ICO or Initial Coin Offering is a process where company carry out crowdfunding to raise money for their project. Investors are issued with the project token which has some utility on the  native platform or decentralized applications. ICO technically has no collateral ( not backed by asset)

Since the token issued has usage and they are not investment, companies bypass certain legal frameworks and do not have to register or comply with the strict governance of regulatory bodies.

Fraudsters use this unregulated platform to cheat people of their money. False whitepaper and elaborate schemes are planned to fleece people's money. This has raised questions over the authenticity of ICO and certainly, the reputation of this medium has been tarnished resulting in investors avoiding such campaigns. China has totally banned ICO  and some other countries allow but with strict control.

STO on the other hand is similar to an initial coin offering (ICO) where an investor is issued with a crypto coin or token representing their investment. But unlike an ICO, a security token represents an investment contract into an underlying investment asset, such as stocks, bonds, funds and real estate investment trusts (REIT). Each token is backed by  the company's asset and as such the security being offered can be considered to have some monetary value. Security token  pays dividends, shares, profits or interest or invests in any other asset that too generates profits for the holder. 

A company that wants to issue a security token must seek out the support of the following players:

• Legal: To ensure that the STO is compliant, a company needs to work within the country’s existing regulatory frameworks. 
• Issuance platform: A company must get  the support of an issuance platform designed for STOs. 
• Custodian: The need for custody is becoming more apparent in the age of STOs. Issuing companies must, therefore, seek out the support of a custodian for storing their digital tokens. Custody services are usually offered by issuance platforms as well as STO exchanges.
• Exchanges: Companies that issue an STO can only list their token on regulated exchanges.

I hope this brief article will give readers some basic knowledge about the differences between ICO and IPO.