Complete Guide to Security Token Offering STO: Explained Simply

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Security Token Offering Simple Guide
Security Token Offering Simple Guide

Crypto token is the most trending term and a buzzword right now in the crypto sector. People are showing interest in crypto tokens rather than crypto coins because of their popularity and benefits. Crypto tokens are classified into two main types such as security tokens and utility tokens. Comparing these two types, security tokens are mostly preferred by the majority of business class people. There has been a lot of hype surrounding security tokens in recent times. Since most of the SECs have started suffocating from utility tokens, security tokens have gained great importance in the blockchain industry. Security tokens are a new strain of cryptographic tokens, which are completely backed by real-world assets like real estate, bonds, shares, and more. 

Security tokens are divided into three types. Such as asset-backed crypto tokens, equity tokens, and debt tokens. Security tokens are created for raising funds through the STO platform. Security token offering is recognized as one of the best crypto crowdfunding strategies for raising funds securely in a crypto sector. STO is currently trending in the market and many startups are creating security tokens for their projects. 

The STO market is still in its early stages. We can expect a huge growth in the security token when it is adopted by most startups and investors in the crypto market. The process of Security Token offering is similar to Initial Coin Offerings, but with a few differences. 

If you are new to the STO concept, then this article is dedicated to you. Being a leading STO Development company in the blockchain industry, we have drafted this article that speaks about the complete process of Security Token Offerings, STO development, and the cost to launch the STO platform for business.

Let us begin this article with… 

How Security Token Offerings differ from Initial Coin Offerings?

Initial Coin Offering is one of the well-known fundraising strategies in the crypto sector which is mostly utilized by crypto startups to raise their funds for the project. In ICO, startups will issue utility types of crypto tokens for the investors for which they will get paid with Fiat currency or any other cryptocurrency. Investors or traders will buy utility tokens from the startups to attain access to a project’s service or product in the future. 

For the past few years, ICOs aren’t performing much better in the crypto market. Because only a few ICO projects are showing their presence in the crypto space but some are portrayed as fake or scams. Thus, to make the approach more secure and provide trust to the investors, another crypto crowdfunding strategy called “Security Token Offerings” came into existence. STOs are far 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 when compared to utility tokens. In ICO, there are no regulations & interference from the government. But when it comes to the STO, the startups should satisfy all the rules and conditions declared by the SEC. If you are planning to create a security token and STO platform for your business, then you should follow all the SEC guidelines and regulations. By launching a security token, you can attract crypto investors globally.

Characteristics of a Security Token Offering:

STO has different characteristics in the crypto industry. Such as 

  • Fraction Ownership

Security Tokens offer fractional ownership assets to the investors. This means that the investors will have equal shares of the company or the asset that is pegged with the security token.

  • Automated Compliance

Security Tokens are completely regulated and the regulations for the security tokens vary with investor type, asset type, and jurisdiction, etc. The STO platform is crafted with a high-end security system and blockchain, so it is secure and safe for investors.

  • Free Market Exposure

It is a painstaking task for 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 globally, with any type of investor who just has an internet connection. 

Now, let us see…

How to Launch an STO Platform?

Coming to the STO development process, here are the five primary steps involved in launching an STO platform. 

Foundation Stage

This is the initial stage to get started with Security Token Offering. Here is the list of important steps involved in STO development.

1. Ideation

Before developing an STO platform, it is crucial to come up with an outstanding business idea that engages a good number of crypto investors. Therefore, it is important to draft a business plan which states your idea or concept. Know the worth of the security token you have decided to launch because it has role, purpose, and features.

2. Drafting STO Whitepaper  

Drafting an STO whitepaper is one of the crucial STO development processes in launching a Security Token Offering platform. 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 excellent and perfect 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 briefly and understandably to attract crypto investors to your project. The STO white paper 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 well-designed and organized. There is a hell of a 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!

3. Hiring a pool of talented blockchain experts for your STO project

It is the right time to gather the set of experts who can assist you with launching a superfine STO platform for your business. You have drafted your whitepaper, business idea, and now hired blockchain experts can do the rest for you.  The STO development team should include skilled blockchain Developers, testers, project managers, Designers, and legal advisories who are well-knowledged. Make sure they have desired expertise in launching Security Token Offering or Initial Coin Offering.

4. Creating Security Tokens

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

  • Create a Security Token Wallet

It is imperative to have a stunning security token wallet before creating Security Tokens. Develop a feature-rich token wallet with elite features and the wallet must be compatible with android and ios platforms. 

  • Registering the Token Symbol

Decide on the name and symbol of the security 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 15 days for approval from advisories. Once it is approved, you will get notifications on them. 

  • Developing Tokens

While developing your tokens, you need to choose the right blockchain. Currently, Ethereum is the best blockchain to launch a security token. Ethereum has a powerful security token standard – ERC1400 which is specially designed for creating a security token. You can develop a security token by using an ERC1400 token standard which enables you to attract more investors in a hassle-free manner.

  • Setting up your Token Offering 

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 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 launch STO. 

  • 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. 

5. Creating an STO Website

Creating an attractive STO website is essential to introduce and sell your security tokens to the targeted crypto audience.  The website should be well-designed to tackle and handle a large number of requests instantly. With your STO website, crypto 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 STO website has the following set of general features in it:
  • To make your website unique, you must 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

1. Start Marketing your STO Website

In this stage, you need 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 security tokens. Once the token reaches your audience, you can start listing on the exchange platforms. 

2. Choosing the exchange to list the tokens

Presently, there are many prominent cryptocurrency exchanges in the blockchain industry. Remember, you have decided to list your security tokens to boost your profits. Therefore, those exchanges must comply with the regulations in the country. Popular exchanges such as Coinbase, Binance, Poloneix, etc can be the best crypto trading platforms to list your security tokens.

Security Token Offering

1. Crowd Sale

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

Post-STO

 1. STO Marketing

Now, you have an eye-catching STO website, your Security Token, and you can start marketing your product. Make sure you have the required funds for marketing activities as well. Marketing is also similarly important to STO 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, you can quickly raise funds.

2. Community Support

The most important factor in raising funds through the STO platform 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 your reliability. 

How Much Does it Cost to Launch an STO Platform?

Most crypto startups have a dream of launching a security token and raising funds through the STO website. But they have a common question in their mind – what will be the cost of launching an STO? Basically, the cost of launching an STO will be based on some essential factors. Such as 

  1. Development of smart contract
  2. Complexity of project
  3. Features enabled in STO platform
  4. User and admin dashboard
  5. Legitimate aspect
  6. Testing and security review
  7. Size of STO development team

The above-mentioned factors will shape the STO development cost. We can not predict the exact STO creation cost but for launching a top-notch STO platform, the cost of development will be around $5.5K – $7K. However, the STO development cost will differ based on your business requirements and urgent needs.

Final Words

By the end of 2021, we can expect a good number of new Security Tokens launched. Besides, it will also emerge to be one of the most popular fundraising strategies in the future. Hope Security Token Offerings unlock the true value of helping startups to raise their funds instantly. All you need to do is hire a team of blockchain developers from the reputed STO development company in the blockchain sector. One such STO development firm is Zab Technologies. 

If you want to launch an STO as per your business needs at a budget-friendly price, then you can get in touch with us! We render end-to-end solutions right from ideation to STO deployment which is feasible for all types of businesses.

Our experts are readily available to assist you anytime!

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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

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