An ICO or STO allows investors to support new initiatives using
cryptocurrency and principles of crowdfunding.
An ICO, or “Initial Coin Offering”, uses cryptocurrency to raise capital for new ventures and projects. During an ICO’s crowd sale, participants purchase project-specific cryptocurrency tokens (or “ICO coins”) as a form of investment in the company. Just like an IPO, an ICO represents the first stage of a project going public.
STO stands for Security Token Offering. STOs, like ICOs, allow investors to support new initiatives using cryptocurrency and principles of crowdfunding. But unlike ICOs, STOs are actual securities in the form of digital tokens. These security tokens grant investors ownership rights in a company or its underlying assets, such as stocks, bonds or investment funds, one of the methods by which STOs guarantee to provide additional security to the investor.
In summary, STOs are much more regulated and safer than ICOs and at the same time much cheaper than IPOs. In other words, STOs can give the token owner a certain percentage of the company, just like on the stock exchange. STOs are filed with the Securities and Exchange Commission (SEC) and receive the approval of securities privileges such as Reg A+. SEC filing is one of the methods by which STOs guarantee to provide additional security to the investor. In summary, STOs are much more regulated and safer than ICOs and at the same time much cheaper than IPOs.
Although most ICOs/STOs only allow funding through Ethereum, your platform should support investments with multiple currencies. Investors can then either buy tokens through fiat currencies such as the Euro or US Dollar, or through other cryptocurrencies such as Bitcoin, Bitcoin Cash, Litecoin and Dash.
ICOs & STOs are based on smart contracts. Smart contracts determine the creation and distribution of ICO/STOs tokens, dividend payouts, and the exchange rate between currencies and tokens. The content of smart contracts is flexible and depends on the issuer’s needs.
Sending and receiving ICO/STO coins requires investors to use the cryptographic information of their private wallet keys. If they lose this information, they lose access to their funds, which places a huge amount of responsibility on them. Your platform should offer each investor their own individual account, with unique login information and funding address. This ensures that investors can recover their coins in the event that they lose their private access. Additional safety features that use email and Google authenticator add extra security to each account.
Your ICO/STO landing page should be easy to navigate and pique the interest of potential investors. Having a well-designed web page is critical to the success of your ICO/STO.
Your ICO/STO platform should feature a detailed admin panel that offers you up-to-the-moment information on where funds are coming from.
Some countries regulate cryptocurrencies to prevent cyber crime. In these places, ICO issuing companies are generally required to implement “Know Your Customer” (KYC) verification procedures in order to launch ICOs. For an STO, performing a KYC process is mandatory to verify the accredited and qualified investor status. Your ICO/STO system should cohesively integrate customizable KYC procedures into its platform. If these are implemented, participants are asked to upload authenticating documents, such as a photo of their ID and proof of residence, to verify their identity
A token sale that operates through a partner exchange is called an initial exchange offering, or IEO. It’s identical to an ICO in almost every way except that investors who can participate in the sale are typically limited to users on the associated exchange.
Partnering with a white label exchange provider like skalex enables you to implement IEOs at a minimum of time and cost. Take a look at our exchange platform to see how a token sale can easily be implemented.
As veterans of crypto-exchange software development, we understand the importance of security….
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