difference between ico ieo sto

What is the Difference Between ICO’s, IEO’s and STO’s?

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First of all, a warm welcome to all newcomers in DesiAirdropsBlog!  Have you all started listening about ICO’s, IEO’s, and STO’s in your business meetings, parties or any other crypto-related place? Or, did you get confused about the difference between ICO, IEO, STO? Then this article will help you to get a,b,c knowledge on the ICO’s IEO’s and STO’s.

First, I had heard those word in-office meetings or in between of my peer group. And the funniest thing is that time I nodded my head in knowing approval without understanding what everyone is talking about. Soon after I had started long research. Also, started to read many articles with lots of examples. And I realized the ICO, IEO, and STO are the evolution of funding. Which is a really great idea!

So, don’t feel panic. Let’s move on to the difference between ICO, IEO, STO.

ICO’s (Initial Coin Offerings)

Before ICO, Crowdfunding was only the process of collecting money from others. The crowdfunding actually is a very old idea. It has been around in various forms for many, many years. However, the modern version of crowdfunding was born with the internet. It has funded all kinds of good projects. But this has been marred due to the involvement of the mediator.

Now the next evolutionary step is ICO. That is possible because of the invention of blockchain. The first blockchain was proposed by the mysterious Satoshi Nakamoto in the year 2008. And by 2009, Bitcoin was born. By 2014 another cryptocurrency Ethereum was invented. Blockchain allowed companies to create and issue their own tokens in return for cash. These tokens were connected to smart contracts. This helps to remove the centralized platform permanently.

So, companies use ICO’s to raise funds for their projects. In detail, companies issue and sell new cryptocurrency to people and use the raised fund for project development. The holders who bought tokens expect to profit by selling tokens at a higher price later. The cryptocurrencies exchanged are utility tokens which are used only within the ecosystem of their native project.

IEO’s (Initial Exchange Offerings)

Basically, IEO is a muted version of an ICO. Here exchange is totally responsible for the fundraising process. For example, Binance Launchpad is a very famous IEO platform that includes many IEOs like Matic Network (MATIC), BitTorrent (BTT), etc. 

The market of IEO cam down in 2018 due to regulatory uncertainty and an abundance of fake projects. As a result, IEO was introduced. In this case, the exchange itself runs the token sale. Moreover, the exchange takes upon itself the due diligence of the project, assessing the viability of the products being developed, risks, financial condition, market position, etc. The fact that the trading platform takes reputational risks in the offering increases the trust level for potential token buyers.

STO’s (Security Token Offerings)

STO is a new method of fundraising. It is almost close to ICO. In STO, contributors get security tokens – digital securities which give rights for dividends, shares, equities, etc. These tokens are traded on exchanges and fall under United States Securities and Exchange Commission (SEC) and Swiss Financial Market Supervisory Authority (FINMA) regulations.

The biggest problem in ICO is- the lack of any guarantees and compensation. The problem occurs when the project fails or turns out to be scammy. They are anchored to real securities. Most importantly, token issuers fall under the regulatory requirements of the SEC and FINMA which include financial reporting requirements. These ensure that the projects are legal. And developers won’t disappear with your money.

Which is good for you among ICO, IEO or STO?

If you search for better something, then I will tell you these three are separate from one another. ICO is very simple to join. Recently, I have participated in one ICO, named MedK. And I got as I expected. You need cryptocurrency, which you then send to the developers. 

In the case of IEO’s, besides crypto, you need an account on the exchange conducting the token sale.

STO’s are more regulated. It has more requirements for token buyers. Buyers should be accredited players of the market. In this category, according to US law, individuals who meet at least one of the following requirements:

  • An annual income of more than $200,000 per person or $300,000 for a married couple. These should be maintained over the past two years and projected in the current year. In which the person plans to buy security tokens,
  • Net assets of more than $1 million. Which do not include the value of the real estate in which the person lives on a permanent basis,
  • An organization that has assets over $5 million. For example, a venture capital fund or a trust fund,
  • A company whose members are all accredited.

Besides these, there are plenty of other minor details important for a token buyer and for a token issuer.

Conclusion

Now let’s conclude the article. I hope that you can distinguish between ICO, IEO, STO after reading this. Now you can join in those discussions in business meetings and parties. There are lots of famous ICO, IEO. Before, investing in any one of them, please do proper research on them.

    Have a Happy reading & Airdropping!

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Disclaimer: The above should not be considered as trading advice by DesiAirdrops