Difference Between ICO, STO and IEO? Interesting Facts in Crypto Offerings

Anyone who has been in the crypto space long enough will remember the madness around Initial Coin Offerings (ICOs) in 2017.  

Initially, these crowdsales were simply supposed to provide a platform for DApp developers to get the required funding for their project.

Ethereum was the first successful ICO in 2014, raising a staggering $18 million over a period of 42 days. Then Ethereum itself became the platform of ICOs since it made it extremely easy for organizations to raise funds for their projects.

It was followed by NEO, that replicated Ethereum’s success as the developers platform for Chinese and Asian markets. Although it was hit hard by the Chinese ban on ICOs in September 2017, Neo turned out to be one of the most profitable cryptocurrencies in the space.

Crypto companies soon engaged in a crowdsale war to the point that ICO pools had to be established at some point since the minimum fund requirements were too high for the individual investor to sustain.

“Advisors” approaching crypto enthusiasts with promises of getting them ultra millionaires was scarily proliferating. 

Until it all blew up and scams were uncovered.

Projects blinded by the prospect of getting rich quick; CEOs disappearing with a full bag of investors’ money; smart ICOs investors selling quickly at all-time highs while the naive ones were getting “rekt” while hodling.

When the hype for ICOs started to fade away in 2018, STOs made an appearance as they seemed to offer a much more legitimate way of operating.

The Security Token Offering (STO) is backed by tokens that represent investment contracts into underlying investment assets, such as stocks, bonds, funds, and real estate investment trusts.

Another relevant difference between the two offerings was also compliance with regulatory governance.

ICOs were able to bypass strict governance regulations with the claim that their utility token would give users access to the native platform or decentralized applications (DApps).  Therefore, they argued that the coin purpose was usage and not investment.

While ICOs and STOs are still in use, although ICOs have lost their initial appeal to investors, we have recently seen the emergence of a new concept, mainly unique to the crypto space: Initial Exchange Offering (IEO). 

One of the first successful IEOs ever experienced was conducted by Binance, which describes IEOs as follows:

“An Initial Exchange Offering, commonly referred to as an IEO, is a fundraising event that is administered by an exchange. In contrast to an Initial Coin Offering (ICO) where the project team themselves conduct the fundraising, an Initial Exchange Offering means that the fundraising will be conducted on a well-known exchange’s fundraising platform, where users can purchase tokens with funds directly from their own exchange wallet.”

Moreover, for a user, it’s extremely easy to participate in the offering as all they need is an account with the exchange and some funds.

Industry Reaction to IEOs

It is fair to say that the IEO concept has been received positively by many to the point that even a group of hardcore bitcoin maximalists, who are typically very critical of the Ethereum platform, have been involved in $1.4 Million investment into an ERC-20 on Ethereum.

Recently, the crowdsale for crypto exchange INX will be shaped into an IPO, a feature that many Bitcoin maximalists may consider an excuse for betraying their position and contradicting their famous belief that Ethereum is a scam, as they have claimed so far.

Meanwhile, the rest of the crypto industry has already bought into the IEO craze with projects raising millions of dollars on popular platforms such as Binance Launchpad and OK Jumpstart.

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