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Overview

What is IPO?

IPO” is short for “Initial Public Offering”, meaning stocks “newly made public” or “newly listed”. Specifically, IPO is a process to sell stocks to investors and list them on securities exchanges for anyone to be able to trade.

What is ICO?

ICO is IPO for crypto currency. While IPO is stock offering on a securities exchange, ICO (Initial Public Offering) is a process for a corporation to issue its own digital currency for funding, and for the digital currency to be listed on an exchange for crypto currency.

The innovation provided by blockchain technology will realize the use of crypto currency, with its process costs rendered10 times lower than those of traditional IPO on securities exchanges.

While ICO is not different from IPO or cloud funding in that returns will be provided for investments, it is very innovative in that it employs crypto currency. That is, the crypto currencies purchased through ICO can be freely traded on block chain between individuals and their market prices can be formed in an exchange based on the law of demand and supply. While listing stocks has traditionally required complex criteria or procedures such as a certain corporate size or audit, funding through exchanges without such criteria or procedures will be made possible with ICO.

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Benefits of ICO

Funding through ICO

In “IPO”, a main source of funding for venture companies, the stocks issued will be sold mediated by investment banks; on the other hand, ICO is characteristic in that the crypto currencies originally issued will be sold through net directly to anonymous third parties including individuals, where its listing cost is lower than that of IPO and dividends do not need to be paid out for ICO, different from IPO.

Why is ICO that seemingly does not have any advantages so popular now? This is because the buyers of crypto currencies through ICO can expect an upside profit depending on demand and supply.

“BAT”, Brave’s digital currency in U.S, once saw its price surge to almost twice after its issuance. Such surging of prices can be seen in other ICO currencies, too. The funding through ICO this year has amounted to 761.02 million dollars (about 85 billion yen), already 7 times that of the annual record last year. IPO has an application period called book-building period; ICO has such an investment period called cloud-sale, during which, without saying, you can participate in ICO.

While for IPO, companies sell theirs stocks to investors through investment banks to be listed, ICO is a little different in that there are no mediating companies such as investment banks, but the developer of crypto currency will directly sell, in principle.

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Strengths of ICO

Innovative means of funding

This is an innovative means of funding that anyone, anywhere in the world can participate in as an investor. A strength of ICO, different from IPO scheme where a limited number of investors or investment banks will be favored, is that anyone can directly participate in it as an “investor” or “supporter”, anywhere in the world, from the early stage of a project starting at a small amount of investment. In addition, it is characteristic in that while its legal interpretation is changing daily along with preparation of related laws, it is possible in the current scheme to take part in ICO and investment activities while maintaining some anonymity.

In the perspective of corporations, ICO is attractive as a new means of funding, and in reality, many new projects have implemented ICO successful in funding their development into this year. The implementation of ICO is far easier than funding sourced from VC or traditional processes such as IPO, at least for now, where in principle, tangibly anyone can source funds from investors all over the world through utilizing Bitcoin or Ether, if he / she can write out “white paper” that summarizes the project structures or concepts, and technological details; it is necessary to write out the business plan, road map and method of ICO in the white paper.

Furthermore, if not merely the barrier of implementation is rather low, but the amount to be raised in the early stage of a project is larger than that from VC, there is no means of funding more attractive for corporations, and as a result, currently the number of projects that implement ICO is rapidly increasing, with new projects of any sort taking place on a day-to-day basis now.

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Comparison of IPO and ICO

You can handily participate at a low amount of investment

IPO has an advantage of being able to purchase stocks at a discount (though recently it is not so cheap) compared to the market value, in general; ICO is a little different in that you can purchase stocks at a discount after the launch of cloud sale most of the time. As the closer the cloud sale gets to its end, the less the ratio of such discount will get, you are advised to make a purchase as early as possible after cloud sale is launched.

It frequently happens that the price at the beginning is lower by more than 20% than that at the end. While it is possible for anyone to participate in ICO to obtain its tokens, unfortunately it often is the case that one is not yet planned to be listed.

A currency with some reputation or level of attention tends to be listed within weeks. And, of course, there is a risk around ICO similarly as IPO that its quota may not be filled even if listed. The typical exchanges for a crypto currency to be listed on are overseas, worldly renowned ones such as poloniex or Bittrex, not domestic bitFlyer or Coincheck.。

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