STO – Security Token Offering What is it and what’s behind it?
In order to be able to answer our main question, we need to find out what tokenization is? This term is commonly associated with the approval of online bank payment transactions. What is the reason why some banks use this way of confirming transactions using a special token, which is generated by the so-called token generator, i.e. a sequence of numbers.
However, today we generally receive a token generated directly on the screen of our smartphone. The Blik system itself is also becoming increasingly common. In the above cases there is talk of tokenization of payments. However, here the tokenization process takes place using a token that is generated without the use of blockchain technology itself.
And what are tokens for?
It is similar in the case of accessing a website with a password, an authorization token. It is also a kind of tokenization. A token is therefore basically used in the security process of using Internet technology. Therefore, it is already very close to the use of tokens in processes directly related to the blockchain technology itself. However, let us leave all kinds of other tokens and tokenization aside. Let us rather focus on the processes of tokenization itself using blockchain or trustworthy technologies.
What is STO?
In many statements about the tokenization of assets itself, the notion of assets comes down to the mere participation in a company, where tokens are issued in the process of their public offering, called STO, i.e. Security Token Offering. They represent the right to the shares of the issuer (or the issuer of the ordering party, in the case of a substitute issuer).
In such a case, however, it seems that it will be better to speak about Equity Token Offering as a kind of subgroup of STO processes, where the token itself represents the rights to shares unequivocally. Otherwise, the application spectrum of asset tokenization processes is called STO. Therefore, it will be really significantly reduced conceptually, to the very detriment of diversification and the use of its possibilities.
An extremely important law is extremely helpful in solving this very problem. This is the Principality of Liechtenstein Act, from which a concept such as ATO, i.e. Asset-backed Token Offering, can be derived. It is about offering tokens that are based on assets.
It seems to be the very proposal itself, which corresponds to the spirit of all economic processes, which are carried out on the basis of the technologies themselves, which are really trustworthy and which are connected and rightly so with the token economy. Especially since the very concept of “security” is highly ambiguous. In a literal sense, “security token” can also mean the security token itself. We must know that security is simply bail.