Heard about IEOs being the new way of financing but having a tough time distinguishing between these terms? In this article, we will cover the key differences so that you can comprehend these terms easily. Let’s take a closer look at their definitions and characteristics.
What is an Initial Coin Offering (ICO)?
It is the crypto space’s way similar to an IPO in mainstream investments and its digital tokens are like stocks for the exchange market. ICOs are used worldwide by companies to raise capital where creators issue a share of their coin’s total supply to reward backers with the projects’ development. Early investors usually contribute via fiat or virtual currency for the new cryptocurrency token specific to the ICO which they hope will increase in value and provide them with good returns.
What is an Initial Exchange Offering (IEO)?
An IEO is administered by cryptocurrency exchanges on behalf of companies who seeks to raise funds with its new tokens. However, these token sales are not available to the public unlike an ICO. Only users of the hosting exchange may participate and in certain cases, with their own native token. As compared to limited trusted parties to monitor ICOs, IEOs may have higher legitimacy as exchanges also need to uphold their credibility before promoting any project.
What is an Initial Public Offering (IPO)?
This is the process of selling stocks of a privately held company to outside investors, converting it into a public company through investment banks/underwriters. It is also commonly known as ‘’Going Public’’ or “Being Listed”. The acquired stocks can be classified into the following categories: preferred stocks, common stocks, or a hybrid. Shareholders are entitled to receive dividends as returns and vote in the stockholders meeting. IPOs are also regulated by relevant authorities.
The Main Differences
What’s good about IEOs?
An IEO gives certain confidence to participants in terms of avoiding fraud (assuming the exchange has done its “due diligence”) and greater liquidity when the project is more-hyped. Exchanges also enjoy varying benefits such as listing fees, percentage of token sold and joint marketing opportunities. The exchange usually sees increase in users, trades and deposits too. A new IEO also adds variety of options to their traders.
Is IEO a better model or the new trend for 2019? While there are many advantages as IEOs are thought to benefit exchanges, investors and projects, do remember that scams exist and you should exercise due diligence by researching about any project before investing. If you enjoyed the article, please feel free to share it!
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