Security tokens play a significant role in transforming the way we look at investments and assets. Tokenization of assets and putting them on blockchain unlocks the potential of bringing about innumerable opportunities for both issuers of the tokens as well as the investors. The major reasons behind the immense popularity of security token offerings or STOs include the following.
- Fractionalization of larger assets
- Enhanced liquidity
- Increased market efficiency
- Reduced fees for issuance
In addition to the benefits, another crucial reason for shifting from ICO or initial coin offering to STO or security token offering development services is due to the elimination of regulatory bodies or centralized controlling authority.
Now, let us understand more about the six major benefits obtained from STO development services.
1. Getting New Investors
The trading of security tokens globally offers a plethora of opportunities for the issuers to comprehend the international capital pool and enlarge their investor base. Security tokens’ regulatory framework is such that they motivate the investors to put their money into these tokens without worrying about being scammed, as in the case of ICOs.
Moreover, because of the fractionalization of larger digital assets, the STOs pull in a lot of new investors into the market of security tokens. Tokenization of assets allows investors to invest in a small fraction of the large stock, real estate, or any piece of art. Without the help of STO development services, access to these assets would have been limited to only investors possessing huge large capital and the capability to make investments that are long-term in nature.
2. Regulatory Compliance
As the tokens are based on blockchain technology, they can execute, regulate and govern themselves. For instance, an STO development company can program the token in a way that it can be verified whether a person can buy and sell the token, which limits the token holders from sending the token to an unverified address. Therefore the issuers of tokens can be a hundred percent sure that their tokens are held by authorized investors only.
In addition to this, some specific restrictions can be imposed on the transfer of tokens. For instance, if the investors are not permitted to sell the tokens for a specified time period, the same can be very easily encoded into the token, which will result in the prevention of the token being sold before the specified period of time.
3. Liquidity is Readily Enhanced
Since security token offerings make fractional ownership possible, it reduces the minimum investments, which plays a significant role in enhancing the overall liquidity of the market. Assets that are not liquid enough are difficult to resell and are easily able to enhance their liquidity on the blockchain by allowing investors to buy a smaller fraction of the large stakes. For instance, one who possesses an expensive piece of art is more likely to find investors who are interested in fractional ownership of the piece of art as compared to investing in the complete asset. Most importantly, access to the STO market is global and 24*7, thereby further contributing to the liquidity of STOs.
4. Improved Transparency
Blockchain technology offers a uniform method for tracking and verification of data. Additionally, because of its immutability, tampering with data can be prevented. An appropriate blend of all these attributes creates a suitable infrastructure to document security tokens’ ownership in an entirely transparent manner. Moreover, security token offerings provide every investor with complete information regarding the token issuer and full visibility of the total number of tokens given.
5. Intrinsic Value
Security tokens represent the fundamental interest in dividends, equity, sharing of profit, rights to voting, and a number of other advantages for the investors, which is not the case for utility tokens. The utility tokens happen to represent future access to a service or product of the company that is issuing it.
To state in simpler terms, security tokens come with an intrinsic value meaning that the tokens already have some value that is based on the worth they offer to the one who holds the tokens regardless of the tokens’ potential value. Security tokens allow the investors to possess a legal right to ownership of the company’s intrinsic that is issuing the tokens. They provide a larger value to investors holding the token at a lesser risk.
6. Easy and Convenient Launching of the Token
Without the help of security tokens offering development services, it would not have been possible to create and launch the STO in the market. Professional security token development services make sure to build the token and successfully launch the same in the market for public use.
Now, it can be very well understood what the major benefits of hiring STO development services are. Thus, at any point in time, if any business is planning to launch a security token; it will be a great idea to get in touch with a trusted, reputed, and reliable service provider to avail of the best of services.
Ritam Chattopadhyay is a seasoned writer with over half a decade of experience in professional content writing. Ritam’s expertise in content writing has enabled him to work with clients globally on different projects. Presently, he is working with SoluLab, a premium IoT, AI, ML, and blockchain development company where he handles multiple projects as a content specialist.