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The rise of STO issuance platforms, will Ethereum be replaced?

 

Security token offering issuance platforms

 

 

The past year has witnessed a paradigm shift in perspective among Blockchain and akin technology enterprises. Initial Coin Offerings used to be all the rage in the crypto space but with regulatory authorities doubling down on ICO sales restrictions, the enthusiasm in the community dwindled that left startups no option but to search for an alternative. A Security Token Offering (STO) appears to be the viable replacement and with its rise in popularity has spawned the birth of Security Token issuance platforms.

 

STOs gain momentum as ICOs tapers

 

STOs are similar to ICOs, except that an investor gains rights over an enterprises tangible assets like stocks or bonds. STOs are compliant with regulatory norms, reducing the chances of fraudulent activity with funds raised. Last year, the number of STOs worldwide witnessed a meteoric rise concurrently as ICO sales depreciated, a similar trend can be observed in 2019 as well. According to InWara’s monthly report: January 2019, the number of ICOs observed a ~67% contraction when compared to January 2019, while STOs maintained healthy numbers.

 

# of STOs according to financial quarter

 

Source: InWara’s ICO+STO database

 

STO issuance platforms

 

Banking on the meteoric rise of interest in STOs, several startups came forward with platforms that facilitate security token issuances and help conventional securities integrate with blockchain tech. According to InWara’s ICO+STO database an overwhelming 252 STOs use Ethereum platform. In spite of the recent years has seen the emergence of other competing platforms such as Polymath, Neufund, Swarm, Tokeny and Securitize.

Related article: Polymath - A launchpad for STOs.

 

# number of security token issuances on various platforms

 

Source: InWara’s ICO+STO database

 

As of now, Ethereum is still the most popular security token issuance platform. But competitors like Polymath are quickly gaining momentum, as enterprises seek out platforms exclusively for security tokens. Unlike Ethereum which is more general purpose and inherently has some technical limitations with scalability and speed. Although some of these issues could be mitigated with new Constantinople upgrade.

 

The latest standard ST-20 standard from Polymath

 

Polymath is a security issuance platform based out of Barbados. In retrospect the company has raised $58 million an SEC compliant token sale, hailed to be the first of its kind at that time. Polymath is renowned worldwide for popularizing the idea of Security Token Offerings through their platform. The company published a new token standard, ST-20 which will ensure security tokens are compliant with regulations.

Polymath claims its new ERC-1400 token standard will make security token transactions more transparent by creating a standard interface that can check the status of any transaction in real time. In addition to this, the new token standard will also be able to reverse tokens credited to a wallet, this feature can be especially useful in case of any legal mandates which requires the funds be returns. Users will also have the ability to deny or accept token transfers to their account with the addition of a new feature dubbed as non-fungible tokens. 

Polymath has partnered up with well known Blockchain enterprises such Tzero, Minthealth, and Blockestate. To know more about strategic rationale behind Polymath’s partnerships check out InWara’s article.

You might also like this article on World's first social crypto trading platform, Blockport, to launch its Security Token Offering.

 

STOs outperform their platforms

 

Conventionally in the crypto space, Blockchain platforms such as EOS raise more capital than the ICOs on their platform. A good example would be how EOS managed to raise $4 billion during its token sale, but the capital raised by enterprises on its platform is a far cry from this value. Interestingly in the STO landscape this trend is turned on its head.


Source: InWara’s ICO+STO database

 

 

 

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