Security Tokens: Pros and Cons

Judy Rubio

Freedom of action makes investors anxious about investing in ICO products. They want to have a vote on the most important business questions inside the company. Security tokens do not provide it as much as ICOS. They have their own strengths and weaknesses, which is important to get acquainted before investing. The article "Investments in ICO" will help to better understand this tool.

Advantages of security-tokens

  • High speed of transaction processing. With the increase in the number of participants in the transaction, the time of its execution increases as well. The Security Token Offering organization increases the speed of selling tokenized securities, since it does not require the involvement of intermediaries. The regulation that governs the smart contract makes the asset secure. This provides an additional security layer for investors.
  • Minimum commission. Security-tokens do not require the services of intermediaries. As a result, the value of commissions decreases. Smart contracts simplify and speed up the process, reduce costs, because many operations do not require human intervention. They are performed automatically and do not need to collect signatures. Cheques are sent to customers after money transfers.
  • Increase customer base. Owners can market and sell their product  to anyone with an Internet connection, it significantly expands the potential customer base. As a result, it is possible not to be limited to accredited investors and US organizations, but to make participation in the project available to almost any investor in the world.
  • Free influence on the market. Many investment transactions take place within a particular state; they do not reach the world level. Thus, Asian investors have almost no opportunity to invest in real estate and assets located in the United States. By using tokens you may easily sell such assets to any investor.
  • No manipulation of financial institutions. These organizations are excluded from the process of investment operations. Therefore, they do not have the ability to perform manipulations and use corrupt schemes.
  • Automated transactions. This is achieved by using smart contracts.

Disadvantages of security-tokens

  • No intermediaries. The functions of brokers and banks should be assumed by the parties of the investment process. Financial institutions often underwrite transactions, attract investors, ensure successful execution of the transaction, develop marketing materials and guarantee security. Now everything rests on the shoulders of the investment process participants.
  • Reduction of decentralization. The reason is many small investors cannot participate in the STO.

Obviously, there are for more advantages rather than disadvantages. However, it is strongly recommended to carefully look through all project details before making an investment. Security tokens seem lucrative, but they bring their own bag of risks with them. Recommendations on the correct choice of the project can be found on the pages of our crypto portal. We wish you successful investments!