Understanding The Growing Trend Of Initial Coin Offerings And Security Token Offerings (STOs)

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When the initial cryptocurrency community was getting its head around Bitcoin, a lot of people thought that it would be the last big move for crypto. But in 2017, we learned that there is much more to blockchain technology than just bitcoin. Today, initial coin offerings (ICOs), token generation events (TGEs), and restated initial public offering (IPO) events are as common as cryptocurrency itself. In fact, ICOs and STOs have become such a fixture of today’s digital landscape that many people seem to think they are alike. While both ICOs and STOs share some similarities, they also have significant differences that suggest they might not be so alike after all.

What is an ICO?

An initial coin offering (ICO) is a financing method where a company launches a new cryptocurrency into the market as a way to raise funds. These offerings are often as but not limited to cryptocurrencies like Bitcoin, Ethereum, and LiteCoin. What makes an ICO unique is that it is a crowdsourced funding effort. Rather than starting out with a small group of investors, the project’s founders launch an initial coin offering and solicit participants from the public to buy a small percentage of the tokens. The largest ICOs to date have raised over $6 billion in tokens.

What is an STO?

A security token is a company’s stock that is issued using a blockchain-based platform. On the surface, the two might seem unrelated, but beneath the surface, they have a lot in common. Both are investments that promise a future financial gain and were meant to raise capital to fuel growth and expansion. However, there are a few critical differences between the two that may affect your decision when investing in security tokens.

How to Successfully Run an ICO

Unlike an IPO, which is legally and structurally complicated, the SEC has issued a clear, concise, and easy-to-follow model rule on how to successfully run an ICO. Here are some of the things you need to keep in mind before diving in. Have a clear idea of the goals of the project. One of the best ways to do this is to talk to the team and find out what their core mission is. Then make a list of the top five goals the team wants to achieve and see if those are related to your goals. Find a reliable and trustworthy partner. You will likely partner with a company that is already well-respected in the blockchain world. It is best to find a partner with whom you have a good working relationship. Make sure you understand the investment risks involved with investing in tokens. One of the best ways to do this is to talk to a financial advisor. Discuss with him or her how token investments might work for you and your investment strategy. Stage your token sale. It is critical that you take the necessary steps to ensure your token sale is successful. All the way from start to finish, your token sale should look something like the diagram below.

How to protect yourself when investing in initial coin offerings (ICOs)

There are many ways to protect yourself when investing in initial coin offerings (ICOs). One of the most important is to be very selective in who you partner with. You should carefully examine any and all partnerships you have in order to avoid gettingaken for a ride by scamming startups.

Conclusion

The initial coin offering (ICO) and security token offering (STO) have become quite popular in the last year or so. While they share a lot of similarities, it is important to remember that they are different beasts. The main difference is that with an ICO, the company issuing the tokens is the one bringing value, whereas, with an STO, it is the investors that are bringing value in. While both ICOs and STOs have their benefits, it is important to consider which one you will lean toward. Get more to know at bitcoin bank.