In the crypto space you probably hear a lot about an ICO, not so much about STO. So when people start comparing STO vs ICO many people want to know what a STO is before comparing the two.
Let’s start off explaining what is a STO. A STO is short for security token offering, which the process is somewhat similar to an ICO, but there are two major differences which we will explain below. While an ICO stands for an initial coin offering.
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What Is The Difference Between STO Vs ICO?
As mentioned above there are two major differences between an ICO and a STO. Since a STO is a security token offering, it provides an underlying asset such as a stock, real estate, bonds or some other type of offering. Not only is a STO backed by an asset, it is also requires registration with the SEC. A STO is 100% legal and has met all the legal requirements before launching.
Compared to an ICO, it does not provide an assets to back the coins, ICOs are able to avoid regulator controls by having the coins being a form of utility tokens. The reason for this is because a utility token in concept can have usage abilities, and not for speculation. This is why you hear so much about ICOs and not STOs, it is because an ICO is much easier to launch. These two points are the main difference between a STO vs ICO.
Below we will expelling the advantage and disadvantages when comparing ICO vs STO.
ICO vs. STO — Advantages
Advantages of ICO:
- Easy for both buyers and sellers to interact
- Tokens are shared in an automated fashion
- ICO team can use the funds how they see fit
- If the coin of the ICO goes up in price, investors are reward
- It is possible for an ICO to offer anonymous participation
Advantages of STO:
- STO is regulated and has followed 100% of laws before launching
- Assets back the coins
- STOs are growing as the ICO space is getting smaller
- STOs are less common to market manipulation and speculation
ICO vs. STO — Disadvantages
Disadvantages of ICO:
- Market manipulation is possible
- Highly volatile
- Low Liquidity
- Scams from ICO team
- Pump and Dumps
- Unregulated space
Disadvantages of STO:
- Only possible for accredited investors
- Takes a long period of time to get regulatory approval
- Generally requires large sums of money
Hopefully now you know the difference between STO vs ICO. Please do your own research as what was mentioned in this article is just for research purposes. Nothing mentioned in this article should be taken as investment advice.
This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.