A security token offering (STO) is a public offering where tokenized digital securities are sold.
A security token offering or an STO is a specific type of public offering where tokenized digital securities — which are known as security tokens —are sold in cryptocurrency exchanges or even on security token exchanges. Tokens can be used to trade real financial assets, and use blockchain virtual ledger systems in order to store as well as validate the token transactions. A security token is this unique token that is issued on a permissioned or permissionless blockchain and represents a stake in an external asset or enterprise.
Security tokens by themselves are used to authenticate the identities electronically through storing personal information. They are issued out by security token services and authenticate a person's identity. They can be used alongside a password in order to prove the identity of an owner. Security tokens are not always secure, however, and have the potential of being lost, stolen or even hacked in the worst-case scenario
Security token offerings differ from initial coin offerings in the sense that while they are made through selling digital tokens to the general public in cryptocurrency exchanges, ICO tokens are the offered cryptocurrency's actual coins, which are entirely digital and even classified as utilities.