Whenever a new cryptocurrency is established the first thing it needs is firm funding. there are two methods for the purpose. First, and the more famous one being Initial Coin Offerings (ICOs) and the second ones are Security Token Offerings (STOs).
The question is what these methods are, which one is better, and more importantly why cryptocurrencies need funding.
Similar to any other item that is introduced cryptocurrencies also need funding to develop and culture the currency. Moreover, the initial funding informs the public about the project as well as attracts new customers.
An Initial Coin Offering is a method of funding that is much similar to the traditional Initial Public Offering (IPO) though it does not give an investor any ownership rights over the product.
An ICO contains a guide called a white paper, which outlines the details about the project as well as future objectives. Moreover, the developers create a website that also spreads awareness about the project similar to the white paper but much more accessible.
An STO consists of the same methods but also has to follow the laws set by the Securities and Exchange Commission (SEC). However, unlike an ICO security does not introduce a new product or asset but rather introduces a new service that is already backed by some asset.
While comparing the two we see that the STOs are more regulated and have therefore much less chance of being a scam and failing. However, such regulations slow down the development of the project, therefore, ICOs are much faster and give fast returns. Nowadays the trend is shifting more towards STOs.