Crypto fundraising landscapes – ICOs and STOs
Posted by johnsmith4626 on December 11th, 2019
With the increasing thirst of the finance and technology startups in finding the most productive way to enhance capital rates, a wide variety of blockchain businesses are evolving consistently around the Globe.
Though there is an availability of numerous crowdsourcing options out there in the market, the two most vital, efficient and modern trends for raising funds are the ICOs (Initial Coin Offering) and STOs (Security Token Offering).
Both these domains have initiated their technological journey with blockchain and their overall functional procedure involves the tokenization of digital assets to facilitate market capitalization.
The tokens of an ICO are termed as utility tokens and that of an STO is termed as security tokens. Out of these two token types, the security tokens form a new asset class in the blockchain business space.
The major criterion that makes STOs distinguishable from ICOs includes token security. This means that the tokens created and offered in STOs are more secure than that of the ICOs. A progressive feature of STO, which make it lead the crypto game, is the regulatory regime.
With the successful launch of master coin (first ICO) in the year 2013, the market for ICOs had started to grow rapidly. But due to some regulatory and scam issues, ICOs have faced several ups and downs in the recent past.
Some of the factors that have a greater influence over the decline of ICOs over recent years are listed as follows:
As there are no proper regulatory directives passed by our Government yet for ICOs, a lot of scams have been occupying the blockchain domain right now.
Hence before going to make valuable investments in an ICO process, it is mandate for every investor to have a clear understanding of the entire idea by properly evaluating its business model, market worth and profit-generating potential. But a majority of the investors today are not aware of these aspects as they possess only a piece of limited knowledge about the underlying technology. This makes them lose their money instantly with scams.
As there is a frequent market manipulation with no reliable or proven sources of information about the ICO exchanges and their associated token values, both the ICO service providers and investors suffer from some considerable challenges while trying to analyze the market worth of ICO projects. This, in turn, reduces the overall buzz around ICOs.
As there are deep and instant fluctuations in the market conditions, the crypto community finds it difficult to attain enough liquidity for their digital assets. This concerns them in making instant cashouts.
All the above issues have made the regulators stepping in with highly secure tokens with a sound regulatory framework in the form of STOs. STOs, come out with solutions limiting the technological barriers of ICOs and hence denoted as the new ICOs.
Notable benefits of STOs over ICOs:
Security tokens have been emerging as a new strain of cryptographic digital tokens with the following advantages:
STOs ward off the regulatory uncertainties of ICOs by bringing utmost security to the systems.
The investors of STOs will be authorized to take complete ownership over their assets in the tokenization process.
The investors can reach out to the secondary market with direct control or access over it.
Even though ICOs are the traditional fundraising models with a greater buzz at present as compared with STOs, it has now been predicted that STOs will certainly dominate ICOs in terms of operational functionalities in the upcoming years. The reason here is that STOs are evolving day-to-day with the incorporation of matchless features with no regrets.
It has also been forecasted that the present digital token asset ecosystems might be the securities of tomorrow, and which will then open up a lot of advanced security-related business opportunities on the go for crypto entrepreneurs and enthusiasts.
Thus, as a whole, ICOs start to mature with a shift to STOs in real-time. To evident this, a recent study also has depicted that total funds of around 20 billion US Dollars have been collected on an average by the capital enhancing models ICOs and STOs.
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Source: ICO Consultant