In this article we explain the differences between the Initial Coin Offering (ICO) and Security Token Offerings (STO).
What ICO means?
ICO (Initial Coin Offering) is the first edition of Coins. It is the most reliable way to collect money for a new crypto-currencies. An ICO is a often a few weeks lasting Event to the Start of a crypto currency. During the ICOs everyone has the opportunity to buy the Coin in exchange for Bitcoin, ETH Zurich, and other large Coins.
In other words, a ICO a type of funding currencies through the use of Crypto. Often, a ICO will be carried out as a Crowdfunding. A defined amount of a crypto-currency is traded in the Form of “tokens” or “Coins” to “shareholders” or investors, in exchange for legal tender or other crypto-currencies such as Bitcoin or Ethereum. The exchanged Token as used, if the financing objective of the ICO is reached and the project begins.
What is a STO?
A STO (Security Token Offering) is fundamentally a ICO are very similar, however, in some important respects very different. In the case of a STO is exchanged, as in the ICO, an Investment (in cryptocurrency or Fiat) against the token of a new crypto-currency, which will be held on a Blockchain. Otherwise, ICOs and STOs, however, have little in common. While ICOs are used for the exchange of Coins, profits, or even currencies, the same STOs more securities.
Security Tokens are cryptographic Tokens, which involve the buyer to a percentage of the profits, you loans or other income to distribute, which can again be reinvested. In contrast to ICOs buyer will receive in the case of STOs, in fact, shares in the company you are investing in.
ICO vs. STO
In contrast to ICOs STOs are actual securities, based on the Token Assets. These tokens describe assets property, plant, and save the investors a share of the company, if the System works well. In other words, STOs, the Token owner can give a certain per cent stake in the company, just like in the stock market. On the one hand, STOs intermittent offer returns, property control, and more interest. On the other hand, STOs are defined by a Smart Contract that describes the Token, similar to a ICO.
STOs make it possible to create companies, Whitelists and Blacklists, which makes it easy to the KYC Standards and specifications for the money to comply with laundering. The main advantage of the STO is in the Clarity. Therefore, STOs can change the Crowdfunding radically.
An ICO is mostly a acquire – to-two-week Event, at any the opportunity is given, crypto-Token in exchange for, e.g., Bitcoin, ETH, XRP, and many more. The investors must Deposit their investment in a Smart Contract, the funds are collected, and the investors receive Coins or tokens of the ICOs. An ICO is a great opportunity for Startup companies to raise capital. Startups can build through Crowdfunding, on the Basis of crypto-currencies, million.
Most of the ICOs offer their first investors a huge discount. While this initially sounds like a great idea to develop the discount quickly a Community, the practical result is often contrary to the objectives of the company. Very often the first investors to have the high discount in the interest of to trade the Token, as soon as he is traded to achieve an immediate (high) profit.
STOs will be filed with the Securities and Exchange Commission (SEC) and obtain the approval of investment privileges such as Reg A+. The tokens that have their origin in the STOs, to give the investors some security in the Hand, to exert influence on the entity that issues the Tokens.
The filing with the SEC is one of the methods by which STOs guarantee to give the investor additional security. Because the regulatory authority shall examine in the course of approval the Background of the founders and the team, and recognizes the companies that are verifiable and seriously work on your project. The method of STO Similarities with the approval for IPOs (Initial Public Offers, IPOs) has to be submitted and for investors to secure an absolutely crucial step, but will help to provide investors with additional security and give the government sufficient information.
The ICO projects are classified on the basis of the Blockchain technology, which is the Token of the project will be held. The focus is on the Token Blockchain and not on the Blockchain technology on which the project works.
Disclaimer: This information is not confirmation of a crypto-currency. It is not a recommendation to trade. The crypto market is full of Surprises and overvalued assets. Please do a little research before you buy something. Invest never more than you can afford to lose.
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This article was from English into German:
Senior IT Consultant and Crypto Enthusiast always in search of interesting news.