Saturday, April 28, 2018

STO's could replace ICO's as cryptocurrency sector transforms into tokens that are backed by stocks and company earnings

With Initial Coin Offerings (ICOs) being the primary means of implementing a new cryptocurrency, regulators around the world have been focusing on them as a means to control or disrupt the crypto sector.  So with this in mind, a new form of cryptocurrency offerings are emerging which are dedicated not specifically to resources (like gold, coffee, or diamonds), but instead to equities (stocks) and company earnings.

Welcome to the era of Security Token Offerings (STOs).

In an ICO, coins or tokens are put up for sale as a form of crowdfunding. Instead of voting rights or dividends that come with shares of a company, "utility tokens" promise access to a network, platform or service. But they're often backed by an abstract idea, or nothing at all. 
The process has facilitated the rise of cryptocurrencies like Dogecoin, a Shiba Inu dog meme-turned-cryptocurrency that has a passionate following on sites such as Reddit. Whoppercoin, Pandacoin, Trumpcoin and PutinCoin have also raised money through initial coin offerings. 
Similarly, in a security token offering, you can buy coins or tokens. But unlike in many ICOs, these tokens must be backed by something tangible, such as assets, profits or revenue of the company. They act almost exactly like a share of a company but are "programmable," to do things like conduct proxy voting, because they're built on blockchain technology, according to one expert. 
"You can program a token, but a static share certificate just sits there and collects dust," said Trevor Koverko, CEO of Polymath, a platform that helps people launch securities tokens. - CNBC
Sadly for investors, this program seems like a virtual scam since if a company already provides dividends to owners of their primary stock, then adding in a token process will only dilute those proceeds.  And if a company does not have a dividend program, then they risk investors simply bypassing the purchasing of their shares in order to benefit from dividends paid to token holders only.


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