Thomas Lambert, Daniel Liebau and Peter Roosenboom of the Rotterdam School of Management, suggest that value token offerings (STOs) are better for financing new businesses than initial currency offerings (ICOs). Their research was published on July 14 on the Oxford University Business Law blog.
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The research paper noted that although ICOs and STOs are issued in distributed books, the idea behind an ICO is “the creation of value for a community”. Utility tokens in Crypto Trader can only grant holders consumptive rights to services or products and cannot be seen as a “funding mechanism”. However, STOs can. The researchers explained that:
“Tokens issued in a STO are investment products that generally grant cash flow rights to their investors and, in some cases, voting rights as well. Therefore, a STO is specifically designed to finance startups, while an ICO aims to finance an organization but does not include its funding.
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Determinants of success
A value token is the digital representation of an investment product, recorded in a distributed general ledger, subject to the regulation of securities laws.
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STOs can be issued either in the early life of a company as equity tokens or later as fund tokens. The researchers found that corporate governance is another key factor for success. The paper concludes:
“Even in the more ‘transparent’ blockchain-based context of STOs, the disaggregation of voting rights and cash flow rights correlates negatively with success outcomes, according to the traditional view of corporate finance.