Token STO & ICO Development – Real Asset Tokenization

In the previous article, we discussed how blockchain represents a revolutionary technology with a strong impact on various industries when implemented correctly.

What is an ICO?

ICOs, or Initial Coin Offerings, were the first crowdfunding option to emerge in the blockchain ecosystem. This fundraising method allowed any company from anywhere to finance the development of a project. Investors would receive tokens, representing future access to a specific company’s product or service.

Anyone can launch an ICO since there are not many regulations, meaning that if you can set up the technology, you can introduce this concept to the market.

Unfortunately, ICOs lack regulation, and recovering funds from a fraudulent sale is nearly impossible. Due to this uncertainty, fraud appearance, and speculation, ICOs may not be the safest funding route for some investors.

Launching an ICO fundraising campaign is easy; you simply announce it and then carry out the digital campaign. There is no entry barrier for any visitor or buyer. Once the ICO is on the market and has a well-defined schedule, investors can start purchasing tokens.

Teams have the freedom to use the funds as they see fit, and tokens are then automatically distributed through contracts. Compared to STOs, ICOs are short-term investments.

What is STO?

STO, or Security Token Offerings, is essentially similar to ICO, but with the added aspect of regulatory requirements. STOs emerged as a response to the lack of supervision regarding ICOs, aiming to bring regulations to blockchain-based crowdfunding and provide more assurance in the token-based fundraising space.

Comparing ICOs with STOs, the latter is certainly more convenient for investors. It may take more time, money, and effort for fundraising to get regulatory approval for launching STOs, but investors have the assurance that the tokens they receive in exchange for their money are backed by something tangible.

From an investor’s perspective, STOs are more trustworthy compared to ICOs. While ICOs are more commonly used for fundraising for a specific product/service, STOs are linked to financial services.

Launching an STO often requires more time to obtain regulatory approvals. Before the actual idea is announced, the company must come up with a scalable business model that can make a mature and reliable project.

ICO Development

ICO development requires precision to keep the process secure, as failing to protect vulnerable elements could make them attractive to cybercriminals. While blockchain itself is secure, the people using it may not be, so the team must be well-prepared for the launch.

Which is better for you – STO or ICO?

Both elements aim to achieve the same goal but do so in entirely different ways. Considering the downsides of ICOs, as they are not protected by any form of regulation, they can be risky in certain situations. On the other hand, STOs focus on protecting investors, albeit at the expense of slower and more time-consuming processes for companies.

It largely depends on what you are doing in the investment space and the goals you set from the beginning. Investors at the beginning of their journey might prefer to start with an ICO, while those with a few years of experience may appreciate the security and regulations that come with STOs.