Step 23: Security Token Offering (STO) Terms

Once the tokenized asset is structured and ready for issuance, it’s time to define the Security Token Offering (STO) terms. These terms outline the conditions under which investors can buy tokens and the financial structure of the offering. Clear and transparent terms are essential to attracting investors and ensuring compliance with financial regulations.

Let’s break down the key elements of an STO in simple terms:

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Security Token Offering Price

This is the price of each token in the STO. The price is usually based on:

• The valuation of the underlying asset.

• Market demand and investor expectations

• Supply & tokenomics (how many tokens are available)

Example: If a company tokenizes a $10 million asset and issues 1 million tokens, each token could be priced at $10.

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Allocation Amount (Total Number of Tokens for Sale)

The allocation amount refers to how many tokens will be offered to investors in the STO.

• Some projects sell all tokens at once, while others sell in multiple rounds (pre-sale, public sale, etc.).

• The total allocation affects liquidity and investor participation.

• The unsold tokens can either be burned (destroyed) or held for future sales.

Example: A company issues 5 million tokens, but only 2 million are allocated for sale in the first STO round. The remaining 3 million can be sold later.

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Token Minting & Distribution: How Are Tokens Delivered?

There are two main ways security tokens can be issued and sent to investors:

Option 1: Minted When Purchased (On-Demand Minting)

• Tokens are created (minted) in real-time whenever an investor buys them.

• This method reduces the risk of pre-minting too many tokens.

• It ensures that only sold tokens exist in circulation.

Example: An investor buys 500 tokens, and the system automatically mints 500 tokens and sends them to their wallet.

Option 2: Sent from Atomic Swap (Pre-Minted Tokens)

• Tokens are pre-created before the sale and stored in a special wallet.

• When an investor buys tokens, they are transferred instantly from the reserve.

• Atomic Swap is a blockchain-based transaction that guarantees secure and automatic delivery.

Example: A company mints 1 million tokens before the STO. When an investor buys 500 tokens, they are instantly transferred from the pre-minted supply.

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Accepted Payment Methods

Investors need to know which currencies they can use to buy security tokens.

• Stablecoins

  • Security tokens can be purchased using blockchain-based stablecoins, ensuring fast and secure transactions.

  • Options include:

    • USDC (USD Coin) – Pegged to USD

    • USDT (Tether) – Pegged to USD

    • EURC (Euro Coin) – Pegged to EUR

    • EURS (Stasis Euro) – Pegged to EUR

• Fiat Payment Options (Traditional Money: EUR/USD)

  • Some STOs allow investors to pay using traditional bank transfers (EUR or USD).

    • In this case, investors send funds via bank wire transfer.

    • Tokens are issued once the payment is verified and cleared.

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Finalizing the STO Terms

Once these key elements are defined, they are documented in the Security Token Offering Agreement, ensuring full transparency for investors. The next step is validating the offering and launching the STO!

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