Cryptocurrency world introduces us to a vast number of new terms such as coins, tokens, presale, crowdsale etc. Two major terms among all these have attracted a lot of attention from the people who work with cryptocurrency. Those two terms are Initial Coin Offering and Initial Public Offering. In this article we explore key differences between IPO and ICO. We clarify the differences between the purposes, strategies, documentations etc in this ICO vs IPO comparison.
ICO vs IPO – Definition
Don’t let the similar names make you think their purposes are the same. Both terms have been brought to the world by the innovation of cryptocurrency. ICO is considered as a way of crowdfunding for the startups. In this process, someone can create and sell tokens in order to fund the startup so that it can develop. This can be done on a platform like that of Ethreum.
IPO, on the other hand, is a well-established process a private company leads to develop and expand. IPO is the process of publicly selling the shares of a company agin in order to collect funds so that the company can develop.
Keep in mind that unlike an Initial Public Offering (IPO), investing in and buying an ICO won’t result in you having an ownership stake in the company you’re giving money to. It’s, in fact, a gamble. The currently worthless currency you pay for now might increase in worth later and make you money.
ICO vs IPO – Strategies
As mentioned above startups’ main goal to create ICO is to raise fund for the enterprise and its projects. On the other hand, in order to perform IPO, the company has to be at a financially stable stage. It’s true that IPO’s goal is to help the company develop too but at later stages when the owners want to expand the company to the public.
ICO vs IPO – Documentation
There has to be a legal document including the most important information- prospectus, for a company to be able to issue an IPO. Issuing ICOs, however, does not need any legal document. The only document you can- but don’t have to, create is called white paper in which you explain every detail about the enterprise and its goals.
ICO vs IPO – Targets
Another important difference we need to mention in this ICO vs IPO comparison is their targets. Although IPO mainly targets institutional investors such as banks – they might also target retail investors, ICO is open to everyone. In order to buy IPO you need real currency but to buy ICO you need to have digital currencies such as Bitcoin or Ether
Finally, it might seem to you that IPO is more secure than ICO since ICO is a kind of gambling. With the hope that the worth of the coin increases but IPO means you have a share of the company. However, it’s actually not so. There is always a chance that the company goes bankrupt and we have seen a lot of promising ICOs that have become very profitable such as Bitcoin! There are risks you should take in both cases that you should take so our suggestion is that you learn and find out thoroughly about your investment project whatsoever.