What is the difference between an ICO, INO, IEO and IDO?

If you’re interested in investing in cryptocurrency projects, it can be incredibly useful to understand the differences between an ICO, an INO, an IEO, and an IDO. Each of these is a popular way to raise funds for a new cryptocurrency project, but they all work a little differently — and they all have their various pros and cons.

In this AAG Academy guide, we’ll explain all four of these funding systems in detail, and look at how they’re different from one another. We’ll also answer some of the most common questions around each one.

What is an ICO?

ICO stands for initial coin offering. It is the cryptocurrency industry’s closest equivalent to the initial public offerings (IPO) used in traditional financial markets. The big difference is that instead of offering shares in a company, ICOs give investors the opportunity to purchase coins or tokens from a new blockchain project for the first time.

ICOs are usually funded by other cryptocurrency tokens, such as Bitcoin or Ethereum, and they are typically launched soon after a project’s whitepaper — which lays out its purpose, how it operates, and its plans for the future — is published. ICOs are usually executed by the project itself and are unregulated, unlike IPOs which are centralized and regulated.

The primary purpose of an ICO is to raise vital funds that will help ensure a project’s continued development. To incentivize investors, project creators will often give tokens some kind of utility, which may be the opportunity to exchange them for a certain product or service in the future, or the ability to vote on a project’s direction later on.

There are three primary ways an ICO can be structured:

• Static supply and static price
  The number of coins or tokens offered, as well as the price of each one, is set in advance and does not change. For instance, if a project plans to raise $1 million, its creators may offer 2 million tokens at $0.50 each.

• Static supply and dynamic price
  The number of coins or tokens offered is set in advance, but the price of each one is determined by a funding goal. Depending on the total amount of investment received, the overall price per token changes. For instance, if a project offers 1 million tokens and raises $5 million, each token is worth $5.

• Dynamic supply and static price
  The price per token is set in advance, but the number of tokens offered through the ICO is determined by the amount of investment received. For instance, if a project plans to raise $1 million, its creators will sell as many tokens as necessary to reach that goal. This could be 1 million, or it could be 3 million.

It is possible for an ICO to be unsuccessful. This means that the minimum funding goal set by the project’s creators is not achieved, usually due to a lack of interest. When this happens, any funds raised may be returned to investors. This doesn’t necessarily mean a project is dead, since it may receive funding from other sources, such as a venture capitalist firm.

When an ICO is successful, the capital raised should be used to fund the project’s development. It should be noted at this point, however, that ICOs can be incredibly risky — particularly for new investors. Anyone can launch an ICO, and unfortunately, lots of scam projects have used the system to steal money from unsuspecting investors in the past.

With that being the case, proper research and due diligence should be carried out before putting any capital into an ICO.

What is an INO?

INO stands for initial NFT offering. These are similar to ICOs, except instead of offering cryptocurrency coins or tokens, they offer NFTs. These are usually limited-edition assets with greater scarcity than others, which is designed to make them more appealing to investors. They may also offer access to certain perks, such as greater returns when staking, later on.

INOs are typically used by startups that are focused on NFTs specifically, rather than blockchain projects with more general purpose use cases. However, they are funded in much the same way; a collection of NFTs is made available through a launchpad or marketplace, and those who are interested can acquire them using popular cryptocurrencies.

What is an IEO?

IEO stands for initial exchange offering, and these work in much the same way as ICOs — they offer investors the opportunity to purchase coins or tokens from a new blockchain project. However, there is a big difference between the two that makes IEOs safer and less susceptible to scams like rug pulls and other fraudulent activities.

Unlike ICOs, which are organized and executed by a project itself, IEOs are carried out by an established, centralized cryptocurrency exchange on the project’s behalf. They are verified using a number of methods, including examination of their whitepaper and creators, before projects are listed to weed out bad actors. In addition, investors must prove who they are.

Because IEOs are carried out by centralized exchanges, most of which are regulated within the countries they operate, the necessary KYC (know your customer) procedures, which include providing a valid ID and debit card, must be carried out. These exchanges also use anti money laundering measures for even greater protection.

One of the advantages of IEOs being listed on centralized exchanges is that it means investors can use a debit card to purchase coins or tokens in many markets. This negates the need to set up a decentralized wallet and then acquire another cryptocurrency of some kind first.

What is an IDO?

IDO stands for initial DEX offering. These are very similar to IEOs, except decentralized exchanges (DEX) are used instead of centralized exchanges (CEX). IDOs have their pros and cons. For instance, it’s much easier for new cryptocurrency projects to launch an IDO than it is for them to launch an IEO, which is great for smaller projects with small funds to begin with.

What’s more, anyone can use a DEX — all you need is a decentralized wallet on a compatible device, and an internet connection. There’s no need to provide a debit card or prove who you are. The downside to IDOs is that, as a result of the advantages just mentioned, they are not as safe as IEOs from an investor’s point of view — though they are still safer than ICOs.

Feature comparison table

References

• Initial coin offering ico
• What is an ico
• Crypto ico tax
• What is an initial nft offering ino
• A beginners guide to an exchange administered fundraising event