A security token is a digital token that has collateral backing it. Companies offer these security tokens to the public in exchange for funds to carry out their business functions or scale up.

The platform on which these security tokens are offered is called a Security Token Exchange. This crowdfunding platform is regulated by central authorities.

STOs create a safe environment for both the investors and the companies by intensifying the security.

Certain procedures (verification tests) that need to be followed encourage accredited investors and companies which are genuinely trying to raise capital for their operations to take part in the crowdfunding.

There are various types of STOs based on the type of asset that backs the token. There are

• Equity tokens,
• Debt token and
• Reserve asset token.

A company can choose from any of the above three based on their requirements. Planning to launch your own STO? Blockchain App Factory can help. With their immense knowledge and experience in the field of blockchain, your project is a sure success!