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Cryptocurrency has been everywhere, and new processes and terms have been introduced to us in the short history that it has been in the market.
Three of the most revolutionary processes that have been introduced to us in the last couple of years are ICO, IPO, and ILO.
You might have never heard about them, but they are involved in the creation of cryptocurrencies, in the sale of digital coins, and with tokens, where they accelerate project development.
While these three terms might still puzzle you, we are going to explain to them so you or anyone who reads this can have an overview of how they work and what they actually do.
What Is ICO?
An Initial Coin Offering, which is also known as the ICO, is the cryptocurrency industry’s equivalent of an IPO. In the ICO, a company that is trying to raise money to create a new coin or application and a service can use it to raise funds.
Initial Coin Offerings are mainly used to raise funds for products and services that are related to cryptocurrencies. They are similar to IPO however coins that are issued in an ICo have utility for a software service or a product.
In order to participate in an ICO, you are required to purchase an established digital currency and have a basic understanding of exchanges and cryptocurrency wallets.
Lastly, ICOs are completely unregulated, which means that investors are required to stay cautious when investing in them.
What Is IPO?
The Initial Public Offering, which is better known as the Initial Public Offering, is a type of public offering where a share of the business is directly presented to a specific retail investor.
With this, the company basically gives a part of its holdings of itself to shareholders, who will then trade it on the stock exchange. This automatically allows them the ability to get massive fundraising opportunities.
What Is ILO?
ILO, which means Initial Liquidity Offering, is a new type of fundraising mechanism that allows multiple projects and startups to raise funds by selling tokens on the DeFi-based Decentralized Exchanges without having to go through the process of ICO, which is another form of cryptocurrency that businesses use in order to raise capital.
The Initial Liquidity Offerings is basically one of the most popular ways to launch new tokens in the market.
Advantages Of An ICO
Initial coin offerings have extensive benefits, which include:
Anyone Can Purchase Tokens– The thing with Initial Coin Offerings is that they are allowed to be sold to anyone and most of the purchases are made anonymously, making it an amazing option for investors.
Tokens Can Be Sold On A Global Scale– Another benefit of going with ICO is that it gives you the opportunity to sell and buy new coins on a global scale.
Token Value– With ICOs, the value of a token will be staying freely inside a worldwide marketplace and will be available to purchase or sell at any point of the day.
Very Few Barriers– Companies can raise funds through the ICOs no matter where they are located from whoever they want to, which just eliminates so many barriers to entering the marketplace.
Instant Sold In The Market– Remember, there are no blocks that would be existing between buyers and sellers, which means that once the cryptocurrency has been created and launched, it can be sold on the crypto market right away.
Advantages Of IPO (Initial Public Offering)
Initial Public Offerings have extensive benefits, which include:
Fundraising– The most known advantage of going with an IPO is that it allows fundraising in a very easy and accessible way, meaning that the money that is provided through an IPO can transform the growth of a company in a huge way.
Publicity– Once a company starts to grow, it will require a lot of exposure to potential customers, and luckily an IPO can provide this exposure as it gives a huge spotlight to companies that are in the market.
Reduced Cost Of Capital– Before the IPO was introduced, companies were required to pay massive amounts of interest rates to receive loans from banks, but thanks to the IPO, it can lessen the difficulty of getting additional capital in a huge way.
Advantages Of Initial Liquidity Offerings (ILO)
Here is a list of benefits of the ILO:
Faster Sale Of The Tokens– The main benefit of the Initial Liquidity Offerings is that it enables the faster sale of the tokens, considering that as the new tokens are released on a decentralized exchange, which means that you will not be required to wait in order to buy or sell tokens.
Immediate Liquidity– As we said, ILO enables the faster sale of tokens, and because new tokens are released on a decentralized exchange, you are allowed to get immediate liquidity.
Affordable Fundraising– With the ILO, you can carry out fundraising at a lower cost when compared to the ICO (Initial Coin Offering) and the IEO (Initial Exchange Offerings).
Decentralized Exchanges– The ILO is a new type of fundraising mechanism that allows multiple projects and startups to raise funds through selling tokens on the DeFi-based Decentralized Exchanges.
Ability To Buy a Large Number Of Tokens – Lastly with the ILO, when a token or token goes for sale, private investors have the ability to purchase a massive number of tokens at a lower price, which they can resell to the public for a bigger profit.
How Do Initial Coin Offerings Work?
Any cryptocurrency projects that want to raise funding through the Initial Coin offering are required to determine how they would be structuring the coin.
There are many ways that ICOs can be structured, which includes the Static Supply and Static Price, where a company is supposed to set a specific funding goal or limit, which means that each token sold in the ICO has a preset price and the total token of supply is fixed.
The second one is the Static Supply and Dynamic Price, where the ICO has a static supply of tokens and a dynamic funding goal, meaning that the number of funds that are received in the Initial Coin Offering would be the one that would determine the overall price of the token.
The last one is the Dynamic Supply and Static Price, where the amount of funding would be the one that would be the one that would determine the supply.
How Does The Initial Public Offering Work?
The IPO is a fundraising method currently being used by major companies, where the company would be selling its shares to the public for the first time. After that’s done, the shares of the company are traded on a stock exchange.
Remember, some of the main motivations for going with the Initial Public Offering include raising capital from the sale of the shares, providing liquidity to company founders and early investors, and in order to take advantage of a higher valuation.
How Does The Initial Liquidity Offering Work?
The Initial Liquidity Offering allows entrepreneurs to make a massive profit by staking all their capital on the De-Fi-based DEXs.
With the IPO, the liquidity providers are efficient, which means that they are going to get bonuses on a regular basis in the form of yields.
The entire process of listing an Initial Liquidity is very economical, especially when compared to other fundraising models used in the digital currency markets. Also, the IPO eliminates the risk of violity, considering that the token holders are getting equivalent stablecoins, which are held securely in liquidity pools.
Lastly, the ILO development ensures flexibility, which allows the creation and listing of new tokens that are according to the demands that are set by investors.
Who Can Launch An ICO?
Anyone is allowed to launch an ICO, considering that there is very little regulation of the Initial Coin Offerings in most major countries, which means that anyone who is allowed to access the proper technology can launch a new cryptocurrency.
However, you have to keep in mind that the lack of regulation can be bad too.
Remember, anyone can make you believe that they have a legitimate ICO and could just run away with all the money that you invest into the launch of a new cryptocurrency.
The thing with the ICO is that out of all the possible funding avenues, this one is the easiest one to set up in order to carry out a scam.
Can Anyone Invest In An IPO?
Most of the time, there is going to be more demand and supply for new Initial Public Offering, and for this reason, there are no guarantees that investors that are interested in IPOs would be allowed to purchase shares, meaning that those that are interested in participating in an IPO can do so through a brokerage firm.
Another way to invest in an IPO is through a mutual fund or in any other type of investment vehicle that focuses on IPOs.
The Future Of ILO
In the future, ILO, Initial Liquidity Offering, would be offering more advantages, considering that Defi is the future of the digital coin market and considering that the fundraising mechanism is going to rise up with decentralized finances.
