When planning to invest in Crypto-tokens, you’ll often come across terms such as ICO and STO marketing. Although confusing at first, don’t let it deter you from exploring this flourishing territory. To begin with, ICO stands for Initial Coin Offering, and STO refers to Security Token Offering. Both of these crypto-assets address different issues and come with their own sets of pros and cons. Read on to get a better understanding of ICO and STO marketing.
Initial Coin Offering (ICO)
ICO marketing is usually employed when a business is raising capital to fund its project. There is virtually no red tape involved thus allowing companies to collect investments faster. This is also the main factor that makes ICOs highly volatile. Often ICOs are synonymous with quick-rich scams as there are many instances where investors have lost their money to fraud companies. However, ICOs have not lost their legitimacy and many startups choose to follow this route in order to attract investment. ICO marketing is also very easy as it does not follow complex procedures and conventional social media platforms can be used. Bounty programs are also an effective way to generate community interest in an ICO.
- Effortless medium to raise funds for projects
- No middleman involved thus eliminating any unwanted costs
- Simple to promote and market
- This is a highly unregulated sector and investors can incur huge losses
- Association with scams and losses has resulted in ICOs losing credibility
- No mechanism to track and penalize fraud companies
Security Token Offering (STO)
Addressing the vulnerabilities present in ICOs, Security Token Offering provides a risk-free network to investors. Just like ICOs, Security Token Offering is used for raising capital, but it is restricted to a closed group of investors who comply with a set of prerequisites. These prerequisites are laid down and regulated by the US Securities and Exchange Commission. Unlike ICOs, it is significantly difficult to market STOs. This is largely due to the strict regulations that companies have to adhere to as well as being limited to a smaller pool of verified investors. Additionally, it becomes strenuous to trade STOs since popular exchanges are not very supportive as it requires a lot of documentation. On the bright side, STOs are quickly becoming the go-to medium for investors given its reliability and experts suggest that by 2020, the market cap for STOs will touch $10 trillion.
- The risk level is very low and guarantees the investor’s investment
- STOs are registered with the SEC and are at par with conventional stock market shares
- Pundits predict that the market cap for STOs will surpass $10 trillion by 2020
- STO marketing is relatively expensive since the investor pool is limited
- Costs have increased since compliance with legal and financial regulations is required
- Listing STOs on exchanges is quite tricky since this medium is not as popular as ICOs.