What is STO?

A security can be defined as a ‘fungible, negotiable financial instrument that holds some type of monetary value, ‘ i.e. an investment product that is backed by a real-world asset such as a company or property. A security token, therefore, represents the ownership information is written on a document and issued as a digital certificate (e.g. a PDF). For SOs, it’s the same process, but recorded on a blockchain and issued as a token. STOs can also be seen as a hybrid approach between cryptocurrency ICOs and the more traditional initial public offering (IPO) because of its overlap with both of these methods of investment fundraising.

Similar to an initial coin offering (ICO), an investor is issued with a crypto coin or token representing their investment. But unlike an ICO,  security token represents an investment contract into an underlying investment asset, such as stocks, bonds, funds, and real estate investment trusts (REIT).