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Initial Offerings Part 2 - IDO, ISO, STO

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1 year ago

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Here I will talk about all of the different initial offerings to fund projects and businesses.

 

IPO:

 

When institutional investors and others can invest in a company before it goes public and can own shares of that company before it becomes available to everybody. This can be a way that companies can raise money for their business. A company is considered private prior to an IPO. IPOs have to be approved by the SEC and companies will only go public once their business gets a high valuation. The stock price of that company  depends on how heavy investors invested into the IPO.

 

Examples of IPO:

Coinbase($COIN)

Roblox($RBLX)

Robinhood($HOOD)

Amazon($AMZN)

 

ICO:

This is a fundraising method in which you can put money in a startup in a coin before it fully launches. ICO’s aren’t regulated unlike IPOs, but the SEC can still intervene and stop things. ICO’s also write a whitepaper to inform the investor what their project is about and its mission.

 

There are different ICO structures: 

 

Capped First-Come First Served - This is when there is a limit to how much money can be funded to an ICO. There is a fixed price on the tokens and a predetermined set amount of supplies of the token.

 

UnCapped Token Sale - Similar to the above model, except this time there is no limit to how much can be put into the ICO.

 

Capped Auction Tokens - Investors have the ability to bid on the price they wish to buy the ICO at, and can bid on the total amount they will put into the ICO. The price of the token will be equal to the lowest bid.

 

UnCapped Auction Tokens - Same idea as the above model, except this auction is done in a descending order starting from the highest bid. This is done until all tokens have been sold.

 

Capped Token Sale With Parcel Limit - The same as a Capped Token Sale, except there is now a limit on the number of tokens investors can buy. Investors can not do multiple transactions and a determined amount of tokens go to the founders of the crypto.

 

Capped Token Sale With Redistribution - Investors can buy a predetermined amount of tokens at a fixed price. If there has been an excess of payments by the investor, they get refunded back. This is the only ICO structure where every investor is allowed to participate in.



Examples of ICOs:

Chainlink

Polkadot

Tezos

Filecoin



ISO(Initial Stake Pool Offering):

I believe this is only being used for Sundaeswap, currently, on the Cardano blockchain, but basically you stake your Cardano in a staking pool, but instead of earning rewards in ADA, you are now earning SUNDAE rewards. The block minting rewards fee has been increased to 50%-100% to help fund the Sundaeswap project. Also, the rewards will unfortunately be lower than what you would get if you were getting ADA rewards.

 

Sundae is currently the only example of an ISO.

 

IEO(Initial Exchange Offering):

This is similar to ICOs but now the exchange itself is the one that implements the token sale. It has a verification process to prevent scams that were happening a lot with ICO projects. The biggest one being a Whitepaper, which will specify:

 

  • Problem being solved

  • Product

  • Architecture

  • Team

  • Tokenomics.

 

Examples of IEOs:

Matic

Ocean Protocol

Fetch.AI

VeriBlock

BitTorrent

 

Binance has an IEO Launchpad that helps with token launch, marketing support, advisory service, etc.



IDO(Initial Decentralized Exchange Offering):

This is the decentralized way of funding a crypto project, where a token is funded on a decentralized exchange such as Uniswap. These tokens are funded on liquidity pools where traders can swap tokens on liquidity pairs.

 

Examples of IDOs:

Raven Protocol

BlockSwap Network

BENQI

MakiSwap

TeraBlock

 

STO(Security Token Offering):

These are similar to ICO’s except these types of offerings are completely compliant with the SEC. There are three types of STOs:

 

  • Equity Tokens - The tracking of tokens are logged into a blockchain and are entitled to a part of the firm’s profit and have the privilege of voting rights. Three main benefits are Governance, startups having a more democratized funding method, and regulators having a system that is easier to regulate without going through any extra trouble.

  •  

  • Debt Tokens - A token that acts as a loan on an interest rate for a short period of time. This can be for real estate mortgage, corporate bonds, and other types of debt. The price of the token is based on risk and dividend(the debt of a bond is not to the same level as a mortgage). Repayment terms are blueprinted in the smart contract of that debt token.

 

  • Asset-Backed Tokens - Represents ownership of assets such as real estate, art, carbon credits, or commodities. These tokens have features similar to commodities: gold, silver, and oil.

 

Examples of STOs:

tZero

Neufund

Corl

RISE

Blockchain Capital

 

Resources:

 

https://www.investopedia.com/terms/i/ipo.asp 

https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp 

​​https://www.businessinsider.com/the-10-biggest-ico-fundraises-of-2017-2017-12#1-filecoin-257-million-11 

https://www.offshorecompany.com/banking/ico-legal-structures/ 

https://coinmarketcap.com/alexandria/article/what-is-an-ieo 

https://coinmarketcap.com/alexandria/article/what-is-an-initial-dex-offering-ido-and-why-do-we-need-them#:~:text=An%20IDO%20refers%20to%20a,including%20crypto%20coins%20and%20stablecoins

https://hedera.com/learning/what-is-a-security-token-offering-sto 

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