Are Security Token Offerings Living Up to The Hype? Are STOs Still Primed to be the Next Wave?
- Creators behind security token offerings hoped to be a solution to the needs that were not being met from ICOs.
- Despite making many promises, STOs have not been very successful.
Security token offerings entered the cryptocurrency market with many promises, giving greater security than what the formerly popular initial coin offerings (ICOs) did. They aimed to be the segue for the traditional financial market to enter the cryptocurrency industry, which already a lofty goal. Ultimately providing increased cost efficiency and offering more access and liquidity, the attention was rather reasonable.
Unfortunately, STOs have not quite gotten the story that they would prefer, based on blockchain-based fundraising.
When the concept of ICO essentially drowned in the beginning of 2018, investors started to see how poor of a fundraising tool the ICO actually was. Funding could be lost by the platform, and investors would be left with no legal recourse. Even during the first quarter of 2018, there were over 1,500 ICOs, but this number has dropped down to 403 during the first quarter of 2019.
Even with the advantages that STOs offer, they have not really seen any additional success during this time. While this year’s first quarter showed 57 token offerings, last year only showed 49 offerings. Even though this would appear to be an improvement in any other situation, but the growth hardly lives up to the promises and progress that was expected for STOs and even IEOs.
Some of the challenges that STOs have seen is in compliance with the current framework. Every country has different regulations and meeting this type of requirement everywhere can be complicated.
Furthermore, the simple launch of an STO can be incredibly expensive, since it requires multiple stakeholders to be involved before it can even get off the ground. While the ICOs have succeeded with the simplicity of entering the market, STOs have come with roadblocks, as these launches have to be accredited first.
Overall, STOs came in with a lot of promises and dreams, but very little of these aspirations turned into anything else. As blockchain projects have seen a lot of the same results, it appears that STOs are seeing a similar struggle to gain the desired momentum.