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Initial Token Offering, or ITO, is a relatively new term in the blockchain space. It is more than often compared with ICO and even used in place of it for the same purpose of raising funds. So, why is ITO becoming so popular these days and how is it better (or different) from the ICO? Let’s find out.Here are the 7 basic (but important) things you should know about ITOs before you decide to become a part of one.
What is an ITO?
ITO is an alternative method of acquiring capital for funding a new project or existing business. ITO can also be used to transform an existing asset class into a digital asset class (aka tokens) and/or transfer to other ownerships agreement between individuals of an underline asset if securitized or a utility function if not securitized. ITOs involve the creation of new tokens in exchange of fiat currencies like dollars or other cryptocurrencies such as Bitcoin and ETH. In the future when countries will move from FIAT to digital national currencies the process will still be the same but with national digitalized currencies based on DTL technologies.Initial Token Offering (ITO , not Crypto-currencies) are primarily of two types securitize tokens (STO) with an underline asset associated to it and no-securitized tokens (Utility Tokens) associated to the rights to access some functionalities provided by the project releasing such a token.Through an ITO, a startup or company issues new tokens as a means for accepting funds from potential investors with a legal agreement embedded within it.
Why ITO?
The basic purpose of an ITO is to raise funds for a new project. ITOs are now effectively replacing the traditional means of fundraising such as IPO (Initial Public Offering), crowd funding, private investment with shared equities ownership. They are more effective and, most importantly, they are easily accessible to everyone. The easy and convenient engagement terms and tools provided, helps anybody to invest in an ITO with few simple clicks that compared with the traditional way of raising capital it is an immense step forward toward simplicity, transparency, that improve user experience and adoption compared for example to an IPO or other traditional funding methods which require experience along with a substantial budget.
ITO vs ICO
ICO and ITO are the terms which most people use interchangeably, however, there are some crucial differences between the two. For one, an ICO deals in coins (aka “crypto-currencies”) while an ITO represents the trading of tokens. Tokens are more valuable than coins because they are easier to trade and have wider applications.ITOs are better because they are more secure, immune to spam and easily accessible.
What is their Target Markets?
ITOs are primarily used by startups as a method of raising capital for their projects in the blockchain, AI, cloud computing and other technology domains. It provides an efficient alternative to traditional venture capital and IPOs. DCI Ecosystem is a blockchain-based startup which provides a comprehensive investment platform to individuals and organizations around the world. The platform makes use of a combination of the top technologies to provide a powerful and seamless investment experience. DCI chose ITO over ICO because of its secure, spam-free and global implementation.
How is an ITO beneficial for Investors?
In exchange for their investments (money), investors of an ITO usually get the right to access whatever application or product/service the company/team is developing. Besides that, some ITOs also give their investors a sharing in the interest of the company.
Is an ITO regulated?
It depends on the type of the token being offered in an ITO. Tokens which are treated as securities and give specific rights to the investors can be regulated. However, other cryptocurrencies such as utility tokens are not easy to regulate because they do not exactly hold a value or can be treated as securities. This is why it is important to know the difference between token types before investing in them.
Is ITO just another Fad?
Not likely. If you ask any blockchain expert or investor, they will most probably say that ITOs are here to stay. It is true. An ITO is a fundraising method backed by blockchain technology, which is the most promising technology of our century. As the blockchain technology is only going to expand in uses and innovations in the coming days, ITOs are also not going anywhere.