Key Differences Between IPOs and ICOs


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In this growing age of finance and technology, it is crucial for everyone to stay updated about the upcoming financing strategies that startups from around the world are adapting to finance-related blockchain projects.

Understanding Basic differences between IPO and ICO

ICO or Initial Coin Offering is very different from an IPO or Initial Public Offering. They both are financial machines that help businesses raise funds. Well-established and more experienced companies raise funds using IPOs and the younger startups raise funds using ICOs.

ICOs is the creation of digital tokens on a blockchain that is distributed via a public ledger. On the other hand, IPOs are the distribution of shareholdings to the public through investment banks known as underwriters.

IPOs are not given to every business. Only the ones that are well-established companies that have been operating in the economy are allowed to carry out IPOs. Hence, even projects that have great ambition can not access IPOs.

In the case of ICOs, most companies do not even have a product to launch and some of them only have a concept or proof-of-stake.

When we talk about returns, IPOs offer dividends from the company’s profit. ICOs on the other hand offer tokens at a price that will increase credit to the trust put into the project by the public.

Even the regulatory environment for both IPOs and ICOs is also different. Before a private business runs an IPO, it is an obligation to make applications to the relevant authorities in order to get authorisation. Whereas ICOs are not in line, decentralised platforms are above international borders, which makes it harder to create a clear regulatory framework.

Understanding requirements for IPOs and ICOs

In order to bring out an IPO, companies have to fulfil several compliances before getting the shares listed. In the case of an ICO, they do not happen to be under the purview of any regulatory mechanism as of now, thereby sparing it the hassle of adhering to compliances.

Ideally, an IPO process requires lawyers, banks and a lot of patience – basically the whole deal; bells and whistles. Whereas, for ICO, the process only involves two aspects – the programmer and the internet.

Pitting investor requirements against each other

In order to invest in an IPO of a company that is based in your own country, the process is very lucid. However, if you wish to invest in an IPO of a foreign company, you will have to ideally engage the services of a broker who will walk you through the process. On the other hand, an ICO will only need one to have a stable internet connection. One can essentially buy tokens from any company based in any country using the internet and a few simple clicks.

Utility of Investment – Investor Profits (IPO vs ICO)

When you concern yourself with an IPO, the shares acquired through it give an ownership stake in the future earnings of the company. The shareholders are entitled to annual dividends based on the company’s yearly performance. In the case of an ICO, that cannot be said – owning coins does not give you ownership in the project or the company.

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