Comparison Analysis of ICO, DAOICO, IEO and STO. Case Study.

34 Pages Posted: 12 Sep 2019

See all articles by Alina Myalo

Alina Myalo

National Research University Higher School of Economics

Nikita Glukhov

National Research University Higher School of Economics

Date Written: September 4, 2019

Abstract

Despite of the fact that the history of Initial Coin Offering (ICO) is short, new modification of it has already suggested. According to the ICORating, in the second half of 2018, the profitability of investments in blockchain startups decreased by 22%, and 58% of ICO projects announced in Q4 2018 were not able to raise more than 100,000 USD. Moreover, in Q4 2018 40% of projects with previously announced ICOs have already deleted their social network accounts and websites. The founder of Ethereum Vitalik Buterin (2015), who started the first ICO, proposed a new way of decentralized fundraising called DAICO in 2018. This new model will include elements of Decentralized Autonomous Organizations (DAO), and its purpose will be to minimize the difficulties and risks associated with the ICO. At the same time, in 2018 another model of financing appeared called Initial Exchange Offering (IEO) in order to minimize risks, problems of liquidity and the postponement of the listing of the tokens at the end of tokensale step. More than 70 IEOs listed on ICObench with average rating of 3.6 and 42 IEOs have been ended and raised $266 million in total. Nevertheless, there three types of tokens 95% of ICO projects are utility-based token. This makes ICO comparable to crowfunding. In order to be more attractive for investors the focus on a new wave of ICO projects is on the security type of tokens. The security token is any cryptocurrency that pays dividends, profits, shares or interest or invests in any other asset that also generates profits. The U.S. Securities and Exchange Commission (SEC) use the Howey Test and concludes the securities token are securities in contract to classical utility token of ICO projects. In order to back by real assets and follow the SEC's guidance on compliance, issuance, and trading new model is called Security Token Offering (STO) and differs from ICO. All three new models are a new focus for small and medium-sized enterprises (SME) and investors. The absence of any type of academic works emphasizes the relevance and scientific novelty of the forthcoming research. The contribution to the existing literature is the systematization of information and comparison analyses of ICO, DAOICO, IEO and STO by method of case study.

Keywords: ICO, DAICO, IEO, STO, investment

JEL Classification: G30, G39

Suggested Citation

Myalo, Alina and Glukhov, Nikita, Comparison Analysis of ICO, DAOICO, IEO and STO. Case Study. (September 4, 2019). Available at SSRN: https://ssrn.com/abstract=3447974 or http://dx.doi.org/10.2139/ssrn.3447974

Alina Myalo (Contact Author)

National Research University Higher School of Economics ( email )

Russia

Nikita Glukhov

National Research University Higher School of Economics ( email )

Russia

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