The ICO model and ecosystem has been a unique fundraising tool for cryptocurrency and blockchain endeavours, but it is also a tool that has come under massive scrutiny. This in itself has given rise to the STO fundraising market, which is yet to prove itself.
However, even though 2017 was the pinnacle of this style of fundraising, and many saw 2018 as the end of it, it has been revealed that as much as $20 bln was raised in ICO and STO offerings through the whole of last year.
There is a lot that can be read into that as the fundraising models continue to evolve, especially with the addition of STOs, but the real question is whether 2019 will be the same, raise even more, or raise a lot less.
STOs and securities concerns
Part of the reason why STOs have come more to the fore in recent times is because of the concerns around securities offerings when it came to the ICO boom. Many projects that raised millions of dollars were curtailed by securities regulators such as the SEC in the US.
The key difference between ICOs and STOs is that the things with the latter one are clearer: they deal with securities. With ICOs, quite often everything is not so obvious. While many of them claim that they are offering to buy utility tokens, in reality, they are selling securities as well.
In total, in 2018, over $19.7 billion was raised by 1,132 ICOs and STOs. Over $5.8 billion of the volume was raised by two projects. They are the EOS Foundation, which is known to have conducted the largest ICO in history with over $4 billion raised in June 2018, and Telegram messenger, which managed to raise $1.7 billion.
These two projects thus have a big role to play in the lifeblood of this market through 2018, and are almost outliers in determining if this ecosystem is healthy or able to continue growing.
The need for clarity
STOs are certainly becoming more popular as ICOs fall away, and the reason has to do with regulation, but there is also still a need for more clarity.
Analysts at PwC’s subsidiary Strategy& said STOs are considered to be a more regulated and mature way of raising funds but if we classify tokens as securities, both these approaches to funding are practically the same.
Because of scams and bad projects, though, many investors have shied away from the blockchain group venture capitalist funding methods. Thus, even with regulation, it could be determined that going forward there will be a drop in the money raised as people approach with caution.