IEO, ICO, STO platforms development - outsourcing company Boosty Labs

IEO, ICO, STO platforms development

Nowadays, when digital assets are rapidly gaining popularity, many companies are looking to create products on the blockchain. Development and launch of IEO, ICO, STO requires resources and experience. For a long time, the Boosty Labs company has been successfully providing outsource IEO, ICO & STO platform development services. We are a world-class fintech and cloud engineering team with a solid background of practice that combines consulting, strategy, design and engineering at scale.
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IEO, ICO, STO platforms development stages

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Website

Creating a resource that provides complete details about project development.

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Whitepaper

A paper containing detailed information for leaders, specialists and other representatives, carefully describing the technical side of the project.

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ICO marketing and PR

Targeting and contextual advertising, social networks, placement of various articles in the media.

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Holding pre-ICO

Pre-ICO It is necessary to develop and collect the most important and necessary connections and contacts.

Aspects of creating a site for IEO, ICO STO platforms

Software part

It includes such components as the development and launch of a wallet, the placement of a token in the blockchain, the implementation of payment instruments, as well as the coordination of financial logic, technical requirements and the development of security factors.

Marketing part

It implies a social background – newsletters, creating topics on specialized forums, creating video reviews, mandatory blogging, press releases, advertising in crypto communities, etc.

Site design

Competent design that attracts the attention of potential investors is necessary.

Initial Сoin Offering (ICO) is a method of raising funds by issuing a certain number of new cryptocurrency units (tokens) by a startup, which are purchased by investors. The latter are offered a new type of asset – a digital token, which serves an investment object during the ICO. 

There are three main categories of tokens:

  • Utility tokens;
  • Tokenized stocks;
  • Asset-backed tokens. 

Utility tokens provide access to a company's platform, product or service. These tokens are not actually created as an investment and therefore are not subject to any regulatory restrictions (yet) in countries where ICOs are allowed.

Tokenized stocks or equity tokens represent a stake in a company that has completed a token sale. Thus, this type of token is actually a digital analogue of shares and implies the right of ownership and control over the project. Equity tokens are currently subject to regulation by the SEC and several other global regulators as they are treated as securities under the relevant legislation.

Asset-backed tokens are digital tokens that represent a physical asset or commodity, for example, gold, oil. Asset-backed tokens are an excellent tool for expanding the use of blockchain technology, but as a rule, such tokens are not very popular among investors, because their value usually does not exceed the value of the underlying asset and, therefore, has less growth potential than other types of tokens.

Goals and objectives of investing in ICO

The ICO procedure gives investors a number of advantages, which largely explain the popularity of this tool. The main ones are: early access to the token, which has the potential to grow in value; the opportunity to invest in an innovative way; the ability to diversify a cryptocurrency or traditional investment portfolio, as well as buy an asset that is not related to fiat currency.

IEO, the next evolutionary step after ICO

IEO, which stands for "Initial Exchange Offering", is a relatively new phenomenon in the blockchain and cryptocurrency industry. The main difference between ICO, which has been a common fundraising tool for blockchain projects for some time, and IEO is that the former plays a key role of crypto exchange in the whole process. In essence, the exchange acts as a counterparty that selects the most promising projects, both in terms of profitability and the usefulness of a product or service, before starting to promote one or another cryptocurrency and adding it to the list of its trading pairs.

In the case of ICOs, there was always a certain time gap, which could last for months, between the end of the sale of tokens issued in the ICO process and the actual listing on the crypto exchange, which provided initial liquidity for the new cryptocurrency. IEO implies that the exchange acts as the main partner of the organizers of the sale of tokens.

The scheme is quite simple: the project issues a token and transfers it to a crypto exchange, which, in turn, distributes newly received digital assets among verified users who have shown a genuine interest in this blockchain project.

How to participate in IEO

From the investor's point of view, the procedure is as follows:

  • The user must register on the crypto exchange that has announced its intention to fulfill the Initial Offer of the exchange of the specified token;
  • After that, the user must go through the identity verification procedure, which is a mandatory measure in order to become eligible to participate in the IEO;
  • Deposit funds to the trading account and, as soon as the IEO starts selling tokens, purchase the desired number of tokens on the exchange.

STO, the next evolutionary step after ICO

How STO differs from ICO

Tokenized securities are shares of companies. The key difference between them and utility and payment tokens is that the owners of tokenized securities have ownership rights, while utility and payment tokens act like coupons and do not give their owners the rights of traditional investors.

ICO problems that STO should solve

An Initial Coin Offering (ICO) is a form of crowdfunding that allows startups to raise investment capital in the early stages of development. Companies raise funds through ICOs for funding from multiple sources simultaneously, selling digital tokens or “coins” to users instead of shares.

The first problem with ICOs is that when users buy tokens, they think that they become full-fledged investors and have the same rights as traditional investors: control over the management of the company, voting rights, profit shares, pre-emptive rights to newly issued shares.

In fact, the acquisition of a cryptographic token only gives the right to use it as a commodity or means of payment. However, the Securities and Exchange Commission (SEC) believes that some tokens can be classified as securities, so they should be regulated in the same way as traditional securities.

The second problem is that many ICOs turn out to be fraudulent and are created only to enrich their founders. That is why a solution to this problem arose - Security Token Offering or STO.

Since the majority of ICO participants consider their participation in it as an investment opportunity, many users believe that most tokens are securities. However, this is not always the case.

To determine whether a digital token is a security token, the Howey test is applied. It is used to check if a transaction can be classified as an "investment contract". If a token meets the SEC's Howey test criteria, then it will be treated as a tokenized security and subject to additional disclosure and regulation requirements. For a token to be classified as an investment contract under the Howey test, it must meet the following requirements:

  • The user invests money;
  • The user expects to make a profit from the investment;
  • The investment is "commonly owned";

The owner profits from the actions of outsiders (not the organizers) or promoters.
In theory, if a token meets these requirements, it will be classified as a security token. 

Otherwise, it will fall under the definition of a utility or payment token. However, there is still ambiguity as to how the SEC will apply this test to cryptocurrencies.

STO regulation

The SEC requires all ICOs to go through the registration process. STO, unlike ICO, never bypasses laws and regulations, it only removes financial institutions and intermediaries from the process. This is due to the fact that security tokens are subject to federal securities regulations – they come into effect on the first day of the STO.

Advantages and disadvantages of STO

Although the STO will not provide the same freedom as an ICO, it has its own significant advantages that can attract those investors who are deterred by the “freedom of action” in an ICO. The undeniable advantages of STO compared to traditional investments are:

Lower commissions. Most of the commissions that are charged when making financial payments are fees to intermediaries (bankers, brokers, etc.). Security tokens remove the need for most intermediaries, which automatically reduces fees, and smart contracts may one day reduce dependence on lawyers. They will be able to make the whole process less complicated, less costly and faster, since most of the operations will be carried out automatically without human intervention (collection of signatures, transfer of funds, distribution of checks, filling out the W-2 form);

Faster transaction processing. The more people involved in a deal, the longer it usually takes to complete. Thanks to the Security Token Offering, the sale of tokenized securities will be much faster, because intermediaries will not be involved in the process. In addition, smart contract code-driven regulation will make security tokens an attractive asset for both issuers and investors;

Free influence on the market. Most investment transactions are carried out within one country and they cannot reach the global level. For example, it is difficult for investors in Asia to invest in private US companies or real estate located in the US. With security tokens, asset owners (i.e. issuers) simply sell their tokenized shares to any investor with an internet connection (within regulatory limits).This free market action should lead to significant changes in the area of asset valuation, since at the moment there are no assets that would be regulated by a free market;

Expanding the investor base. When asset owners can offer their securities to anyone with an internet connection, the potential investor base is greatly increased. It is one thing to attract investments only from accredited American investors and institutions, and quite another to attract every potential investor in the world to your project. This will ensure healthy competition and long-term profit for the financial markets;

Automated transactions. In most transactions, lawyers are less likely to act as intermediaries and more often as service providers. If STO is launched, issuers will start using smart contracts to automate the service provider function using software. This does not mean that lawyers will disappear – most likely, their task will be more to provide advisory services;
No manipulation by financial institutions. It is a complex topic that causes controversy. But one thing can be said: there is a strong possibility that corruption and manipulation by financial institutions will decrease significantly if they are excluded from the process of investment transactions.