By definition, a security token offering (STO) is a type of public offering in which tokenized digital securities, known as security tokens, are sold in cryptocurrency exchanges. Tokens can be used to trade real financial assets such as equities and fixed income, and use a blockchain virtual ledger system to store and validate token transactions.
Security tokens are authentication offered to investors to provide validity in order to raise funds. The holder of a security token shall acquire some privileges of possession and be a shareholder of the company. A security token may constitute a stake in the company or be a participant of the LLC. So, in simple terms, when shares in the company are provided in the form of a security token, companies are more likely to attract more investments at a reduced cost than if they had been listed on a stock exchange.