Blockchain-based financing opens up a horizon of innovative opportunities for raising funds and creating cutting-edge financial services.
Within this area, two protagonists stand out: STOs (Security Token Offerings) and DeFi (Decentralized Finance) protocols.
Despite sharing the same technological foundation on blockchain, these two approaches differ markedly in their operational dynamics, applicable regulations, obstacles to overcome, and inherent risks.
STOs provide companies with the ability to issue security tokens backed by financial assets, such as stocks, bonds, or real estate. This mechanism facilitates investment in fragments of emblematic buildings or in shares of promising companies, through digital tokens. The process of launching an STO begins with the issuance of these security tokens, which investors can acquire in both cash and cryptocurrency. The intriguing thing is that all transactions linked to these tokens are recorded and executed on a blockchain, providing a level of transparency and traceability at each stage. However, it is important to note that carrying out an STO involves compliance with current financial regulations.
On the other hand, DeFi protocols operate in a completely decentralized environment without intermediaries, thus representing an alternative to STOs. These protocols make use of smart contracts on the blockchain to automate a wide variety of financial transactions, including lending, swapping, and generating passive income. The distinguishing feature of DeFi protocols lies in their decentralized approach. Users interact directly with smart contracts through their digital wallets, granting them access to financial services without relying on traditional intermediaries such as banks or broker-dealers. Unlike STOs, most DeFi protocols are not subject to established financial regulations.
It is relevant to note that the DeFi community has implemented measures to mitigate the inherent technical and security risks, including security audits carried out by experts, the use of reliable oracles to obtain external information, and the adoption of best practices in cybersecurity, all with the purpose of protecting user assets and data.
