ICO stands for Initial Coin Offering and represents a form of crowdfunding for a crypto-related project in its pre-launch stage. In an ICO, a company is able to raise funds for a new product or service by selling a new crypto token to interested investors. The tokens often have some sort of utility within the future product. ICOs reached peak popularity back in 2017, when investors saw an opportunity to get their hands on some cheap tokens. They were also extremely popular with scammers, however, who tried their luck raising funds for all sorts of suspicious (and sometimes non-existent) projects.
STO, or Security Token Offering. STOs feature aspects of both ICOs and IPOs. In fact, another name for them is tokenized IPOs. An STO is essentially a public sale of tokenized securities (aka security tokens) on a crypto exchange. A security token represents an investment contract linked to a financial asset. While STOs share a process with IPOs, STOs issue tokens on a blockchain while IPOs issue traditional share certificates. The STO process is arguably quicker than the IPO method though, thanks to the use of blockchain technology, as well as cheaper, due to the lack of intermediaries involved. STOs are often described as legally-compliant ICOs. They make a significantly more secure investment than ICOs, and are much more difficult to launch, since they are subject to strict regulation.
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