Are you aware of the concept of tokenization? If not, you have landed on the right page. The article illustrates different offerings such as IPOs, ICOs, STOs and explains how they differ from one another.
Learning Of Blog
1.Understanding the concepts of
2. Distinguishing IPO with ICO
3. Distinguishing ICO with STO
4. Final Words
Initial Public Offering(IPO)
Initial Public Offering(IPO) is also known as “going public” as the company moves from being a private company, and it is one of the oldest and most popular fundraising methods. When a company decides to conduct an IPO, it sells shares to institutional investors, and these shares are traded on the stock market. Companies can raise investment capital with the help of an IPO by issuing new shares, or even the existing shareholders can sell their shares to the public without raising any new capital.
Initial Coin Offering(ICO)
Initial Coin Offering(ICO) is the cryptocurrency industry that is equivalent to an IPO. The major difference between the both is that IPO does not give investors any ownership rights to the company. Investors can only buy units of the newly-issued digital currency but cannot acquire the right or opportunity to contribute to the future plans of the organization, although investors are able to have a say on the plans as they possess shareholder voting rights.
Security Token Offerings (STO)
The concept behind security tokens is easy; it’s about security on the blockchain. An STO perform effectively the same way as an ICO. But the only difference is that investors are purchasing regulated financial security in tokenized form. STO may replace other offerings because, as an investor, they let you own something actually.
Want to become a Certified Blockchain developer? Check out the best Blockchain certification courses here.
Distinguishing IPO & ICO
- The first difference between an ICO and an IPO is that IPO is usually for well-settled companies, whereas ICO is generally for the young and risky.
- Another key difference is the process of issuing one. An IPO is a much more extensive process than ICO that requires underwriters and lengthy evaluations to determine the market price of each share. Thus for an IPO, you need lawyers, banks, and patience while for ICO, one needs programmers and the Internet.
- When it comes to investor requirements, in case of IPO, there is a lengthy legal procedure if one wants to invest in a foreign company, so one may need need to utilize the services of a broker. But in ICO, the best part is one just needs an internet connection to start investing.
- For profit-sharing, unlike an IPO, in an ICO there is no means to distribute the profits that the company has made as a result of the investment.
- Due to the multi-step process while issuing an IPO, raising money through this method is quite lengthy in comparison to ICO.
The image below shows IPOs differs from ICO in terms of reliability, legal coverage, investments, and international accessibility.
Let’s have a look at the major differences between the two offerings.
|Usually for well-settled companies||Mostly for beginners and youths|
|You need lawyers, banks and patience||You need programmers and only Internet|
|Requires legal procedure||Just an Internet|
|Represents an ownership stake on the future earnings on the company.||Coins do not grant ownership of the project.|
|Less secure||More secure|
Distinguishing ICO with STO
- It is the Blockchain empowered equivalent of IPO. It has more powerful requirements than ICO but not really as much as IPO.
- An STO is a token offering similar to an ICO, but the main difference is that STOs are regulated. On the other hand, ICOs are highly unregulated. STOs are registered with required government bodies, meet all the legal requirements, and we can say they are 100% lawful.
- As STOs are more regulated, they are more convincing to investors when compared to ICOs.
- STOs have already resulted in some big moves for varied businesses, and it is expected that they will replace ICOs in the coming years.
- There is no risk of fraud or illegal activities in STOs as compared to ICOs.
|Less Regulated||Highly Regulated|
|Less expensive to launch||More expensive|
|Anyone can invest||Only accredited investors|
|Risk of fraud or illegal activities||Secured|
|You get a token||You get ownership|
The tokenized economy is a new skyline for many investors, and all the three offerings IPOs, ICOs, and STOs give companies and businesses new ways to raise funds.
Which choice do you personally are inclined to invest in?