The World of DeFi: ICOs, IEOs and the Future of Security Tokens
AZ Coin
DeFi is a decentralized financial ecosystem that uses blockchain technology to provide various financial services such as lending, borrowing, trading, insurance, and many other applications.
In this article, we will take a closer look at each stage of DeFi's development, from ICO to IEO and the future of Security Tokens.
ICO (Initial Coin Offering) is a new form of fundraising, born in 2013 to help blockchain and cryptocurrency projects raise capital effectively and quickly. Instead of using traditional methods such as selling shares, IPOs or borrowing from banks, blockchain projects can create digital tokens (cryptocurrencies) to sell to investors.
In ICO, the issuer will create a fixed number of tokens and sell them to investors at a certain price. Investors will use cryptocurrencies (usually Bitcoin or Ethereum) to buy these tokens. The proceeds will be used for project development, infrastructure construction, marketing and other business activities.
The special thing about ICO is that participants can become early investors of the project, and if the project is successful, they will also benefit greatly from the increase in the value of the token.
ICO launch have quickly become a popular trend in the blockchain and cryptocurrency world. Since 2017, the number of ICOs has been increasing, attracting billions of dollars from investors worldwide. Some notable ICOs such as Filecoin ($200 million), Tezos ($232 million), and EOS ($4.1 billion) have attracted great attention to the community.
The ICO boom is due to many reasons:
Easy access to capital: ICOs help blockchain projects access large capital sources quickly, without having to go through complicated procedures such as IPOs.
Attractive profits: Many investors have earned huge profits from participating in ICOs early. This created an ICO "fever" in the market.
Transparency and freedom: ICOs bring transparency and freedom to projects, as they are not subject to the control of traditional financial intermediaries.
Trust in blockchain: The strong development of blockchain technology has created great trust in the community, especially investors.
Initial Exchange Offering (IEO) is a new form of fundraising, born after the boom and collapse of ICO. In IEO, blockchain projects will cooperate with cryptocurrency exchanges to be listed and sell tokens on the exchange.
The combination of blockchain projects and cryptocurrency exchanges brings many benefits:
Increased transparency: The exchange will thoroughly check the legality, technicality and operation of the project before listing. This helps reduce risks for investors.
Effective investor access: The exchange has a large number of users, helping the project reach and attract more investors.
Increased liquidity: Listing on a large exchange will help increase the liquidity and value of the token.
Reputation and reliability: Cooperating with a reputable exchange also helps increase the reputation and reliability of the project in the eyes of investors.
Thus, IEO is considered the next step of ICO, helping to minimize previous risks and uncertainties.
After ICO encountered many problems, IEO quickly became a new trend in the blockchain and cryptocurrency world. Major exchanges such as Binance, Huobi, OKEx... launched their own IEO programs, attracting the attention of blockchain projects.
In 2019, IEO experienced a period of strong development. According to statistics, the total capital mobilized through IEOs in 2019 reached about 1.7 billion USD, 5 times higher than in 2018. Some prominent IEOs such as Bittorrent, Fetch.AI, Matic Network... have attracted millions of USD from investors.
However, after a period of rapid development, IEO also began to encounter some problems similar to previous ICOs:
Lack of strict control: Some exchanges have not really thoroughly checked the project, only focusing on profits from IEO.
Low transparency: Much information about the project, the capital mobilization process and capital use has not been fully disclosed.
Investment risks are still high: IEO projects are still young startups, not yet proven to be successful.
Therefore, the IEO trend is gradually being replaced by a newer model - Security Token.
Security Token is a type of digital token that represents real assets (such as stocks, bonds, real estate, etc.) on the blockchain platform. They are considered the future of DeFi, when connecting the blockchain world with the traditional financial market.
Security Token possesses the characteristics of both traditional cryptocurrency tokens and traditional assets:
High liquidity: Like cryptocurrency tokens, Security Tokens can be traded quickly and flexibly on exchanges.
Asset rights: Like stocks, Security Token owners will enjoy rights such as dividends, voting rights and asset ownership.
Governance and supervision: Security Tokens are strictly managed and supervised by financial regulators, ensuring transparency and safety.
The birth of Security Token marks a big step forward for DeFi, as it can connect the blockchain world with traditional financial markets. This opens up many new opportunities and potentials for investors and businesses.
Despite facing some challenges, the future of Security Tokens in the DeFi sector is very promising. As more and more financial institutions and enterprises begin to adopt blockchain technology, the demand for transparent, efficient, and accessible financial products will increase.
With the combination of blockchain technology and the traditional financial market, Security Tokens can become a powerful bridge between these two worlds. This will not only increase the liquidity of assets but also open up new opportunities for investors, thereby promoting the development of the decentralized finance sector.
In addition, with the rapid development of new technologies such as artificial intelligence and the Internet of Things (IoT), we can imagine that Security Tokens will play an important role in optimizing transaction processes and asset management in the future.
In general, ICO, IEO and Security Token are all important steps in the development of the field of crowdfunding and decentralized finance. Each model has its own advantages and disadvantages. However, the important thing is that they have contributed to changing the way capital is raised and assets are traded in the modern economy.
Security Token, with its great potential and ability to connect the blockchain world and traditional finance, is a promising step for the future of DeFi. Grasping and developing these trends will bring many opportunities for investors as well as businesses in today's digital economy.