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ICO |
It generally refers to the offering of crypto token or utility; the offering is directly managed by the issuer website |
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IEO |
It generally refers to the offering of crypto token or utility; the offering is managed through the exchange launchpad
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STO |
Financial instruments offering through DLT |
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IDO |
It generally refers to the offering of crypto token or utility; the offering is managed through a decentralized exchange |
According to FINMA, the Swiss regulator the types of tokens are the following:
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Utility tokens are tokens which are intended to provide access digitally to an application or service by means of a blockchain-based infrastructure.
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Asset tokens represent assets such as a debt or equity claim on the issuer. Asset tokens promise, for example, a share in future company earnings or future capital flows. In terms of their economic function, therefore, these tokens are analogous to equities, bonds or derivatives. Tokens which enable physical assets to be traded on the blockchain also fall into this category.
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Crypto Tokens or Payment tokens are tokens which are intended to be used, now or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer. Cryptocurrencies give rise to no claims on their issuer.
Another category that must be considered are the Stable Coin:
Stable coins are currently not governed by any specific regulations, either globally or in Switzerland. FINMA’s treatment of ‘stable coins’ under supervisory law follows its existing approach for blockchain-based tokens. Stable Coins are linked to currencies (where the token is linked to a specific fiat currency with a fixed redemption claim [e.g. 1 token = CHF 1], classification as a deposit under banking law is indicated); commodities (where the exact nature of the claim on the assets as well as the type of commodity are of particular significance); real estate (where a link to individual properties or to a real estate portfolio and a redemption claim of the token holder exists, the normal third-party management of the real estate portfolio is in itself an indication of a collective investment scheme); and securities (a token that is linked to an individual security by way of a contractual right for delivery to the token holder would normally also constitute a security).
Take a look at this image for a visual comparison:
ICO
A company seeking to raise money to create a new coin, app, or service can launch an ICO as a way to raise funds. The issuers should always pay attention: the capital fundraising through this method is often perceived by the market regulator as an establishment of a financial instruments (therefore not as a crypto token or utility).
How does it work?
Anyone can launch an ICO. When a cryptocurrency project wats to raise money through ICO, the project organizers' first step is to determine how they will structure it. The most common ways to structure ICOs include:
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Static supply and static price: A company can set a specific funding goal or limit, which means that each token sold in the ICO has a preset price, and the total token supply is fixed.
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Static supply and dynamic price: An ICO can have a static supply of tokens and a dynamic funding goal—this means that the amount of funds received in the ICO determines the overall price per token.
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Dynamic supply and static price: Some ICOs have a dynamic token supply but a static price, meaning that the amount of funding received determines the supply.
What is generally the purpose of an ICO for a project?
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Raise Funds;
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Create community;
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Build and strengthen project.
IEO
Initial exchange offerings (IEOs) are a recent development in the rapidly evolving digital asset space. Similar to initial coin offerings (ICOs), IEOs are initial offerings of digital assets (e.g., coins or tokens) to raise capital. However, IEOs are being touted as an innovation on ICOs because they are offered directly by online trading exchange platforms on behalf of companies—usually for a fee—to provide immediate trading opportunities for the digital assets.
It is important that the trading platform involved in the IEO has complied with securities laws.
What is the generally the purpose of an IEO for a project?
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Raise Funds;
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Create community;
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Build and strengthen project.
STO
STOs (security token offerings) were created in response to the ICO (initial coin offering) bubble burst in 2018.
A Security Token Offering is the procedure through which the sale of financial instruments to the public is carried out, represented by digital tokens.
The token is a digital instrument for the representation of an underlying real asset, i.e. a security (e.g. share, bond, derivative, property, title of property etc.), which entitles the holder to receive future cash flows and it mimics the behavior perfectly; a company can issue security tokens following the standard procedure for issuing financial instruments to the public.
STOs function as digital representations of real-world assets, like bonds, stocks, or even gold. Because of this, security token offering services enable asset tokenization for many businesses.
Security tokens are similar to the certificates issued for stocks. For stocks, ownership information is entered into a document as an official certificate of ownership, while for security tokens, similar information is recorded, the major difference being that it is recorded on the blockchain and represented by a token.
What is generally the purpose of an STO for a project?
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Financial Instrument
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Raise Funds;
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Access crypto market;
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Create liquidity
IDO
Initial decentralized offering - or IDO - is a new fundraising model that offers better liquidity of crypto assets, faster, open, and fair trading. IDO model is the successor of fundraising models such as ICO and IEO.
IDOs are issued by decentralized exchanges and this method might offer businesses a way to engage their communities in an economy that both enriches their products and services while allowing them to make smart business decisions regarding their assets.
These concept falls under the categories of DAOs and Liquidity Pools.
What are DAOs? DAOs represent an effective and safe environment to work with people with akin minds around the globe. It’s basically an internet-native business that’s collectively owned and managed by its members. Follow the link to know more:
https://www.edsx.ch/blognews/dao-decentralized-autonomous-organization
While Liquidity Pools enable users to buy and sell crypto on decentralized exchanges and other DeFi platforms without the need for centralized market makers. To know more, follow the link: https://www.edsx.ch/blog-news/liquidity-pool
Unlike an initial public offering, investors in initial decentralized offerings never own any equity in the project.
IDOs have some benefits that may make them more attractive than ICOs and IEOs, such as immediate liquidity, immediate trading and lower costs for listing.
Based in Zug, the platform is fully compliant with all Swiss laws related to financial intermediaries, banking, anti-money laundering, and organized trading facilities. Among its core values, there are innovative solutions through blockchain technology, which ensures security and liquidity.
EDSX is the first platform in Europe with primary and secondary markets for both institutional and retails. EDSX is a pioneering platform that employs the world’s leading technology to globally list security tokens in both primary and secondary markets, listing digital securities of real financial instruments to the public with a decentralized peer-to-peer exchange. Our goal is to fully engage every aspect of the financial revolution.
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