm some of the regulations of investment in STO.
Use a security token platform to set up your STO. There are various platforms that can help you in the issuance of the security tokens as well as all the legal paperwork for your STO. Polymath is one of the popular platforms to set up your STO. However, you can also choose from Harbor, Swarm and securitize.
The last and most important step is marketing your STO. Although it is not a part of investing in a STOs, you should always look at the ways to create the buzz regarding your invested STO. It is relatively easy to market an STO as compared to an ICO.
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