IPO stands for an Initial Public Offering, a fundraising process related to the first time a private company offers its stocks to the public. To sell shares or raise capital and fund expansion, companies and entrepreneurs utilise IPO. An IPO is a big move for any corporation or company to offer their shares to be listed on a stock exchange, where their shares can easily be traded.
If you run a business and want to obtain more money, you can go through an IPO. As a company owner, you should hire a bank as an investor who underwrites the IPO. Underwriting is a procedure in which investor banks specify a company’s valuation. Then, a part of the company’s shares or the whole part will be sold to the investor bank at the set price, and the bank distributes the shares. These processes force the company to be submitted with securities and exchanges. After applying for an IPO, the company’s crypto assets trade on a crypto exchange, a market where securities are bought and sold.
Although companies aspiring to go public and further grow their finances face enormous opportunities to expand their organisation, they also have to deal with the downsides or challenges associated with the transition. On the one hand, an IPO increases sales, profits, prestige, public image, marketing and development. On the other hand, all the companies and communities that implement the IPO should disclose their financials, like accounting information, taxes and profits. The transition to an IPO is expensive and requires lawyers, bank investors, accountants, and time-consuming endeavours.
ICO or Initial Coin Offering is similar to Initial Public Offering (IPO). It is an alternative way for corporations and companies to raise capital across the cryptocurrency market. An ICO is another process of fundraising and crowdfunding that came up in the blockchain ecosystem. Instead of selling shares or getting loans and dealing with banks or capitalists, ICO allows startups and companies to create a digital coin or token. These digital tokens could be sold to investors in exchange for cash or cryptocurrencies, like Bitcoin and Ethereum.
The first step for developers and marketing teams is to issue a whitepaper consisting of technical, functional, and fundamental business details and announce their new project and roadmap. The next step for getting involved is to broadcast the details of their ICO. These details include the total number of tokens, the token’s price and how long these tokens need to be held. Before launching their company, they sell tokens to the investors. Most investors use Bitcoin and Ethereum for tokens and hope that the startups become very popular to become more valuable than their tokens.
Blockchain is changing the traditional financial market to streamline the process of financial fundraising. IPO is being replaced with ICO and STO on the blockchain ledger. STO stands for Security Token Offering and is quite similar to ICO, another important method in the financial world to push your business forward. Using STOs is a simple and cheap way to raise capital for companies and associations. An STO is a process of selling security tokens to the public while preventing the long unbearable process of an IPO. STO offers secure and transparent direct investment to investors of a company. If a company issues a security token, the process is called STO.
STO enforces all the companies and entrepreneurs to fulfil the regulations and disclose their information. Blockchain and smart contracts certify that these processes are safe, transparent, valid, and fast and reduce the risks.
Despite the differences, both STO and ICO are proven fundraising ways for blockchains and similar projects. The main difference between ICO and STO is that ICO is built for utility tokens, but STO is for security tokens. To participate in an STO, one needs to have an accredited company. Meanwhile, an ICO does not require a company operation for buying and selling utility tokens, and anyone can launch an ICO. ICP offers investors the company services and products, whereas STO offers tangible securities. Unlike the ICO, STO is regulated by the government and needs to adhere 100% to the rules set by the governance bodies.
So far, we have learned about IPO, ICO and STO and figured out how they work. Now, let’s elaborate on an even newer method known as IEO. IEOs are ICOs administered by a cryptocurrency where crypto startups raise capital through crypto exchanges.
In IEOs, crypto exchanges will confirm whether the projects and their whitepaper, core team, and tokenomics are rightful and valid before any token sales. As a startup or company issues some of its tokens to the exchange, the IEO will be listed on the exchange website, where users can purchase tokens with funds directly from their own exchange wallet.
Although an IEO is a type of ICO, there are several significant differences between the two fundraising methods:
One of the most popular terms in crypto is Initial DEX Offering or IDO, the newest pattern for crypto projects and a substitute for the previous fundraising model. An Initial Dex Offering is like an IEO but with more freedom. IDO was first introduced in 2021 and is used by projects looking to raise funds from investors, like Uniswap, PancakeSwap, etc. The IDO coin is distributed via decentralised liquidity exchanges, such as Uniswap, Bancor or Binance. Binance DEX has hosted the first-ever IDO.
IDO works with a DEX (decentralised liquidity exchange), a type of crypto asset exchange. DEX relies on liquidity pools with which traders can swap tokens, it also makes companies launch a token, and instant liquidity will be available for them. In an IDO, developers don’t need to wait for a pre-sales end to access funds like in an IEO.
Initial Game Offering or IGO is a new crowdfunding and fundraising platform with its own gaming blockchain. IGO allows developers to invest in blockchain before starting a project for expanding the games. Additionally, it helps developers get extra funds and returns for their projects while giving gamers early access. An IGO is generally similar to an ICO with some differences. IGO is an advanced concept of the crypto space that makes it possible to enhance the level of NFT gaming to a greater space.
Various IGO launchpads have surfaced recently, given the agile development of many blockchain gaming platforms. IGO launchpads are designed to help users build a space to showcase their skills on their projects and implement their gaming ideas freely. Launchpads are hosting and offering several game-based projects on their platforms. To expect considerable ROI as an investor, you can put your money and stock into the gaming projects, and once that gaming project is launched on the greater crypto exchanges, you will earn more funds. Such a hack, ha?!
GameFi (GAFI), Enjinstarter, Gamestarter, Seedify.fund (SFUND) are several launchpads through IGO.
As we said earlier, the concept of IGO is similar to ICO, and the only difference is that in IGOs, the platform hosts gaming projects that are based on NFTs or tokens as their in-game currency and rewards.
Although the ways and models of investing in new blockchain projects have major improvements every year, it doesn't mean that you should blindly trust IPO, STO, IEO, IDO or IGO projects. Before investing in any project, you should do your own research, study the whitepaper, be aware of all the details and information about the project, and compare the market value. This article and other similar articles in Crytplogist.st are just a collection of information gathered for educational purposes to help you make crypto decisions confidently, and you must not rely on us for financial advice.
Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation, or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation, and legal advice.
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