Tokens and shares: are they similar or not?

Nowadays, almost everyone has already heard about cryptocurrencies. Approximately a year ago, cryptocurrency has made a splash when bitcoin caused real hysteria among investors, almost reaching the level of $20 000 in just a few months. However, if you are just starting to be interested in digital money, the study should start with some fundamental concepts. The first terms that the future crypto investor needs to know are tokens and ICO. These unfamiliar words can drive a person who has heard about cryptocurrencies but has not yet delved into the topic into a dead end. Without knowledge of these concepts, there is nothing to do in the  crypto market. Therefore, let’s talk in more detail about what those things are and how the terms from the crypto world differ from their  counterparts in securities markets.

What is a token?

Surely you can imagine what a share is. This is a security that indicates that  the holder has made a certain contribution to the capital of an  enterprise. The share allows the owner to receive dividends from the company in which the money was invested. In addition, holders can sell,  exchange, donate, and dispose of securities in a different manner, under  the right of ownership. A  token is an analogue of a share in the cryptocurrency world. However,  from a technical point of view, its functionality is much wider. Tokens can be used for verification, storage of information, they are actively introduced in the banking sector, especially when it comes to modern  methods of making payments. New tokens appear on the market due to startups. Often teams have an idea, but they simply have no money for its implementation. In this case, various projects create their own tokens and sell them, after which they are placed on exchanges. But we will talk about that later.

What is an ICO?

Again, we can’t do here without drawing an analogy with the stock market in its traditional sense. Sooner or later, a successful business will develop and therefore will require new investments for development, and internal opportunities will be not enough. In this case, there is a way to an exchange, for which an IPO is held. During an IPO, the company issues a certain number of shares, which are bought by investors. After the  acquisition, the shares are sent to the stock exchange where they are then traded. Technically an ICO (initial Coin Offering) is similar to an IPO. This is an initial placement of crypto coins which are then bought by investors. Thus, the startup manages to raise money for the subsequent implementation of a certain idea. However, in the future, it will have to fulfill certain obligations to investors. As a rule, it is an opportunity to pay for any goods or services provided by one or another ICO.

What’s the difference between ICO and IPO?

Again, from a technical point of view, these two are very similar concepts. The main difference is only in the goals and the stage of development when companies come to an IPO and an ICO. In the first case, the  placement of shares is carried out at a certain stage of the company’s  development. For example, if an organization reached a ceiling in a certain niche and it needs money to take a step forward, or if an urgent  update of the material and technical bases is required, or if they plan  to expand their business, open offices in other countries, construct  new plants, trading spots, etc. Therefore, in some way, IPO has similar features to lending. As for an ICO, its goals are much closer to crowdfunding than lending.  There is an idea, there is a team, there is a plan, but there is no money. In this case, the company carries out the initial offering of crypto coins and raises funds for the implementation of its idea. In  return, investors have the opportunity to pay with tokens for certain  goods or services.

What’s the difference between tokens and shares?

Tokens and shares have a common goal — to provide the company that issues them with the inflow of investments that will help to implement the tasks.  And they really look alike. However, the devil is in the details and we will now analyze them.

1. Main goal

The main goals of the tokens and shares are the same — to attract  investments. However, if a share is a more profitable solution compared to lending, then a token is much more profitable for the company even  compared to a share. In addition, the share is about the payment of dividends in monetary terms, and some types of tokens can be used as a currency and a payment method for goods or services.

2. Companies’ obligations

In the case of securities, it can be a share in the company or dividends only. If you hold a certain number of shares, you are entitled to participation in various management decisions approved by the board of  directors. In the case of tokens, the situation is somewhat different. After the acquisition, the holders are mainly interested in the  development of the project and its impact on the price of the token. The more interesting the idea and successful its implementation, the greater the cost. And accordingly, the bigger the income from the token.

3. Volatility

If you have ever been interested in stocks, you may have noticed that they can grow fast, and then quickly fall in price. In about 5–7 years, the share price can grow up to 30 times. However, there is also a risk of depreciation. In the case of tokens, the situation is even more interesting. In just a year or two, their cost can jump up to 200–300  times. However, the fall may be more rapid and shocking. This should be taken into account because many startups can’t complete what they’ve set out to do.

4. Trading on exchanges

One of the main features of tokens is decentralization. They are not subject to any particular control center, unlike securities. Regulators are also absent. There are also such interesting phenomena as insiders  information and pump (collusion of the parties when buying to change the  price in the right direction). In the case of shares, insider trading  is actively fought with, but here information can also “slip”. As you can see, tokens and shares are both similar and different from each other. Therefore, the specifics of working with these assets have  significant differences. If you have previously traded shares and decided to try yourself in the crypto business, do not rush. Take some time to study the characteristics of the market, because the keydifferences can be too expensive.

Now, let’s talk about our own tokens!

ChangeNOW  is a non-custodial fast exchange service, and now it is issuing its own token, which strikes the balance of advantages of good old cryptos and  the innovation that is to eliminate their drawbacks. The service is  successful and is developing rapidly, therefore the NOW token has a good potential for growth. It is an Ethereum coin based on the ERC20 platform, and will be on private sale for professional investment funds only at a pre-sale price of 0.2 USD. The token will never be available for purchase by individuals and is exclusively distributed through airdrops and bounties. The tokens will give the customers a range of privileges, such as fixed rates and enhanced technical support. ChangeNOW  itself has a thoroughly developed business roadmap, which they are sticking to quite firmly, and its future solid partnerships ensure a dramatic increase in value. Finally, the company promises to repurchase  and burn half of the tokens from circulation, thus further adding on to the potential of the value increase. These factors make this new player a strong attraction for anyone seriously involved with cryptocurrencies.