Security Token Offering (STO) is slowly becoming a darling among technocrats, especially those involved in raising funds for blockchain projects. STOs are usually strictly regulated by federal regulations making them one of the best and most secure forms for raising funds. However, due to the strict regulations that the STO tokens must comply with, special standards are required to make them comply with the regulations.

The common ERC-20 standard is not sufficient for creating STO tokens. Therefore, companies and organizations had to come up with more advanced standards with an additional layer for regulations compliance. In addition to complying with the set regulations, the additional layer also helps in identifying who interact, purchase or even trade the STO token.

Available token standards for creating STO tokens

  1. ST-20

This security token standard was developed by a company known as Polymath. It is a smart contract that defines a set of rules, including who can interact with the security token and how they should interact.

Polymath, the company behind this standard, provides a set of pre-programmed regulatory modules that developers can use when creating a security token using the standard.

  1. R-Token

This standard uses a combination of three smart contracts, namely A, B, and C. The three smart contracts are interlinked in a way that they can associate. Smart contract A contains ERC-20 standards. Smart contract B contains the rules on who can interact with the STO token and how they should interact. Smart contract C dictates who can communicate with the token and how they should communicate.

  1. ERC-1404

This is a special standard, developed by Tokensoft. The standard enables tokens that are built using different standards, including R-Token and ST-20, to be interoperable with different cryptocurrency wallets and exchanges.

  1. ERC-1400

This standard was developed by ERC-20 and ST-20 developers. The standard is designed to incorporate gatekeeper access control, redemption semantics or issuance, error signaling, and differentiated ownership.

For non-fungible tokens, this standard is backward compatible with the ERC-777 standard.

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