Equity Token Offering: Better Benefits Than Initial Coin Offering Model?
Ever since ‘blockchain’ and ‘funding’ found parallel mentions, ICO was considered to be de facto standard for raising funds for crypto project and startups. The process for an ICO is quite simple. A company can offer investors a new innovative cryptocurrency or a representative token that the investors can buy using Bitcoin or Ethereum or fiat currency. This money will be used to finance the development of a new project or application. Future investors receive tokens and a promise that the investment that they have made will benefit them in the form of access to the platform, product or services.
In ICO, the legal protection of potential investors is considerably poor. The entire process is based on trust. There is every chance that the trust can be misused and any team can scam the investors. While the rapid advancement of Technology can be considered a boon, making the existing legal system catch up with the technological advancements is another task. This is one of the major reasons why blockchain failed, especially when it comes to ICOs.
ETO (Equity Token Offering) - Striking The Perfect Balance
An ETO (Equity Token Offering) creates the much-needed balance between the trust of traditional banking and their advantages of blockchain technology. It is seen as the centroid of the vertices of IPO, ICO, and VC funding.
IPO was considered to be the classic method of going public. IPO is legally regulated and protects the interest of the investors and the participation is subject to . Just like IPO, ETOs also happen in a compliant ecosystem. Equity tokens represent actual ownership in the company. It gives the holders of the tokens the same rights and entitlements as shareholders of a company listed on the stock exchange.
Equity tokens guarantee all the rights that any investor would get. This includes but is not limited to shares in the company, the dividends and even voting rights. The entire process of ETO takes place through platforms that have been established as being in compliance with the legal requirements of the country.
The company receives funds from the ETO to finance the development or marketing of their products or services. The investors stand to gain the benefits of being actual equity holders of a company that has exhibited the potential to grow bigger.
IPO is a slow process and it might take anywhere between six months and one year to complete depending on the company and its advisors. The cost of getting your company listed is in the tune of a tenth of a million to a few million dollars. While the ETO might also consume a similar stretch of time, the elimination of intermediaries and the costs involved make it relatively easier.
ETO also ensures that the purchase of shares or tokens is easier from an investors’ perspective. Since the process of the offering takes place on the blockchain, the need for intermediaries is completely eliminated. The transactions are peer-to-peer, and the commission costs are relatively lower compared to that of the traditional stockbroker commissions.
ICOs, in their heyday, had acquired all the credibility it takes to position itself as the next big thing in fundraising. In the third quarter of 2017, ICOs were able to raise 16 times more money than all the venture capitalists combined. However, what made this number possible was the ICOs weren’t always focused on business and security. One ICO aimed to finance the world's biggest aquarium, and it raised around a million dollars. Even this ICO might have made it to the final account of the total value, but it does not even make the minutes of business sense.
One of the greatest advantages that ETO presents over ICO is that while ICO asks you to invest in the uncertainty of the future, ETO asks you to invest in the certainty and the credibility of the past and the present. The company that issues an ETO has already proved its ability to develop a successful business and soliciting funds is just another step to elevate the company and the business to another level and not to start from scratch.
ICOs might be viable solutions for any issuer and also for small investors who are looking for short term profits and less of long-term security. However, the unregulated nature, the lack of legal hold and the probability of scams should never be forgotten. ETOs, on the other hand, protect the investors, are legally compliant and represent actual equities.
It has always been taught that a perfect balance between the values of the past and the technology of the present along with the securities of the future will be the best solution. ETOs seem to have achieved that with respect to funding. They uphold the legal protection of interest for the investors and at the same time, also incorporate the benefits of blockchain by eliminating intermediaries and reducing costs for issuers. It is only a matter of time before most of the countries change their legal and financial framework to accommodate this new revolution in the field of finance and funding!
For Blockchain Technology Development Services Click here
In ICO, the legal protection of potential investors is considerably poor. The entire process is based on trust. There is every chance that the trust can be misused and any team can scam the investors. While the rapid advancement of Technology can be considered a boon, making the existing legal system catch up with the technological advancements is another task. This is one of the major reasons why blockchain failed, especially when it comes to ICOs.
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| Equity Token Offering |
ETO (Equity Token Offering) - Striking The Perfect Balance
An ETO (Equity Token Offering) creates the much-needed balance between the trust of traditional banking and their advantages of blockchain technology. It is seen as the centroid of the vertices of IPO, ICO, and VC funding.
How is an ETO similar to an IPO (Initial Public Offering)?
IPO was considered to be the classic method of going public. IPO is legally regulated and protects the interest of the investors and the participation is subject to . Just like IPO, ETOs also happen in a compliant ecosystem. Equity tokens represent actual ownership in the company. It gives the holders of the tokens the same rights and entitlements as shareholders of a company listed on the stock exchange.
Equity tokens guarantee all the rights that any investor would get. This includes but is not limited to shares in the company, the dividends and even voting rights. The entire process of ETO takes place through platforms that have been established as being in compliance with the legal requirements of the country.
The company receives funds from the ETO to finance the development or marketing of their products or services. The investors stand to gain the benefits of being actual equity holders of a company that has exhibited the potential to grow bigger.
Advantages of ETO over IPO
IPO is a slow process and it might take anywhere between six months and one year to complete depending on the company and its advisors. The cost of getting your company listed is in the tune of a tenth of a million to a few million dollars. While the ETO might also consume a similar stretch of time, the elimination of intermediaries and the costs involved make it relatively easier.
ETO also ensures that the purchase of shares or tokens is easier from an investors’ perspective. Since the process of the offering takes place on the blockchain, the need for intermediaries is completely eliminated. The transactions are peer-to-peer, and the commission costs are relatively lower compared to that of the traditional stockbroker commissions.
The advantages of ETO over ICO
ICOs, in their heyday, had acquired all the credibility it takes to position itself as the next big thing in fundraising. In the third quarter of 2017, ICOs were able to raise 16 times more money than all the venture capitalists combined. However, what made this number possible was the ICOs weren’t always focused on business and security. One ICO aimed to finance the world's biggest aquarium, and it raised around a million dollars. Even this ICO might have made it to the final account of the total value, but it does not even make the minutes of business sense.
One of the greatest advantages that ETO presents over ICO is that while ICO asks you to invest in the uncertainty of the future, ETO asks you to invest in the certainty and the credibility of the past and the present. The company that issues an ETO has already proved its ability to develop a successful business and soliciting funds is just another step to elevate the company and the business to another level and not to start from scratch.
ICOs might be viable solutions for any issuer and also for small investors who are looking for short term profits and less of long-term security. However, the unregulated nature, the lack of legal hold and the probability of scams should never be forgotten. ETOs, on the other hand, protect the investors, are legally compliant and represent actual equities.
The Conclusion
It has always been taught that a perfect balance between the values of the past and the technology of the present along with the securities of the future will be the best solution. ETOs seem to have achieved that with respect to funding. They uphold the legal protection of interest for the investors and at the same time, also incorporate the benefits of blockchain by eliminating intermediaries and reducing costs for issuers. It is only a matter of time before most of the countries change their legal and financial framework to accommodate this new revolution in the field of finance and funding!
For Blockchain Technology Development Services Click here
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