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Recently in the cryptocurrency market, the two terms ICO (Initial Coin Offering) and STO (Security Token Offering) are creating debates among investors. Both are good for small scale companies to raise profit for Blockchain projects. But, the question is for an investor which one is more profitable? ICO or STO? Let’s have a look.
ICOs are launched by small scale companies who need fund to complete their Blockchain projects. As an investor when in you invest in an ICO project, you deposit funds in the form of Bitcoin, Etherum or even fiat currencies. In return, you are given newly mined Crypto coins by the companies that are expected to raise its value compared to the base price on the project completion so as to give you profits by trading them.
STOs, on the other hand, are similar to ICOs but involve government authorized security assets like stocks, bonds, real estates, etc as an investment contract. Just like when you invest in traditional stocks or bonds you are presented with a document having ownership information of the respective company; here in case of STO, it is done through digital certificate along with the offering of new crypto coins as tokens.
ICO issues utility token which is more into funding a blockchain based project and later using the tokens to trade or buy something at a better price. From an investor point of view, it lacks any kind of rules, regulations or contracts to save their funds if the company project fails to achieve success. The risk factor is high.
STO issues security token which takes care of the company’s funding as well as investors security as it is back by the real-time assets of the company issuing tokens. Companies need to submit real-time documents of their assets to get registered with STO that operates on Alternative Trading System having SEC as the intermediary monitored by FINRA.
STO has more legality and transparency compared to ICO as they comply with regulatory governance. ICO compared to that have no official regulatory system which becomes a source of uncertainty for the potential investors if the project fails to succeed and their funds are lost.
Winner: – STO
As an investor, security, and legality are highly important. Hence taking both factors into consideration; STO makes the best choice for having profits with security.