The Role of ICO and STO in Attracting Investments to Projects

Global digitization and geopolitical constraints have led to the creation and ongoing development of new decentralized digital investment tools for financing existing businesses and new startup projects. The number and variety of digital assets are increasing each year, with new decentralized exchanges and platforms actively being created with their unique protocols and digital instruments. Digital financial assets are also widely used on centralized platforms. For example, in the Russian stock market, issuers such as Alfa Bank and Sberbank actively attract funds from citizens by issuing digital financial assets (DFA) instead of traditional bonds. The most popular methods of attracting investments in new startup projects at the moment are initial coin offerings (ICO) and security token offerings (STO). The main advantages of both methods include quick access to the global capital market regardless of existing sanctions constraints, with the key difference being the level of investor rights protection. The author of this work examines the key differences, advantages of these financing methods for projects, existing limitations, and provides mathematical justification of token value during the initial offering for each method.