ICO VS IPO – What’s The Difference? | Blockchain Central


Hey everybody and welcome to another episode
of BLOCKCHAIN CENTRAL! Today, we’ll look into the main differences
between Initial Public Offerings (IPO) and Initial Coin Offerings (ICO). An IPO, or Initial Public Offering, is a process
in which a company sells shares to investors on a stock exchange. With each share, the investor owns a part
of the company. This process is also called ‘going public’
because it makes it possible for almost anyone to invest in that company. An ICO (or Initial Coin Offering) is when
a company sells early access to their own, new currency. In a way, you could say an ICO is like a “Kickstarter”
campaign for blockchain projects. Over the course of this video, we’ll take
a closer look at the main differences between the two. Let’s start with IPOs: the traditional approach
to raising money. In fact, the first IPO was held by the Dutch
East India company, listed on the Amsterdam stock exchange in 1602. At the core of every IPO is the idea to give
potential investors the opportunity to invest in a company and own stocks. Owning a stock typically comes with additional
benefits, such as voting rights or dividend: a share of company’s profits. ICOs, on the other hand, have only been around
for a few years. The very first ICO was held by “Mastercoin”
in July 2013 and raised 5,000 Bitcoin. A year later, Ethereum raised money in the
same way. In an ICO, a company that developed a coin,
offers to sell some of the coins at a discounted, early-bird price. So, people who believe in the project can
invest in it early and profit over time; once increased demand drives the price up. The money collected from ICOs is then typically
used to fund project development. Often, the company that does the ICO doesn’t
even need to build their own blockchain: they can use ERC20 tokens that run on the Ethereum
blockchain. As mentioned earlier, an ICO works almost
like a Kickstarter campaign for coins – especially when it comes to regulation. ICO’s are not as heavily regulated as IPOs
which are governed by financial institutions like the FCC and SEC in the USA. One significant way in which regulations matter
is that companies that are preparing for an IPO have to disclose audited financials. The idea is to allow potential investors to
analyze the company more accurately. ICOs are relatively unregulated, which means
that there is no rigorous due diligence done by any third party. As a result, ICOs are riskier and can even
turn out to be fraudulent. The second main difference between IPO’s and
ICO’s is ownership. Investors who buy shares through an IPO, own
a proportionate size of the company and have corresponding voting rights. ICOs simply sell their product. Participating in an ICO will give investors
ownership of their coins, but no stake in the company. As coins can rise in value, there is still
an upholding promise for profits, but there is typically no direct relationship to the
company as is the case with IPO’s. Apart from these few theoretical distinctions,
we also have a few more practical differences. ICOs, for example, are much cheaper and as
such a better fit for young startups. An IPO comes with a responsibility that is
a better fit for mature companies. The lack of regulation for ICOs means, an
ICO can be quickly executed and can be done more creatively. One creative way, for example, is an “airdrop”. A company that does the ICO sends a small
amount of coins to all owners hoping for more widespread use of their product. So, as a final note: ICOs and IPOs are the
two options to achieve the same goal: raising money. However, one is a very early stage way of
raising funds while the other is usually the last. So it is possible for a company to have a
successful ICO and then do an IPO a decade later, after growing bigger and reaching financial
maturity. Ok, so what can you take away from this video? An IPO marks the first point in time when
shares of a company are publicly offered, while an ICO marks the first point when new
coins are offered. Because coins are just a product, they may
yield profit, but they do not provide owners with voting powers or dividends. Overall, ICOs are more risky investment opportunities
that reward the higher risk with higher potential earnings. That’s it for this episode of Blockchain
Central. Before you go, please not that this video
does neither represent financial, legal, or tax advice, nor is it supposed to be understood
or interpreted as solicitation to buy or sell any securities, coins or tokens. Thank you so much for watching. If you liked this video, make sure to hit
that like button and don’t forget to subscribe to Blockchain Central to never miss a beat! Happy investing!

3 thoughts on “ICO VS IPO – What’s The Difference? | Blockchain Central”

  1. Great video! very informative. I just started looking into ICO and found your video very helpful. If you are taking suggestions for you next reviews, I would love your opinion on SciDex.

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