Understanding Security Token Offerings (STOs)
A Security Token Offering (STO) is a specific type of public offering where digital securities, known as security tokens, are sold on cryptocurrency exchanges or security token exchanges. These tokens can be used to trade real financial assets and rely on blockchain technology to store and validate transactions. A security token is a unique token issued on a permissioned or permissionless blockchain that represents ownership in an external asset or enterprise.
Security tokens also have the function of electronically verifying identities by storing personal information. They are issued by security token services to authenticate a person’s identity and can be used in combination with a password to demonstrate ownership. However, it is important to note that security tokens are not immune to risks such as loss, theft, or hacking.
It is worth noting that security token offerings differ from initial coin offerings (ICOs) in that ICOs involve the sale of digital tokens as a form of cryptocurrency, whereas STOs involve the sale of tokens that represent ownership in an asset or enterprise.
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