STO: Why can traditional assets also be on the blockchain?

Question

Have you ever wondered why real estate transactions go through so many procedures? Why can only the wealthy invest in art? The answer to these questions is actually very simple — assets are trapped in the real world.

Security Token Offering (STO) is designed to solve this problem. In simple terms, it allows any real asset to be digitized and flow freely on the blockchain.

What is a Security Token?

Imagine you want to buy a building worth 1 million. According to the traditional process: lawyers, notarization, taxes… it takes several months to complete the transfer.

But what if this building is “tokenized”? A building worth 1 million can be divided into 1 million tokens, each representing ownership of 1 yuan. You can buy 1000, or you can buy 10. These tokens can be transferred to others at lightning speed, just like buying vegetables.

The key distinction is: security tokens must comply with financial regulations. They are not virtual currencies; they represent legal ownership of real assets behind them. This is also the reason why they are called “securities.”

What can be tokenized?

Divided into three categories:

Bond Type: Tokens issued by the company represent the money you lend to them. Regular interest payments, similar to traditional bonds.

Equity-type: Buying tokens is like buying company shares. You can receive dividends, participate in voting, and truly own a stake.

Asset Type: This is the most interesting one. Real estate, gold, artworks, wine—anything valuable can have its ownership divided. For example, a famous painting can be owned by 100 people together, each with 1%.

Why is this called a revolution?

Liquidity Explosion: Properties that could originally only be sold once a year can now have their shares traded at any time after tokenization.

Threshold Significantly Reduced: Investing in a New York property requires millions. But buying a token of a New York property only costs a few thousand. Global investors can participate.

Dramatic Cost Decrease: Eliminated intermediaries, lawyers, and audits. Smart contracts automatically handle dividends and transfers, completing in seconds.

Transparency max: Every transaction on the blockchain is recorded and immutable. This is a huge protection for investors.

Real-world issues

The ideal is very full, but reality is very skinny. The biggest killer is regulatory chaos. Different countries have completely different attitudes towards STOs, and some countries still do not have a clear legal framework. This has led to:

There are very few exchanges. You can't find a place to buy safe tokens.
Liquidity is concerning. Even if you can buy it, there may not be anyone willing to buy it when you want to sell.
Security risks. The technology is still in an evolving stage, and hacker incidents occur from time to time.

Can it take off?

Short term (1-2 years): It may still be in the experimental stage. Mainly large institutions are involved.

Long-term (3 years+): If regulation is clear, STOs will be a game changer. Especially in the real estate and private equity markets, with a total scale of several trillion dollars, if only 1% goes on-chain, it will be astronomical.

Key points to consider: Will the government regulate this matter; Is blockchain technology stable enough? Currently, both are in progress.

In simple terms: Security tokens are not speculation, but an upgrade of financial infrastructure. However, it still needs time to mature.