Investors know the difference among initial coin offering (ICO), initial exchange offering (IEO) and security token offering (STO). For the ordinary people, this section would feature the main characters of the three offerings blockchain developers use for raising capital.
In the ICO, blockchain developers sell tokens before developing technologies or products. Thus people buy coins after reviewing the White Paper, executives and partners. Developers use the capital they raise through the ICO.
Theoretically, the method is attractive for startups. However, many South Korean startups abused the ICOs to raise capital and fled away. Investors have no way of having their money returned. The ICO is a high-risk, high-return formula.
Unlike the ICOs, the IEOs involve the exchanges. The exchanges
screen blockchain technologies before listing them for trading. Blockchain developers and exchanges became partners. Thus the IEOs are safer than the ICOs.
In the IEOs, developers must make available Minimum Visible Product (MVP).
The STOs enable investors to become shareholders, thus allowing the STO holders to exercise their rights in the affairs of blockchain startups in which they invest.
Issuers must have real estate, bonds or other physical assets to raise capital through the STOs.