We hear a great deal about ICO and IPO nowadays. In spite of the fact that the names ICO and IPO sound comparative and numerous individuals imagine that their motivations are comparative also, there are numerous contrasts between them.
The Initial Coin Offering (ICO) is a process brought to life by the cryptocurrency innovation. It is a way of crowdfunding for the startup companies, which includes creating and selling tokens to fund the start and the development of a project. ICOs are related to the blockchain technology.
Initial Coin Offering (ICO)
- Little to no regulation (currently)
- No red tape
- No investor protection
- Receive tokens
The Initial Public Offering (IPO) is a well-established process leaded by a private company in order to expand and become publicly traded. It involves some formalities in the duration of the process. IPO refers to the public sale of the shares of a company, with the goal of collecting funds for development.
Initial Public Offering (IPO)
- Heavy regulation
- High-level of bureaucracy
- Investor protection
- Receive stock/equity
So it’s clear, while ICOs do provide some advantages over traditional IPOs (decentralization, no bureaucracy), they also come with more risk. As it stands today, there’s not much stopping a crypto team from running away with investor’s money after an ICO. Numerous projects have already successfully done so.
An additional risk, one receives tokens instead of equity with own investment. So, there’s a chance that although the company behind one’s token is successful, the token holders hold could be worth next to nothing, leaving them up a creek. The success of ICO investment ultimately depends on the token’s adoption within its ecosystem.