The Complete Guide to Security Token Offering: Explained Simply!

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sto-security-token-offering-development-companyThere has been a lot of hype surrounding security token these days. Since most of the SECs have started suffocating from utility tokens, security tokens have gained great importance. They are a new strain of cryptographic tokens, which are completely backed by real-world assets. 

The STO industry is still in its early stages. We can expect a huge growth in the security token when it is adopted across all set of crypto markets. The process of Security Tokens is similar to Initial Coin Offerings, but with a few differences. Being an STO Development Company, we have drafted this article speaks about the complete process of Security Token Offerings in the crypto industry. 

How Security Token Offerings differ from Initial Coin Offerings?

Initial Coin Offerings are the fundraising strategy used by startups to raise their funds for the project. The Startups here issue utility tokens for the investors for which they will get paid with Fiat or Cryptocurrencies. These Utility tokens promise the investors to attain access to a project’s service or product in the future. 

For the past few days, ICOs aren’t performing much better. Thus, to make the approach more secure, another strategy called “Security Token Offerings” came into existence. STOs are similar to IPOs but in a more digitized way implemented using Blockchain Technology. 

In the case of Security Token Offerings, they primarily issue Security Tokens which have more power and protection to the investors of the tokens rather unlike utility tokens. Hence, STOs should be compliant with at least any of these regulations.

Characteristics of a Security Token Offering:

  • Fraction Ownership

Unlike Utility Tokens, Security Tokens offer fractional ownership assets to the investors. This means that the investors will have equal shares of the company.

  • Automated Compliance

Security Tokens are completely regulated and these regulations vary with investor type, asset type, and jurisdiction, etc. As STOs can be easily programmed, it becomes an easy task for the investor to do any future changes.

  • Free Market Exposure

It is a painstaking task for Asian investors to invest in US real estate or private startups. With security tokens, owners have the complete responsibility to worldwide. Deals can also be closed in a global manner, with any type of investor who just has an internet connection. 

So, How Security Token Offering STO works?

Coming to the working of STOs, here are the five primary steps involved in working of Security Token Offering:

Foundation Stage

This is the initial stage to get started with Security Token Offering. Here is the list of steps involved here: 

1.Ideation

Before you start launching STO, it is crucial to come up with an idea that engages a good number of investors. Therefore, it is important to draft a business plan which states your idea. 

Know the worth of your token you have decided to launch. It should decide the role, purpose, and features of your token.

Since security tokens aren’t utility tokens, they should be listed issued from the best security token exchanges. Here are some of the topmost security token platforms to launch an STO.

2. Picking the perfect security token issuance platform

  • Polymath

Polymath platform provides legal and technical solutions to securitize bonds, assets or tokens on the Blockchain. It connects the KYC providers, smart contracts developers, legal advisors, and token investors everything being integrated into the single platform. 

They are compliant to SEC Guidelines and facilitate the trade of security tokens authentication of investors. The platform is powered by an ERC20 Token called Poly which acts as the primary economic unit that makes the legal, developer and authentication services feasible.

  • Securitize

This is the regulatory-compliant cloud platform for the tokenization of securities that facilitates the tokenization of companies, funds, and other entities. 

It has secured commitments from companies that are currently running Initial Coin Offerings in the range of $500 million. 

  • Swarm Fund

This platform makes use of SR20 protocol, which is the cryptographic standard meant for security tokens to tokenize the real-world assets. Once the object has been tokenized, it becomes an asset that can be managed and traded easily on the Swarm Network. 

3. Drafting STO Whitepaper

An STO whitepaper is the crucial document in launching a Security Token Offering. It has been said that around 76% of people have used white papers as part of their decision making efforts. Thus, it is important to come up with an STO whitepaper for your business.

Here are the few things which must be incorporated in an STO Whitepaper:

  • The Business Model.
  • The Current STO Market.
  • Legal Disclaimers.
  • Technical Architecture.
  • The Team Involved.
  • The Roadmap.

All these factors should be discussed in a brief and understandable way to attract investors for your project. Furthermore, hire the right set of STO Whitepaper writing service providers in the market. 

The document should be free from grammatical errors and should have a good readability factor. Make sure to divide the larger sections of paragraphs into smaller sections with two or more paragraphs to enhance the presentation. 

Adding, flow charts will make the document a well-designed and organized. There are a hell lot of online tools such as Lucidchart, Smart draw, Omni Graffle which you can make use of.

Never forget to mention regulations associated with security tokens here!

4. Forming a pool of talented experts for your project

Now it is the right time to gather the set of experts who can assist you with launching Security Token Offering. You have decided on the STO issuance platform, drafted your whitepaper and now your experts can do the rest for you.  

The team should include Developers, Marketing & Sales Experts, Designers, Accounting, Legal Advisories who are well-knowledged. Make sure they have desired expertise in launching Security Token Offering or Initial Coin Offering. 

5. Creating a Marketing Website

Creating a website is essential to introduce and sell your security token to the people.  The website should be well-designed to tackle and handle a large number of requests instantly. 

With your website, STO investors can instantly register and participate in token sales. The platform should be robust and powerful to integrate KYC/AML features for the customers. 

Make sure your website has the following set of general features in it:

  • To make your website unique, it is important that you list the entire details related to your project on the site. 
  • You can add visual images, graphics to make your website more attractive for investors.
  • Customer Support is one of the biggest problems for now. Ensure you integrate the Customer Support link on your website.

Pre-STO Stage

A. Start Marketing your Website

In this stage, you will have to start introducing your product to your target audience. This means that you are going to get started with Marketing your Security Token Website. On handling the traditional strategies like Social Media Marketing such as Reddit, LinkedIn, Bitcoin Forums such as Bitcointalk, Bitcoin Wiki, etc. In addition to SMM, you can run Email campaigns to make people clear about your ideas and STO tokens. Once the token reaches your audience, you can start listing and selling it. 

B. Choosing the exchange to list the tokens

Presently, there are a lot of cryptocurrency exchanges in the industry. Remember, you have decided to list your security tokens. Therefore, it is crucial that those exchanges should comply with the regulations in the country. Popular exchanges such as Coinbase, Binance, Poloneix, etc can be the platforms to list your security tokens.

C. Creating Security Tokens

Now you can start focusing on developing Security Tokens. Here are the steps involved in creating tokens:

  1. Get a Metamask Account

It is imperative to have a funded Metamusk Account to start building Security Tokens. Download the chrome extension and load the account with Ethereum funds. Once you have registered with the Metamask Account, you can visit the Polymath website and can start creating the token by clicking on “Issue your Security Token”. 

        2. Registering with Polymath

You can start registering your account on Polymath by entering your name and email id. Initially look for the terms and conditions in it and start creating an account by signing in with your Gmail account and wallet Address to link your wallet. 

      3. Registering the Token Symbol

Decide on the name and symbol of the token. This approach is to eliminate the duplication risks associated with the token. 

For instance, if you give your Token Name as “Coinhyip”, you can give a symbol like “CNHYP”. After reserving the symbol, you will get a period of 15 days for approval from advisories. Once it is approved, you will get notifications on them. 

      4. Selecting the members 

As we have discussed, the Polymath platform already has all set of people for development, you can select the experts who can assist you in integrating all the features you are looking in the Security Token. Once you have selected the members, you can click on “Create Token Now” to build the desired token you were expecting. 

       5. Developing Tokens

While developing your tokens, if you wish to add any links to your website, you can do this by linking your website with the icon of “Additional Information”. Nextly, you can click on submit to create issuance of the token. You will receive a copy of the transaction details in your inbox. 

        6. Setting up your Token Offering 

Now you have to click on “Set Up your Token Offering Details”. You can now sell your tokens at a specified price. Once the limit is reached, you cannot sell any more tokens.   

If you wish to configure the details, you can click on “Select and Configure STO”. You can set up your start and end time of the token sales, Modes of Payment Acceptance, etc. Once you are done with all these, you can click on “Confirm and Launch STO”. 

      7. Whitelisting Investors

The final step is to whitelist investors. You need to create a Whitelist for your future investors in such a way that they can buy your Security Tokens. This will enable the investors to participate in your STO. 

Security Token Offering:

A. Crowd Sale

Start offering your Security Tokens to the public in exchange for raising funds. List your tokens on the website you have designed. Make sure the website handles all the features to instantly support them in buying tokens.

Post-STO:

A. STO Marketing

So you have a website, you have your Security Token, now you can start marketing your product. Make sure you have the required funds for marketing activities as well. STO Marketing is also similarly important to development.

Introduce your Security Tokens to the global audience by advertising in Social Media Channels, running Email campaigns, etc. Once you have promoted your tokens to the public, it is time to launch Security Token Offerings and begin crowd sale.

B. Community Support

The most important factor is to support your communities. Your customers may have certain queries or issues they may be facing. It is important to support them all the time. This will increase reliability on you.

STO Development for your Crowdfunding business:

If you are one such entrepreneur or startup interested in launching STO, we poeple are readily available to help you. Be it an Entry-level, Mid-level or Enterprise level solutions, we are ready to assist you!

We render high-end Liquidity, fractional ownership, and much more which are in compliance with your unique business requirements to raise your funds in a hassle-free way!

To Close

By the end of 2019, we can expect a good number of Security Tokens launched. It will emerge to be one of the most popular fundraising strategies in the future. Hope Security Token Offerings unlock the true value of helping the startups to raise their funds instantly!

If you need STO to be launched at an affordable cost, you can get in touch with us! We render end-to-end solutions right from STO development to STO Marketing services which is feasible for all types of businesses.

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About the author

Steve

I have started my career with Search Engine Optimisation and slowly concentrated on creative part as well. Now I'm working with a leading Blockchain Development Company in India - Zab Technologies

By Steve