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    What is an Equity Token Offering? ETO Explained

    What is a Equity Token Offering

    What is an Equity Token Offering?

    An equity token offering (ETO) is a fundraising event that allows companies to raise funds by issuing digital tokens that represent ownership in the company. These tokens, also known as security tokens, are issued on blockchain platforms and can be bought and sold on cryptocurrency exchanges.

    In an ETO, the company issuing the tokens sets a fundraising goal and a deadline, and investors can purchase tokens using cryptocurrency. The value of the tokens is generally tied to the performance of the company, so if the company is successful, the value of the tokens will increase, but if it fails, the value of the tokens will decrease.

    One of the key advantages of an ETO is that it allows companies to raise capital from a global pool of investors. This can be particularly beneficial for companies or projects that are not based in traditional financial centers or for those that are looking to raise capital from a more diverse group of investors.

    Another advantage of an ETO is that it allows investors to buy and sell ownership in the company on an exchange platform, which can provide liquidity and make it easier for investors to exit their positions whenever they want.

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    Examples of ETOs

    Here are a few examples of companies that have conducted successful equity token offerings (ETOs):

    • 22x: A real estate development company that conducted an ETO in 2019 to raise capital for a luxury hotel development project in Miami. The company issued equity tokens that represented ownership in the project, and the tokens could be traded on cryptocurrency exchanges.
    • Aspen Digital: This company conducted an equity token offering in 2019 to raise capital for the development of a real estate project in Aspen, Colorado. The company issued security tokens that represented ownership in the project, and token holders could trade trade them on cryptocurrency exchanges.
    • Neufund: A blockchain-based fundraising platform that facilitates ETOs for startups and SMEs. Neufund has helped several companies conduct ETOs by raising funds, including the blockchain-based platform, 5th Force.
    • Slice: A prop-tech start-up that issued security tokens representing fractional ownership of a luxury apartment building in New York.
    • Bitbond: A German-based fintech company that helps small businesses borrow and lend money using blockchain technology. It conducted an ETO in 2018, issuing security tokens that represented ownership in the company.

    Important

    It's worth noting here that ETOs are still an emerging area in the crypto space. The number of companies that have conducted successful ETOs is relatively low and they are still subject to regulations and legal frameworks of the countries where they are performed. Additionally, it's important to perform due diligence and research the company and the team behind a project before investing in any ETO. Regulatory compliance is one of the main factors to keep an eye on in our opinion as the blockchain and crypto industry is currently in the stage of maturation.

    What is the Difference between a Token and Equity?

    Difference between equity and token

    A token is a digital asset that is issued on a blockchain platform and can be bought and sold on certain cryptocurrency exchanges. Tokens can represent a variety of different things, such as a unit of value, a digital collectible, or a representation of ownership in a company or asset.

    Equity, on the other hand, refers to ownership in a company. When a company issues stock, it is issuing equity in the form of shares of stock. Stockholders are considered owners of the company and have the right to vote on certain matters and receive dividends if the company is profitable.

    Combined features

    Equity tokens combine the features of both tokens and equity. The company issues digital tokens that represent ownership in the company, similar to shares of stock in a traditional initial public offering (IPO). These tokens, also known as security tokens, can be bought and sold on cryptocurrency exchanges, giving investors the ability to buy and sell ownership in the company just like traditional stocks.

    Takeaway

    Tokens are digital assets that can represent a variety of things, while equity refers specifically to ownership in a company. An equity token combines the features of both tokens and equity by issuing digital tokens that represent ownership in the company on a blockchain platform. Equity token holders can also contribute more towards equity token development through this global capital investment opportunity.

    What are the 4 Types of Tokens?

    There are different ways to classify tokens, but one commonly used framework is to categorize them into four kinds:

    1. Utility tokens, also known as access tokens, grant access to a specific product or service offered by the issuing company. They are often used to incentivize the usage or adoption of a particular platform or ecosystem.
    2. Security tokens are digital assets that represent ownership in an asset, such as a company or real estate. They are often subject to federal securities and regulations, similar to traditional securities like stocks or bonds, and can be traded on secondary markets.
    3. Currency tokens are digital assets that are designed to be used as a medium of exchange, similar to traditional fiat currencies. They are often used to facilitate transactions within a particular ecosystem.
    4. Asset-backed tokens are digital assets that are backed by a real-world asset, such as gold or real estate. The value of the token is tied to the value of the underlying asset.

    Important

    These categories are not mutually exclusive and some tokens may exhibit characteristics of more than one category. Additionally, new types of tokens may emerge and the classification may change over time as the blockchain and tokenization industry continues to evolve.

    Conclusion

    Equity tokens and equity token offerings are important parts of the blockchain landscape today. They allow new companies to participate in equity issuance and raise liquid capital, allowing them to streamline their cash flow and become an integral part of the blockchain network. Without equity tokens, it would be hard for companies to raise funding capital and grow business since capital investment is one of the major sources of investments in any industry.

    FAQ

    Most frequent questions and answers

    Equitel is a mobile banking platform offered by Equity Bank in Kenya, and it allows customers to perform a variety of banking transactions, such as checking account balances, paying bills, and transferring money, using their mobile phones.

    To buy tokens with Equitel, you would need to follow these general steps:

    1. Make sure you have an active Equitel account. If you don’t have one, you can visit an Equity Bank branch and open an account.

    2. Find a platform that supports buying tokens using Equitel, such as a cryptocurrency exchange or a company conducting an equity token offering (ETO).

    3. Register on the platform and complete the necessary KYC (Know Your Customer) and AML (Anti-Money Laundering) verification procedures.

    4. Once you have registered, you can deposit funds into your account using Equitel. This can usually be done by sending money to the platform’s Equitel number.

    5. Once the funds have been credited to your account, you can buy tokens using Equitel as a payment method.

    Note that this process may vary depending on the platform and the specific tokens that you are trying to buy, so it’s important to check the platform’s instructions and regulations.

    Yes, it is possible to cash out acquired tokens. Tokens can be bought and sold on cryptocurrency exchanges, just like stocks on traditional stock exchanges. You can sell your tokens on the exchange for the current market price, and then withdraw the funds to your bank account or other supported withdrawal methods. The process of cashing out a token may vary depending on the specific exchange or platform and the regulations in your jurisdiction.

    An example of a token is a digital asset that represents ownership in a company, such as a security token, which is issued during an equity token offering (ETO). These tokens can be bought and sold on cryptocurrency exchanges, and their value is tied to the performance of the company.

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    Skrumble.com provides all its content for informational purposes only, and this should not be taken as financial advice to buy, trade, or sell any investment instruments or products, including but not limited to cryptocurrencies, or use any specific exchange. Please do not use this website as investment advice, financial advice, or legal advice, and each individual’s needs may vary from that of the author. Investing in financial instruments, including cryptocurrencies, carries a high risk and is not suitable for all investors. It is possible to lose the entire initial investment, so do not invest what you cannot afford to lose. We strongly advise conducting your own research before making any investment decisions. This post includes affiliate links with our partners who may compensate us.

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