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ICO vs STO vs IEO – A Quick Overview

by Syed Shoeb
, ICO vs STO vs IEO – A Quick Overview

If you’re wondering the difference between the new crowdfunding platforms and the differences between them, here is a quick overview of what they are and how they work.

What is an ICO?

ICOs are Initial Coin Offerings used to raise money for crypto/blockchain projects. They issue and sell new cryptocurrency to people and use the raised money for project development. The utility tokens which are issued can be used only within the ecosystem of their native project.

What is an STO?

STOs are the next generation of token offerings, where contributors get security tokens – digital securities which give rights for dividends, shares, equities, etc. These tokens are traded on exchanges and fall under the United States Securities and Exchange Commission (SEC) and Swiss Financial Market Supervisory Authority (FINMA) regulations.

What is an IEO?

Initial Exchange Offerings (IEOs) are alternative to ICOs in which tokens are sold directly on an exchange. Basically, an IEO is an advanced version of an ICO, where the exchange is totally responsible for the fundraising process.

STO vs ICO and IEO

STOs were introduced as an alternative to ICOs as they work within a regulated framework. They are not very popular because they are much harder to implement than ICOs and IEOs. Token issuers have to comply with the Securities Act of 1933 and offer the security tokens to potential buyers.

Blockchain Capital, one of the earliest STOs raised $10 Million, within a few hours of the STO. STOs don’t promise huge returns for buyers, Blockchain Capital’s gains were at 161% and the trust factor is much higher than IEOs or ICOs.

In STOs, the entry level is high and there is no difficulty in choosing a legitimate project.

Some competitive advantages of STOs are:

  • More trust because it works within the legal framework of the SEC and FINMA
  • Tokens have real value because they are backed by a company’s assets.

IEO vs ICO and STO

There are several exchanges and launchpad platforms across the world, popular ones include Binance, Huobi and OKEx.

Some competitive advantages of IEOs are :

  • Low entry level: Just need a verified exchange account, cryptocurrency and KYC verified account for IEO.
  • IEO tokens are listed immediately after a token sale and trading goes live within a few hours.

ICO vs IEO and STO

ICOs were rage in 2017 when Bitcoin hit $19K and the glory faded soon after. They are now replaced by STOs and IEOs.

Some competitive advantages of ICOs are :

  • Low entrance level: You need only cryptocurrency on your wallet. You can get tokens for free via airdrop and bounty programs.
  • There is a higher chance of getting tokens than IEOs, where token sale ends within seconds and there is excessive criteria for entering the sale.

Which funding method is the best?

While every investor has to consider his or her requirements and expectations before choosing one of the three, ICOs are much cheaper than IEOs or STOs. STOs are the most expensive of the three and do not guarantee high returns. Investors looking for more security and a serious investment opportunity prefer IEOs over ICOs and STOs. STOs are typically for investors with a large budget and less expectations for the first few years. The final choice depends on time, resources and spending potential of an investor. It also depends on the risk and reward that investor is looking forward to.


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