fxs_header_sponsor_anchor

STO is a better startup funding mechanism than an ICO, Research

  • Rotterdam School of Management study shows that STOs are better at financing startups than ICOs.
  • Utility tokens in an ICO only grant holders with consumptive rights and is not a “financing mechanism,” as per the study.
  • Researchers found that corporate governance is an essential factor for the success of an STO.

Recent research by Rotterdam School of Management has shown that Security Token Offerings (STO) are better at financing startups than Initial Coin Offerings (ICO). Although both are issued on distributed ledgers, the idea behind an ICO is “value creation for a community.” Utility tokens in an ICO only grant holders with consumptive rights on services or products and cannot be viewed as a “financing mechanism,” the research paper noted. However, STOs can be. 

A security token is a digital representation of an investment product recorded on a distributed ledger, which is subject to regulation. STOs can be issued either early in the lifetime of a company as equity tokens or in later stages as fund tokens. Researchers found that corporate governance is another factor for STOs’ success. 

The paper concludes by stating:

Even in the STOs’ more “transparent” blockchain-based context, unbundling voting rights and cash flow rights negatively correlate with success outcomes, consistent with the traditional corporate finance view.


 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.


RELATED CONTENT

Loading ...



Copyright © 2024 FOREXSTREET S.L., All rights reserved.