Security Token Offerings, or STOs, essentially perform atomic token swaps by minting new tokens based on a price or rate you have established.
As an example, let's say that:
- You have a total supply pre-STO of 500m TORO tokens - This pre-STO total supply could represent the TORO tokens distributed to founders and/or kept by the company in its treasury.
- You are looking to raise 10m POLY by selling an additional 100m TORO tokens. To do so, have configured an STO with a hard-cap of 100m TORO tokens and a rate of 10 TORO tokens per POLY received.
Every time an investor sends POLY (could be ETH as well) to the smart contract address, the amount of POLY is converted into a number of TORO tokens - this amount of TORO tokens is minted and sent back to the originator of the transaction while the POLY (or ETH) are sent to your wallet.
Continuing with the example above:
- Investor A sends 10,000 POLY to the smart contract address,
- Since the rate is set to 10 TORO tokens per POLY, Investor A receives 100,000 newly minted TORO tokens, and
- Your wallet receives the 10,000 POLY.
At the end of the STO,
- if your STO raised all the funds you wanted, your total supply will be 500m + 100m = 600m TORO tokens.
- if your STO raised only 50% of the funds you wanted to raise, your total supply will be 500m + (50% * 100m) = 550m TORO tokens
Additionally, if your original 500m TORO tokens was the max total supply you ever wanted, you could always burn 100m TORO tokens from treasury and run a similar STO.
Doing so will make your total supply of TORO tokens 400m pre-STO and 500m post-STO, assuming your STO reaches its target.