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4 Key Benefits of a Security Token Offering for Investors

  • Security token offerings work by having an active counterparty issue a stock, and have several major benefits for investors
  • They offer fractional ownership, meaning lower minimum investments, as well as better security and greater transparency through data verifying and tracking 
  • They also open up a 24/7 market, and provide real value in their own right

A security token represents a share of the company that issued the security tokens, which is why they are also known as equity tokens. It is an investment contract that is recognized by the law for the preservation of capital or a company’s expectation of return. 

On the other hand, security token offerings work by having an active counterparty issue a stock. Think of it like stocks and bonds, though the digitized world transforms it into tokens on a blockchain to provide more liquidity and transparency. 

In essence, it is when an initial coin offering (ICO) and initial public offering (IPO) meet in the middle. This makes it an asset-backed token wherein records of ownership details and investment product are on a blockchain.

This means that nothing changes for investors, although the crowd sale is under the protection of cryptography and other smart contracts. As a result, investors can enjoy offerings that are easier, more affordable, and significantly more secure. 

To that end, here are more reasons why an STO is beneficial for you:

Benefit #1: Liquidity and Fair Access

An STO provides more liquidity to the market as it enables investors to have fractional ownership, which consequently lowers minimum investments. Additionally, security tokens allow the issuer to market to anyone on the internet. With a larger audience, the asset valuation also increases. In turn, the number of investors doubles as the investor base is no longer limited to a particular place. 

Benefit #2: Transparency

An STO is in a blockchain, which offers built-in immutability as it eliminates the weak points of online use: the need for easily compromised passwords and identities. With that in mind, an STO also has a more uniform method of verifying and tracking data. Additionally, reporting and auditing become easier as blockchain prevents fraud and arbitrage, and is immune to third-party manipulation. 

Benefit #3: Unlocking a 24/7 Market

Many traditional markets are limited by a strict, 8-hour shift. This means that you can no longer trade stock once employees clock off, especially during the holidays. This increases the chances of you missing out on any influential events that may occur during downtime. 

Fortunately, security tokens are available around the clock, allowing investors to act on opportunities in a timely manner. This makes it easier to expand investments and reach out to various geographic locations as businesses now have access to investors across different time zones. 

Benefit #4: Providing Real Value

Many people tend to mix up security tokens and utility tokens as both are created on a blockchain. However, they have nothing in common, as security tokens provide real value in their own right, making them a credible financial tool that can designate assets. To that end, it can grant rights in the following areas:

  • Virtual or physical asset ownership
  • Profit-sharing
  • Financial commitments
  • Dividend payments
  • Direct or indirect participation

Security tokens and security token offerings have been generating a buzz around the industry and amongst investors. What makes this type of investment stand out is that it is a simple, secure, and legitimate ICO response. 

If you’re looking to learn more about STOs and their benefits for investors, get in touch with STO Filter to see how we can help!