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All you Need to Know about ICOs, IEOS, and STOs


cryptoknowmics.com 08 July 2022 08:47, UTC
Reading time: ~6 m

Are you a crypto trader looking to invest in new projects? Or are you a developer? Want to raise 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 one that best suits their needs. On one hand, investors explore those options. Where the chances of fraud are less while on the other hand startups try to explore alternatives with fewer procedural requirements. So that they can raise funds for their project. Choosing the best option seems a daunting task for both those who want to earn. And those who want to launch. Projects involving cryptocurrency and blockchain technology mainly raise funds using three popular methods of ICO or IEOS and STOs. Oops! You might be thinking what is an ICO or IEOS and STOs? 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 by having a sufficient number of Bitcoins and Ether in any project.   IEOS and STOs   How does ICO work? Firstly, before launching the ICO, the project developers or teams want to raise funds. Issue a document called a white paper. In which the objective of their project, essential details of the team, mission, and vision of the same should be clarified. This should also be highlighted. Benefits for investors. Then, initially, the coins are given to investors interested in the project in exchange for crypto coins (usually BTC and ETH). If the project becomes legit, the coins get listed on an exchange. Opens doors for business. But the risk is real in the present scenario. Because many projects are short-lived and meant to dupe investors. But, if you research the project carefully. So you can invest in a real working project and make huge profits. There are currently many websites like Icobench, Coincodex, Coinschedule, Cryptoslate, etc. available to help you choose from several 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 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 tokens and coins issued in ICO or IEOS and STOs respectively. The 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 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 ICO or IEOS and STOs. An Initial Exchange Offering or IEO is defined by the exchange's platform on behalf of the startups who are looking up to raise the funds for their project with their newly issued coins. The token sale is conducted on the platform of a cryptocurrency exchange after the token issuer pays the listing fees along with a percentage of tokens that 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 CEOs like Binance Launchpad, Huobi Prime, OKEx Jumpstart, 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 ICO or IEOS and STOs? 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 insights into all 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 to the entry of both buyers and sellers.
  • The distribution process of tokens is 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 costs and complex processes are involved in 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.
  • The protection of investors is insured by the 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 the activities of the exchange.

Summing Up

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 starting raising the funds; then they end up 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 IEOS and STOs.
  • 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 doesn'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!!   Articles You May Read  

  • ICO vs IPO | Simplified Guide For The Beginners Of 2020
  • Guide For Cryptocurrency Scams | How To Find If A Company Is A Scam?
  • Guide On How Do You Trade On Binance Exchange

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