There are many similarites and differences between ICO’s and IPO’s.
However, there are 2 main differences every investor needs to be aware of:
IPOs are an established method of raising capital; they are tightly regulated, and must follow strict rules. IPOs must inform the SEC, the regulatory body in charge of IPO management, of any potential risks, as well as all pertinent information regarding the business.
Unlike IPOs, ICOs are not governed by any sort of regulation or legislation. Many market observers have accurately observed that this lack of oversight has the potential to burn investors. Most of the ICOs present in the blockchain environment have provided a significant return, but others have suffered losses, and some have even been downright fraudulent.
As a result of this unregulated environment, the ICO market is extremely volatile. If investors purchase tokens through an ICO and lose money, they have no legal recourse to recover their funds.
Regardless of the type of investment you are considering, preparation and investigation is the most important element of your strategy. It’s important to remain cautious when assessing an ICO- while the prospects of these sales can seem both extremely lucrative and extremely intimidating, there are a number of measures you can undertake to ensure you’ve performed your due diligence.
IPOs typically offer a range of different windows through which investors are able to purchase securities. ICOs, however, have been observed to completely sell out in mere seconds. Blockchain based browser Brave sold out in just 30 seconds, generating more than $35 million USD, while Esports platform FirstBlood raised more than $5.5 million USD in less than a minute.
Buying securities in an IPO, on the other hand, is far more simple and slower-paced, and can be conducted through a broker. Participating in the launch of an ICO requires investors set up a wallet, understand the basics of cryptocurrency, and then transfer cryptocurrency in order to purchase the digital tokens being sold in the ICO.
ICOs vs IPOs Conclusion
While ICOs and IPOs may appear similar on the surface level, they are both extremely different. While IPOs require a lengthy approval process and are governed by a regulatory body, virtually anybody with the wherewithal to create a whitepaper can run an ICO.
As always with any kind of investment, gathering intelligence is key. Always ensure you’re performing the necessary research in order to strategize effectively, whether investing in IPOs or ICOs.