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You may have heard about ICOs, but do you know what IEOs and STOs are? Trijo News explains.
There is a huge hype right now that the security token offering (STO) is the new form of initial coin offering (ICO), but did you know that there is a new form of blockchain-based fundraising on the rise?
Yes, say welcome to the initial exchange offering (IEO). This detailed guide will highlight the major differences between these fundraising methods and why one would be more beneficial over the other.
So, let’s get started already!
Initial coin offering (ICO) is, or maybe was, a very popular crowdfunding method among crypto investors. It’s an effective way of funding a new product or service in the crypto world, say a new coin or an app.
ICO is not quite different from IPO (initial public offering) that is often used by companies venturing into the stock market.
An ICO works by issuing digital coins or crypto coins against investments. They are sold directly to investors at a discount. Just like the stock markets, investors gain profits if the tokens increase in value from the initial launching price.
Pros of an ICO
Cons of an ICO
Technically speaking, an initial exchange offering (IEO) is just a new form of ICO, but the difference comes in on the platform where the token or coin is offered. As the name suggests, an IOE fundraising offers coins through a partnering crypto exchange as opposed to directly dealing with investors.
Anybody can participate in a public ICO, but in an IEO, the tokens are sold exclusively to members of the exchange. However, it’s not a difficult process to join an exchange that offers the tokens if you’re interested in investing in the new coin.
Sometimes, it’s even easier investing through an IEO than an ICO. Instead of following specific guidelines that are unique with each ICO offering, the exchange will standardize the process for all offerings, making it less tedious for the users to invest in different coins.
Pros of an IEO
Cons of an IEO
Security token offering (STO) is a more complex form of fundraising that is a little more difficult to implement than ICOs. STOs work by issuing an investment contract backed by security tokens and recorded on a blockchain platform.
With an STO, the security coin is asset-backed and contains the ownership information of the investor, which is recorded digitally on the blockchain. It’s more of a digital certificate, the same way you’d have a certificate for bonds and stocks in exchange for your investment.
Pros of an STO
Cons of an STO
IEOs have significantly mitigated the legal risks associated with ICOs though the liquidity is lower. STOs, on the other hand, provide a more secure platform for serious investors who don’t want to leave their investment at the mercy of exchanges.
That said, whichever fundraising method you choose, always remain cautious and do thorough background research about the coin offering.
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