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  1. 1. What are these cryptocurrencies?
  2. 2. Bitcoin - the story of a technological revolution
  3. 3. Satoshi Nakamoto, who is the creator of Bitcoin?
  4. 4. Vitaly Buterin – the creator of Ethereum
  5. 5. What is Blockchain, and how does it work?
  6. 6. What is an NFT token?
  7. 7. What is money?
  8. 8. Cryptocurrencies vs fiat money, which will win?
  9. 9. What is DeFi (Decentralized Finance)?
  10. 10. DeFi: opportunities, advantages and disadvantages of decentralized finance
  11. 11. What is an altcoin?
  12. 12. Stablecoins - What are they?
  13. 13. Cryptocurrency wallet - what is it?
  14. 14. Why do we talk about bull and bear markets?
  15. 15. Security in the crypto market - what rules are worth following?
  16. 16. What is the seed phrase in cryptocurrencies?
  17. 17. Dogecoin and memecoin - what are they?
  18. 18. What is a Ponzi scheme?
  19. 19. What is a Soft and Hard Fork?
  20. 20. Blockchain - examples of use
  21. 21. Is blockchain safe?
  22. 22. Smart Contracts - what are they?
  23. 23. What is Ethereum? 
  24. 24. Liquidity in the cryptocurrency market
  25. 25. What is cryptocurrency mining?
  26. 26. What is the mining difficulty?
  27. 27. Inflation and its effects on financial markets
  28. 28. What is compound interest, and how does it work?
  29. 29. Cryptocurrency wallet diversification
  30. 30. Blockchain and NFT games - how to make money on them?
  31. 31. Decentralized Apps – what are they?
  32. 32. What is Proof of Work (PoW) and what is Proof of Stake (PoS)?
  33. 33. What is Proof of Burn (PoB)?
  34. 34. What is the Proof of Authority (PoA) consensus mechanism?
  35. 35. What Are Privacy Coins and Are They Legal?
  36. 36. What is CBDC - central bank digital money?
  37. 37. What is Cryptocurrency Airdrop all about?
  38. 38. What are the types of blockchain networks?
  39. 39. Key differences between ICO, IEO and STO
  40. 40. What is IoT - the Internet of Things?
  41. 41. What is the difference between Circulating Supply and Total Supply?
  42. 42. Everything you need to know about gas fees in Ethereum!
  43. 43. The most important cryptocurrency acronyms/slang you need to know!
  44. 44. Halving Bitcoin - what is it, and how does it affect the price?
  45. 45. What is the Fear and Greed index for cryptocurrencies?
  46. 46. APR versus APY: what is the difference?
  47. 47. Snapshot from the world of cryptocurrencies - what is it?
  48. 48. Know your customer (KYC) and Anti-money laundering (AML) what are they in the cryptocurrency industry?
  49. 49. What is a whitepaper? What is its purpose, and how do you write it?
  50. 50. How do you transfer cryptocurrencies?
  51. 51. What is EURT? How does it work?
  52. 52. What is an Initial Farming Offer (IFO)?
  53. 53. What is Regenerative Finance (ReFi)?
  54. 54. Bitcoin Pizza Day
  55. 55. What Is Stagflation and Why Does It Have a Negative Impact on the Market?
  56. 56. What are decentralized DAO organizations, and how do they work? What are DAO tokens?
  57. 57. CyberPunks - the story of the most popular NFT collection in the crypto industry!
  58. 58. Michael Saylor, Self-Proclaimed Bitcoin Maximalist
  59. 59. AI blockchain - a new look into the future?
  60. 60. The Bored Ape Yacht Club (BAYC) - the story of the popular NFT collection!
  61. 61. Who is Changpeng Zhao, CEO of Binance?
  62. 62. What is blockchain network congestion, and how does it work?
  63. 63. Azuki NFT collection guide: everything you need to know about it!
  64. 64. Who Is Craig Wright, the Alleged Creator of Bitcoin?
  65. 65. What Is Bitcoin (BTC.D) Dominance?
  66. 66. What is WorldCoin? Everything you need to know about this cryptocurrency!
  67. 67. Who is Brian Armstrong - CEO of Coinbase?
  68. 68. The 10 most expensive non-fungible tokens (NFTs) ever!
  69. 69. Web3's most popular social media platforms! Will they replace the platforms we know?
  70. 70. Cryptocurrency wallets: Hot Wallet vs. Cold Wallet - key differences!
  71. 71. Gavin Wood: Blockchain Visionary and Co-Founder of Ethereum
  72. 72. The memecoin story: madness or great investment?
  73. 73. Blockchain versus databases: key differences!
  74. 74. NFT Art: The digital art revolution - history and examples!
  75. 75. Who is Galy Gensler and the SEC? How does the Securities and Exchange Commission (SEC) affect the cryptocurrency market?
  76. 76. On-chain analysis in the cryptocurrency world: Everything you need to know about It
  77. 77. What are utility tokens and what use do they have in the cryptocurrency sector?
  78. 78. Can you pass on your cryptocurrencies after death? How do you pass on a cryptocurrency inheritance?
Lesson 39 of 78
In Progress

39. Key differences between ICO, IEO and STO

We may associate abbreviations with consensus mechanisms. Nothing could be further from the truth, however! The continuous evolution of cryptocurrencies requires the development of new methods, supporting blockchain and fundraising. Today we will discuss the basic differences between Initial Coin Offering (ICO), Initial Exchange Offering (IEO) and Security Token Offering (STO). Get to it!

Initial Coin Offering (ICO)

This is a kind of crowdfunding that uses cryptocurrencies to fund blockchain projects in their early stages of development.

How. A person, project, or investor can sell their new cryptocurrency tokens to other investors, thus obtaining funding to further develop the venture. Initial Coin Offering gained popularity in 2017.

The main goal of ICO is to raise funds, create a community and strengthen the project.

There are three main categories of tokens in ICO:

  1. Utility tokens (utility tokens) – provide us with access to a particular company’s platform, product, or service. As these tokens are not created as an investment, they are not subject to any regulatory restrictions in countries where ICO is allowed.
  2. Tokenized shares – represent our share in a company that participated in ICO. This type of token are nothing more than digital shares that give us ownership and control of a project. However, it is worth knowing that this type of token is subject to the SEC and other regulatory bodies.
  3. Asset-backed tokens (Asset-backed tokens) – they represent physical assets or commodities. For example, gold and oil. They are the least popular among investors because, as a rule, their value does not exceed the value of the underlying asset.

Advantages of Initial Coin Offering

  • They are easy to implement. A project basically only needs a white paper, a website, and a team that supports the project.
  • It has low startup costs, so it is ideal in the early stages of project development.
  • In the case of ICO, fundraising is easy – all it takes is a well-thought-out strategy.
  • Initial Coin Offering provides relatively high liquidity early in the project.
  • The originators have full control over the funds raised.

Disadvantages of Initial Coin Offering

  • Extortion and fraud are common in this type of financing.
  • This is not a good investment in the long term.

How does Initial Coin Offering work?

Any cryptocurrency project that wants to raise money can launch an ICO. However, the first step to take when going for this type of funding is to determine how it will be structured. Some of the most common ways include:

  • Setting a specific target or limit for financing by the company. This means that the token sold during ICO must have a predetermined price and a fixed supply of tokens.
  • The amount of funds received in ICO in advance determines the price per token.

Initial Exchange Offering (IEO)

It is limited only to members of the cryptocurrency exchange and fully supervised by it. It involves a particular cryptocurrency project selling its new tokens directly to the exchange, to raise capital. For a fee, of course. The project cannot sell the offered assets to an individual. Therefore, investing in this case is not so complicated for the recipients of the project.

IEO provides almost instantaneous trading of cryptocurrencies. It is important, however, that in this type of financing, the exchange, or trading platform where one intends to place one’s assets complies with securities regulations.

Initial Exchange Offering also has three main goals: raising funds, creating a community around the project, as well as strengthening it.

Advantages of Initial Coin Offering

  • We are confident that the exchange, where the IEO, takes place is verified and secure.
  • Investors send their new tokens directly to the exchange. A faster and safer process.
  • Instead of sending funds to the intelligent contract, they are transferred directly to investors’ accounts. Of course, after deduction of commissions by the cryptocurrency exchange / platform.
  • IEO prevents fraud and scams, by funding through verified platforms.

Disadvantages of Initial Exchange Offering

  • The setup and process of the entire project is more difficult.
  • The cost of fundraising is higher, compared to ICO.
  • Liquidity is also lower than even ICO.

How does the Initial Exchange Offering work and how to participate?

A project that wants to participate in IEO, must first register with a cryptocurrency platform that agrees to do so. Then the entire project, but also the user, goes through the required verification procedures and is qualified to take part in the process.

If you are a user, your next step is to purchase tokens on the exchange.

Security Token Offering (STO)

Very often referred to otherwise as tokenized IPO. It is the public sale of security tokens, on a cryptocurrency platform. The STO process is more complicated and time-consuming. It is also definitely more difficult to implement than ICO. STO made its debut in 2018.

A security token is a digital asset that represents an underlying, real asset such as a security. Therefore, the STO procedure enables tokenization of assets for many companies. We can confidently compare Security Tokens to certificates issued for shares. In the case of shares, any ownership information is entered into the ownership document. In the case of tokens it is the same, except that, such information is placed on the blockchain and represented by a token.

STO has slightly different goals than ICO and IEO. Its task is to build a financial instrument and raise funds. Then to reach the cryptocurrency market and create liquidity for the project.

Advantages of Security Token Offering

  • It is a very trusted and safe investment tool.
  • It is ideal for long-term investments.

Disadvantages of Security Token Offering

  • It is quite a challenge, due to strict regulatory rules.
  • Unfortunately, but it provides low fluidity.

Security Token Offering is complicated in that it must follow the law and SEC regulation. It can only exclude financial institutions and intermediaries from its process. Unfortunately, however, security tokens are subject to federal securities regulations.

Similarities between ICO, IEO and STO

In addition to the many differences, each, of the discussed ways of raising capital, has a lot in common. Let’s take a look at these most obvious features:

  1. All three require careful preparation before starting a project.
  2. A platform, or project, must have an existing community to reach its collection goal and succeed.
  3. The project team, no matter whether in ICO, IEO or STO, must prepare a white paper and other necessary documents.
  4. For the project to achieve better results, it is advisable to take advice from qualified advisors.

How do you launch your ICO, IEO or STO?

Here are a few things you need before launching your financing:

  • Whitepaper, otherwise known as a whitepaper.
  • His reliable and irreplaceable team.
  • Find the right and specialized advisors.
  • Choose your fundraising strategy.
  • Create a marketing plan and strategy.
  • Prepare to launch fundraising!

Summary

You already know the main differences, between the three most popular ways to raise funds. Knowing the advantages and disadvantages – which way, according to you, is the best? Share your opinion with us!