An STO (Security Token Offering) and an ICO (Initial Coin Offering) are both fundraising mechanisms used by blockchain-based companies to raise capital. However, they differ in several key ways.

An ICO typically involves the sale of a new cryptocurrency to investors in exchange for funding. These cryptocurrencies are not backed by tangible assets and do not represent ownership in the underlying company. As a result, ICOs are largely unregulated and have been subject to fraud and scams.

In contrast, an STO involves the sale of a security token, which represents a stake in the underlying company and is subject to securities regulations. These tokens are backed by tangible assets and can represent shares in the company, equity, or debt. STOs provide greater transparency, compliance, and legal protection for investors compared to ICOs.

In summary, while ICOs may offer more flexibility in terms of fundraising, STOs provide greater investor protection and regulatory compliance, making them a more secure option for investors.

A Security Token Offering (STO) differs from an Initial Coin Offering (ICO) primarily in regulatory compliance and asset backing. STOs issue digital tokens that represent ownership in real-world assets, such as equity, debt, or real estate, and are classified as securities under financial regulations. This means STOs must comply with strict legal requirements, including investor accreditation and disclosure norms, providing greater investor protection. In contrast, ICOs typically offer utility tokens, which grant access to a platform or service rather than ownership rights, often bypassing securities regulations. While ICOs were popular for fundraising with minimal oversight, their lack of regulation led to scams and instability. STOs, though more complex and costly to launch, offer transparency, legal security, and reduced fraud risk, making them a more trustworthy investment model.