By Sandra Quinn
Whether you are thinking of using tokens as a way to raise capital for your own corporate venture or if you are on the other side of the coin and are looking to invest in a company through their token offerings, here are some top tips to look out for.
When token offerings first emerged, they were lauded as a way to democratise investments and allow anyone to invest in a company or idea.
It can be viewed as a way of crowdfunding using the blockchain technology.
First things first — there are two types of token offerings out there and the differences between the two are vast. There are ICO’s — Initial Coin Offerings and STO’s — Security Token Offerings.
Straight off the bat, I would urge you towards a STO option, as it offers more protection, compliance and regulation, but here are the main differences so you can make up your own mind.
· ICO’s are less regulated than STO’s.
· With STO’s you get ownership, whereas with the ICO, you get a token.
· STO’s are more expensive to launch.
· Anyone can invest in an ICO, while only accredited investors will have access to STO’s.
Investors who choose to go down the route of ICO’s are usually hoping to benefit from the possibility of token appreciation, while those opting for STO’s are hoping to benefit from future cash flows, dividends or voting rights.
Security tokens (STO) have an immediate value, backed by real-world assets, profits and cash flow, whereas the value of utility tokens (ICO) is almost always theoretical until an application is fully developed.
If you are thinking about using tokens to issue shares, as a way of raising capital for your company, check out one of our previous blogs on the topic here; https://blog.horizon-globex.com/how-to-issue-shares-within-an-ethereum-token-model/.