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STO stands for security token offerings, but before we go deep into it, let us talk about tokens and securities in general.

Tokens

A token is the symbol of something in its particular field. It could be anything, be it a value, exchange, food, rights, etc. Here tokens could be compared to the cryptocurrency coins. In simple words, tokens are a kind of asset that could be given to the investors when a sale or something is going on, whereas currency could be used to buy goods.

Securities

The financial assets that are tradable, such as bonds, notes, shares, stocks, etc. are called securities. The importance of securities could be understood with the example of stocks. Stocks or shares are the assets that could make a person the owner of a company without having its actual ownership. Visit cryptalker to know more about securities.

Now, let us talk about the type of tokens. These are of two types basically. The first one is known as utility tokens, while the second one is known as security tokens. Let us discuss these two types of tokens one by one.

Utility token

A test, named as Howey test is conducted, in order to classify the type of tokens. According to the records, most of the tokens are classified as security tokens. If due to some reasons, a token failed to meet the criteria required for a security token, and then it is considered as a utility token. These tokens are known as gateway tokens and are used to provide the user with a particular type of service or product.

Security tokens

As we mentioned earlier also, that the token that passes the Howey test is called the security token. The security tokens are capable of sharing profits, for investments, etc. In simple words, we could say that security tokens are tradable assets. If the ICO fails to follow the rules, it may lead to some penalty. To know about these rules go to cryptalker.com/cheapest-bitcoin.

Security tokens, if used properly could be the thing of a great benefit. Before investing them, gather all the information required for it.