Are you a crypto trader looking to invest in the new projects? Or are you a developer who wanted to raise the funds from the crypto market for your project? With the number of fundraising tools available in the market, it is difficult for both investors and startups to choose the best one as per their requirements. On one hand, investors explore the options where the fraud possibilities are less while on other hand startups try to explore options wherewith less procedural requirements, they can raise the funds for their project. Choosing the best of the option seems to be the daunting task for both who wanted to earn and also who wanted to launch. Projects associated with cryptocurrency and blockchain technology mostly raise funds mainly using three of the popular methods of ICO, IEO and STO. Oops! You might be thinking what is an ICO or IEO or STO? Let us try to explain and compare three widespread methods so that you can assess them before taking their advantages.
What Is An ICO(Initial Coin Offering)?
If you are a crypto enthusiast, you might know about ICO. But newbies, are you wondering what is an ICO? An Initial Coin Offering or Initial Currency Offering (ICO) is a crowd fundraising tool specially meant for blockchain startups. Startups issue coins or crypto tokens in crypto marketplaces to raise funds which are usually exchanged with crypto coins. Any individual or organization can become an investor having a sufficient number of Bitcoins and Ether in any project.
How ICO works? First of all before launching the ICO, project developers or teams who wish to raise funds, release a document called a whitepaper explaining the aim of their project, essential details of the team, mission and vision of the same and also highlights the benefits for investors. Then, initially the coins are offered to investors interested in the project, in exchange for crypto coins (usually BTC and ETH). If the project turns out to be legit, coins get listed on an exchange and open the doors for trading. But the risk is real in the present scenario as many of the projects are short term and meant to dupe the investors. But, if you research the project carefully, you might end up investing in a real working project and can earn huge profits. Presently many of the websites like Icobench, Coincodex, Coinschedule, Cryptoslate etc are available to help you in choosing out of multiple ICOs.
What Is A Security Token Offering (STO)?
If you are exploring the options to invest in a new project, you may have encountered STO. Did you search for what is the STO or Security Token Offering? Similar to ICO, STO is also a fundraising method in the crypto marketplace. In the case of STO, cryptocurrency or token representing a security contract is offered to investors. Security is a kind of investment product (which can be stocks, bonds, funds or Real Estate Investment Trusts(REITs) backed by the assets of the real world. Thus, the security token signifies the information of ownership of the investment product recorded on the blockchain. There is a significant difference between token and coin issued in STO and ICO respectively. Coin is not backed by underlying assets while the token is fungible and backed by the assets of the real world of the company, thereby less likely to be involved in faking the projects. Also, some of the sites like STO Check, STO market, STO analytics etc, are committed to providing the best overview of the reliable STOs of all across the world.
What Is An Initial Exchange Offering (IEO)?
So here we respond- What is IEO for our investors, which they might be expecting us after IEO and STO. An Initial Exchange Offering or IEO is defined by the exchange’s platform on behalf of the startups who are looking up for raising the funds for their project with their newly issued coins. The token sale is conducted on the platform of cryptocurrency exchange after the token issuer pays the listing fees along with a percentage of tokens which are needed to be sold. Issuers have to create accounts on the exchange and investors fund the exchange wallets with coins to purchase the newly issued tokens. Various platforms are available to conduct IEOs like Binance Launchpad, Huobi Prime, OKEx Jumpsmart, Coineal Launchpad and many more.
Which One To Choose To Invest/Raise Funds?
Is it the battle of ICO vs STO or IEO vs ICO or ICO vs IEO vs STO? As in the real world different people have different requirements, similarly, their choices depend on the kind of investment that suits them best. We can only give you the insights of all the three methods, but final choices need to be made by you only.
Review Of Pros And Cons Of ICO
- Initial requirements of setting up of whitepaper of the project, a website informing the details and a technical support team are easy to fulfill before issuing ICO.
- Low funds are needed for investment (even newbies can try their hand!).
- No barrier for the entry of both buyers and sellers.
- Distribution process of tokens in simple and automated.
- Susceptible for scams as anybody can design the ICO with the help of easily available standards in the market like that of ERC20.
- Not preferable for long term investments.
Review Of Pros And Cons Of STO
- Compliance with government rules and backing up with real assets, STOs are considered trustworthy tools for investment.
- Secured investment tool due to the limited accessibility given to the recognized investors.
- Long term investment tool.
- High fundraising cost and complex process is involved for issuing STO.
- Low liquidity due to heavier government regulations.
Review Of Pros And Cons Of IEO
- Highly secured as the exchanges are mostly KYC/AML verified.
- Protection of investors is insured by exchange platform conducting IEO.
- Familiar process for investors who already know about the trading process on crypto exchanges.
- Issuers might be charged highly by exchanges, thereby expensive process of issuing IEO.
- Investors have little control over activities of exchange.
We might conclude that none of them is completely flawless or they are complete flaws. It depends on the needs of investors and the issuer while choosing the fundraising tool.
- If an investor believes in the idea of decentralization (many do) and wants short term and inexpensive investments and fundraisers are not mature enough to fulfill several compliances before start raising the funds; then they end up in choosing ICO.
- If an investor is ready to invest a huge amount and prefers the traditional structure of investing and the issuer is ready to follow the stricter regulations of the authorities; then they might end up choosing STO.
- If an investor believes in the credibility of a particular crypto exchange and wanted to choose a safer source for their investments and the issuer wanted to utilize the popularity of the exchange and don’t mind spending the listing fees; then they might end up with IEO.
Thus, in the end if you are an investor, it’s your money, choose judiciously to invest it. And if you are an issuer, then choose wisely which option best suits your needs!!
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