ICO vs IPO: A reality check and whats the difference?

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ico vs ipo differences

Even today, people really don’t know much about the associated differences between ICO and IPO. ICO is the abbreviated form of Initial Coin Offering, while IPO stands for Initial Public Offering. Those who have a close association with stock markets & wall street generally know about the IPO’s. When it comes to blockchain technology, ICO is the synonym for IPO here, what IPO’s are in the stock market, ICO’s are in blockchain technology domain. Let’s dig deeper and know more about the difference amidst Initial Coin Offering & Initial Public Offering.

What really is an Initial Coin Offering?

When it comes to an effective way for corporates to raise capital for the purpose of developing better projects amidst their blockchain platform, ICO (Initial Coin Offering) comes to rescue. Early investor or simply capital contributors were presented with digital assets in the form of tokens. These tokens were accessed by making a purchase using bitcoins during the initial days.

Since the inception of Ethereum, trends have been ever-changing, more and number of people are migrating form bitcoins and are using Ethereum for making payments. You might get confused amidst digital currency & digital assets, well let us clear that out. Digital currencies like Litecoin, Ethereum, Bitcoin and more are just currencies, but the tokens that your purchase by trading these which are called ICO’s are the stocks and they represent a significant percentage of ownership in any respective technology of the company. Buy and Sell stocks are what this token is really are. On the other hand, digital currencies can be traded for different currencies, for example, US dollars or even Euros and much more.

What is an IPO?

IPO or Initial Public Offering is a traditional process which enables an array of companies to sell their securities to public or investors in real time for the first time. When it comes to publishing or holding an IPO, companies generally tend to hire various investment banks. These banks are called underwriters, the main aim of this is to get a better picture of how much the IPO might raise or how much securities will be at stake or simply sold?

The preliminary prospectus is what investment banks develop in IPO’s. This helps the investor get information about a company’s business description, management information, strategic initiatives and much more. After the preliminary prospectus is passed by the company, it is sent to SEC or other financial government institutions of their respective countries, then it is converted to a final prospectus.

Major difference amidst IPO and ICO?

Traditional IPO requires proper documentation, defined regulations as well approval before you start trading them. The above-mentioned aspects must be performed and the company must seek clearances before the same can offer potential investors its equity shares. Only after the successful completion of these tasks, the shares can be swooped up. Investors and an array of institutions can then only invest.

When we talk about ICO i.e. Initial Coin Offering, investors are required to do an array of extensive research as well. They are strictly required to know about the company’s technology in detail as well as company’s background. But the main thing about ICO is that the company can be in its initial phases of development, in other words, that technology is yet to be developed and implemented. Investors in ICO invest in potential technologies that encapsulate huge returns through its development and hence, deployment. An infant company can have an ICO but IPO will only be there from a company with a proven record. ICO’s are not required to get registered with any institution, whether private or public.

But, on the other hand, IPO needs to get approval from the government institutions. Therefore, this blooms the investment endeavors of the early investors. Instead of ordinary or traditional equity purchase, ICO’s are continuously referring their respective offerings as crowd sales or even contributions. The ICO model can experience an array of unique structural changes when it comes to a longer run, the method seems to be working as of now.
Future scope of ICO:-

When it comes to the momentum, it would be evident to say that it is favoring Initial Coin Offerings in the present scenario. We can say this trend will now slow down anytime soon. When it comes to supporting an array of diverse projects and technologies, ICO’s have helped companies garner more potential early inverters than ever. Young investors today are ever increasing and a constant support is getting build up through the same.

Do you know, if you list your company’s ICO, you can start getting funds within an hour? Well, what comes as a great fact is that, people get a fear of missing out whenever they see any potential ICO. Therefore, this blockchain amenity is like a bubble, time can only tell about the effects of the same on enterprises around the world, this would also re-shape the way companies have done business.

ICO’s are not piece of cake:

A majority of businesses tends to fail, they are pretty destined for it. Same goes for ICOs, many of the technologies are just meant to look good on paper, ICO offers a great and inflating risk of getting failed. You must know that any type of investment demands preparation when it comes to ICO’s you must stress carefully. Where IPO’s offer a varying window for their investors to buy securities, ICO’s can be sold in just a few seconds. Let’s cite an example here, Brave is a browser making company, they raised over $35 million in a matter of 30 seconds.

This guy explains very well…

Participating in IPO is completely different than the ICO. In IPO, you might simply approach any broker, but in ICO, you must attain technical amenities like wallets, you are required to meet standards, you must have bitcoin or ether and much more. Doing a detailed and proper research is important when it comes to making an effective investment. Since ICO’s aren’t under the jurisdiction of any financial regulation institution, be extra careful with those.

Also read: Buying Bitcoin on eToro Vs Coinbase – What is the difference?