ICO vs STO

Maciej Zieliński

08 Mar 2022
ICO vs STO

Modern technologies make more and more people try to raise capital in order to make their ideas a reality. The ICO (Initial Coin Offering) and STO (Security Tokens Offerings) methods which we describe below can help with this immensly! The entire acquisition process is based on digital assets, crypto tokens, blockchain technology and smart contracts.

What is Initial Coin Offering (ICO)?

Initial Coin Offering (ICO), is a method of raising capital in the form of cryptocurrency or tokens in order to finance a project. This method is very often used when finalizing blockchain startups. Initial cain offering is equivalent to initial public offering (IPO) in the cryptocurrency industry. A company that wants to raise money to create a new coin, application or service can launch ICO as a way to raise funds. A crypto token is typically created as a currency that matches the currently created ico projects. This means that a project that wants to raise funds for its own idea should create a crypto cain or a token that allows for financial settlements between project developers and investors. This is different from traditional trade markets because it is based on crypto assets and a smart contract that accounts for them.

Place for ICO

Nevetheless, there are many cryptcurrency markets and crypto exchanges which allow token sales and organizing ico projects and initial cain offerings. Interested investors may purchase a preliminary coin offer to receive a new cryptocurrency token issued by the company. These utility tokens are associated with a product or service offered by your company, or may simply represent your participation in a company or project.

How do initial coin offerings work?

When a blockchain project wants to have a sucessful ico and raise coins through that ICO, the first step of the organizers should be to determine how the project can be organized. An ICO can be organized in several different ways, including:

  • Static Price: A company can set a specific financing target or limit, which means that, every token sold in ICO has a fixed price, and the total supply of tokens is fixed.
  • Static Supply and Dynamic Price: ICO may have a static token supply and a dynamic funding goal – that means the amount of money received in the ICO determines the overall price per token.
  • Dynamic supply and static price: Some ICOs have a dynamic supply of tokens, but a fixed price, which means that the amount of funding received is determined by supply of the market.
How do ICO work?

In addition to the structure of ICO, a cryptocurrency project should normally have a white paper which is made available to potential investors through a new token web page. The project promoters use white paper to explain important information related to ICO, namely to present:

  • What is the project about
  • How many virtual tokens are kept by the founders
  • What kind of payments (and currencies) will be accepted
  • How long will the ICO campaign last
  • The demand the project will satisfy after its completion
  • How much funding is needed for the project
  • minimum entry barrier
  • what do we gain access to as part of our investment

The project should present the whitepaper as part of the ICO campaign it creates to encourage enthusiasts and sympathizers to purchase some tokens. Investors can generally use either a fiscal or digital currency, or use other financial instruments to buy new tokens. As part of the capital they have invested, investors enjoy high profitability, along with the benefits of the token, while also helping to achieve the project objective. Let us remember that if the money collected in the ICO is less than the minimum amount required by the ICO criteria, then all money can be returned to the project investors. If the funding requirements are met within a certain period of time, the money collected is spent on the project's objectives. It is worth noting that the investment on the basis of tokens or coins provides anonymous participation in the project.

Who can launch an ICO?

Currently, anyone who has access to the relevant technology can launch a new cryptocurrency (unless it is restricted by national law). Unfortunately, out of all possible ways of financing, ICO is probably one of the easiest forms which can be used to commit fraud. To avoid scams you should:

  • check who is behind a successful ico
  • obtain as much knowledge as possible regarding what a given cryptocurrency token offers
  • find out if we are dealing with a well executed digital campaign
  • obtain information regarding the investment contract
  • analyze the regulatory scrutiny of the project
  • determine whether purchasing a token grants us any ownership rights, or at least fractional ownership

Pros and cons of ICO

Online services can help you generate and acquire cryptocurrency tokens, so your business can consider launching ICO with ease. ICO managers generate tokens according to the terms of the ICO, receive them, and distribute tokens to retail investors. Let us remember that ICO is not strictly regulated by financial bodies such as the SEC, and therefore funds lost as a result of fraud or incompetence may never be recovered. The advantages of ICO are undoubtedly that a company can obtain rapid capital for the development of a project and investors can expect high return rates on their investment.


What is STO (security token offering)?

STO, or Security Token offering, is increasingly important in the financial world. STO is a process in which investors introduce a cryptocurrency coin or token. Such securities or financial instruments have a monetary value and can be traded on STO cryptocurrency exchanges where the information is recorded in public blockchains This process is often seen as a hybrid approach between the initial coin offering (ICO) and the more traditional initial public offering (IPO) for shares.

ICO vs STO: what is STO?

What are security token offers?

The security token offering (STO) is in fact a public event where tokens are sold through cryptocurrency exchanges. Tokens can then be used for trade in real financial assets such as shares. STO were already used in many investment scenarios and are more enthusiasticly perceived by both mainstream and institutional investors.

What is the difference between Initial Coin Offerings and security token offerings?

How do ICO and STO compare to one another? The ICO and the security token offerings (STO) generally follow the same process. They represent the initial distribution of coines related to a particular investment mechanism. However, they differ in the characteristics of the offered token.

STO offers are supported by assets and are fully in line with the legal order. On the other hand, ICO are tool tokens that offer access to a native platform and decentralized applications. ICO tokens are primarily intended for use, not investment. In practice, this means that the entry barrier for ICO is much lower. It is therefore much more likely that they will be offered to the general public. It is much more difficult to start a STO because their ethos is to provide an investment contract while ensuring investment security. This requires much more preparatory work and compliance.

Pros and cons of STO

Here are some of the pros and cons related to STO:

Pros

  • STO are generally seen as less risky investments than ICO and IPO, as they are protected by securities laws. They are also supported by real assets, which means that it is easier for the user to assess whether the token is accurately priced.
  • Initial offers of security tokens are also cheaper because their structure allows for the removal of intermediaries such as banks and brokerage houses.
  • Smart contracts, which are a part of the STO package, also reduce the need for lawyers, making STO a more affordable option.
  • STO are available for trade 24 hours a day, 7 days a week, providing additional flexibility

Cons related to STO

A huge disadvantage of STO is that non-accredited investors cannot possess them. In the United States, to become an accredited investor, you must earn at least $200 000 per year or have at least $1 million in your bank account. This makes tokens much less available than traditional Blockchain offers.

STO are more expensive than utility tokens due to their regulatory requirements. In addition, unlike similar coins, they are also subject to restrictions on second hand markets.
Moreover, security tokens have a time interlock mechanism. You can only trade STO tokens between qualified investors for a pre-determined period after the STO process is initiated.

ICO VS STO

Both ICO and STO are offers that allow for quick and substantial raising of capital for new blokchain related start-ups. However, both ICO and STO have some advantages and disadvantages which can help you decide which technology you prefer to use. With ICO, access to investments is much easier and simpler than with STO. Unfortunately, STO imposes an obligation to only allow accredited investors to invest in it, which may make raising funds much more complicated. At the same time, STO ensures greater security of the collected funds. Which method is better? It depends on what is more important for us. However, both methods are very popular.

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AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

Gracjan Prusik

11 Mar 2025
AI-Driven Frontend Automation: Elevating Developer Productivity to New Heights

AI Revolution in the Frontend Developer's Workshop

In today's world, programming without AI support means giving up a powerful tool that radically increases a developer's productivity and efficiency. For the modern developer, AI in frontend automation is not just a curiosity, but a key tool that enhances productivity. From automatically generating components, to refactoring, and testing – AI tools are fundamentally changing our daily work, allowing us to focus on the creative aspects of programming instead of the tedious task of writing repetitive code. In this article, I will show how these tools are most commonly used to work faster, smarter, and with greater satisfaction.

This post kicks off a series dedicated to the use of AI in frontend automation, where we will analyze and discuss specific tools, techniques, and practical use cases of AI that help developers in their everyday tasks.

AI in Frontend Automation – How It Helps with Code Refactoring

One of the most common uses of AI is improving code quality and finding errors. These tools can analyze code and suggest optimizations. As a result, we will be able to write code much faster and significantly reduce the risk of human error.

How AI Saves Us from Frustrating Bugs

Imagine this situation: you spend hours debugging an application, not understanding why data isn't being fetched. Everything seems correct, the syntax is fine, yet something isn't working. Often, the problem lies in small details that are hard to catch when reviewing the code.

Let’s take a look at an example:

function fetchData() {
    fetch("htts://jsonplaceholder.typicode.com/posts")
      .then((response) => response.json())
      .then((data) => console.log(data))
      .catch((error) => console.error(error));
}

At first glance, the code looks correct. However, upon running it, no data is retrieved. Why? There’s a typo in the URL – "htts" instead of "https." This is a classic example of an error that could cost a developer hours of frustrating debugging.

When we ask AI to refactor this code, not only will we receive a more readable version using newer patterns (async/await), but also – and most importantly – AI will automatically detect and fix the typo in the URL:

async function fetchPosts() {
    try {
      const response = await fetch(
        "https://jsonplaceholder.typicode.com/posts"
      );
      const data = await response.json();
      console.log(data);
    } catch (error) {
      console.error(error);
    }
}

How AI in Frontend Automation Speeds Up UI Creation

One of the most obvious applications of AI in frontend development is generating UI components. Tools like GitHub Copilot, ChatGPT, or Claude can generate component code based on a short description or an image provided to them.

With these tools, we can create complex user interfaces in just a few seconds. Generating a complete, functional UI component often takes less than a minute. Furthermore, the generated code is typically error-free, includes appropriate animations, and is fully responsive, adapting to different screen sizes. It is important to describe exactly what we expect.

Here’s a view generated by Claude after entering the request: “Based on the loaded data, display posts. The page should be responsive. The main colors are: #CCFF89, #151515, and #E4E4E4.”

Generated posts view

AI in Code Analysis and Understanding

AI can analyze existing code and help understand it, which is particularly useful in large, complex projects or code written by someone else.

Example: Generating a summary of a function's behavior

Let’s assume we have a function for processing user data, the workings of which we don’t understand at first glance. AI can analyze the code and generate a readable explanation:

function processUserData(users) {
  return users
    .filter(user => user.isActive) // Checks the `isActive` value for each user and keeps only the objects where `isActive` is true
    .map(user => ({ 
      id: user.id, // Retrieves the `id` value from each user object
      name: `${user.firstName} ${user.lastName}`, // Creates a new string by combining `firstName` and `lastName`
      email: user.email.toLowerCase(), // Converts the email address to lowercase
    }));
}

In this case, AI not only summarizes the code's functionality but also breaks down individual operations into easier-to-understand segments.

AI in Frontend Automation – Translations and Error Detection

Every frontend developer knows that programming isn’t just about creatively building interfaces—it also involves many repetitive, tedious tasks. One of these is implementing translations for multilingual applications (i18n). Adding translations for each key in JSON files and then verifying them can be time-consuming and error-prone.

However, AI can significantly speed up this process. Using ChatGPT, DeepSeek, or Claude allows for automatic generation of translations for the user interface, as well as detecting linguistic and stylistic errors.

Example:

We have a translation file in JSON format:

{
  "welcome_message": "Welcome to our application!",
  "logout_button": "Log out",
  "error_message": "Something went wrong. Please try again later."
}

AI can automatically generate its Polish version:

{
  "welcome_message": "Witaj w naszej aplikacji!",
  "logout_button": "Wyloguj się",
  "error_message": "Coś poszło nie tak. Spróbuj ponownie później."
}

Moreover, AI can detect spelling errors or inconsistencies in translations. For example, if one part of the application uses "Log out" and another says "Exit," AI can suggest unifying the terminology.

This type of automation not only saves time but also minimizes the risk of human errors. And this is just one example – AI also assists in generating documentation, writing tests, and optimizing performance, which we will discuss in upcoming articles.

Summary

Artificial intelligence is transforming the way frontend developers work daily. From generating components and refactoring code to detecting errors, automating testing, and documentation—AI significantly accelerates and streamlines the development process. Without these tools, we would lose a lot of valuable time, which we certainly want to avoid.

In the next parts of this series, we will cover topics such as:

Stay tuned to keep up with the latest insights!

The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Tomasz Dybowski

04 Mar 2025
The Ultimate Web3 Backend Guide: Supercharge dApps with APIs

Introduction

Web3 backend development is essential for building scalable, efficient and decentralized applications (dApps) on EVM-compatible blockchains like Ethereum, Polygon, and Base. A robust Web3 backend enables off-chain computations, efficient data management and better security, ensuring seamless interaction between smart contracts, databases and frontend applications.

Unlike traditional Web2 applications that rely entirely on centralized servers, Web3 applications aim to minimize reliance on centralized entities. However, full decentralization isn't always possible or practical, especially when it comes to high-performance requirements, user authentication or storing large datasets. A well-structured backend in Web3 ensures that these limitations are addressed, allowing for a seamless user experience while maintaining decentralization where it matters most.

Furthermore, dApps require efficient backend solutions to handle real-time data processing, reduce latency, and provide smooth user interactions. Without a well-integrated backend, users may experience delays in transactions, inconsistencies in data retrieval, and inefficiencies in accessing decentralized services. Consequently, Web3 backend development is a crucial component in ensuring a balance between decentralization, security, and functionality.

This article explores:

  • When and why Web3 dApps need a backend
  • Why not all applications should be fully on-chain
  • Architecture examples of hybrid dApps
  • A comparison between APIs and blockchain-based logic

This post kicks off a Web3 backend development series, where we focus on the technical aspects of implementing Web3 backend solutions for decentralized applications.

Why Do Some Web3 Projects Need a Backend?

Web3 applications seek to achieve decentralization, but real-world constraints often necessitate hybrid architectures that include both on-chain and off-chain components. While decentralized smart contracts provide trustless execution, they come with significant limitations, such as high gas fees, slow transaction finality, and the inability to store large amounts of data. A backend helps address these challenges by handling logic and data management more efficiently while still ensuring that core transactions remain secure and verifiable on-chain.

Moreover, Web3 applications must consider user experience. Fully decentralized applications often struggle with slow transaction speeds, which can negatively impact usability. A hybrid backend allows for pre-processing operations off-chain while committing final results to the blockchain. This ensures that users experience fast and responsive interactions without compromising security and transparency.

While decentralization is a core principle of blockchain technology, many dApps still rely on a Web2-style backend for practical reasons:

1. Performance & Scalability in Web3 Backend Development

  • Smart contracts are expensive to execute and require gas fees for every interaction.
  • Offloading non-essential computations to a backend reduces costs and improves performance.
  • Caching and load balancing mechanisms in traditional backends ensure smooth dApp performance and improve response times for dApp users.
  • Event-driven architectures using tools like Redis or Kafka can help manage asynchronous data processing efficiently.

2. Web3 APIs for Data Storage and Off-Chain Access

  • Storing large amounts of data on-chain is impractical due to high costs.
  • APIs allow dApps to store & fetch off-chain data (e.g. user profiles, transaction history).
  • Decentralized storage solutions like IPFS, Arweave and Filecoin can be used for storing immutable data (e.g. NFT metadata), but a Web2 backend helps with indexing and querying structured data efficiently.

3. Advanced Logic & Data Aggregation in Web3 Backend

  • Some dApps need complex business logic that is inefficient or impossible to implement in a smart contract.
  • Backend APIs allow for data aggregation from multiple sources, including oracles (e.g. Chainlink) and off-chain databases.
  • Middleware solutions like The Graph help in indexing blockchain data efficiently, reducing the need for on-chain computation.

4. User Authentication & Role Management in Web3 dApps

  • Many applications require user logins, permissions or KYC compliance.
  • Blockchain does not natively support session-based authentication, requiring a backend for handling this logic.
  • Tools like Firebase Auth, Auth0 or Web3Auth can be used to integrate seamless authentication for Web3 applications.

5. Cost Optimization with Web3 APIs

  • Every change in a smart contract requires a new audit, costing tens of thousands of dollars.
  • By handling logic off-chain where possible, projects can minimize expensive redeployments.
  • Using layer 2 solutions like Optimism, Arbitrum and zkSync can significantly reduce gas costs.

Web3 Backend Development: Tools and Technologies

A modern Web3 backend integrates multiple tools to handle smart contract interactions, data storage, and security. Understanding these tools is crucial to developing a scalable and efficient backend for dApps. Without the right stack, developers may face inefficiencies, security risks, and scaling challenges that limit the adoption of their Web3 applications.

Unlike traditional backend development, Web3 requires additional considerations, such as decentralized authentication, smart contract integration, and secure data management across both on-chain and off-chain environments.

Here’s an overview of the essential Web3 backend tech stack:

1. API Development for Web3 Backend Services

  • Node.js is the go-to backend runtime good for Web3 applications due to its asynchronous event-driven architecture.
  • NestJS is a framework built on top of Node.js, providing modular architecture and TypeScript support for structured backend development.

2. Smart Contract Interaction Libraries for Web3 Backend

  • Ethers.js and Web3.js are TypeScript/JavaScript libraries used for interacting with Ethereum-compatible blockchains.

3. Database Solutions for Web3 Backend

  • PostgreSQL: Structured database used for storing off-chain transactional data.
  • MongoDB: NoSQL database for flexible schema data storage.
  • Firebase: A set of tools used, among other things, for user authentication.
  • The Graph: Decentralized indexing protocol used to query blockchain data efficiently.

4. Cloud Services and Hosting for Web3 APIs

When It Doesn't Make Sense to Go Fully On-Chain

Decentralization is valuable, but it comes at a cost. Fully on-chain applications suffer from performance limitations, high costs and slow execution speeds. For many use cases, a hybrid Web3 architecture that utilizes a mix of blockchain-based and off-chain components provides a more scalable and cost-effective solution.

In some cases, forcing full decentralization is unnecessary and inefficient. A hybrid Web3 architecture balances decentralization and practicality by allowing non-essential logic and data storage to be handled off-chain while maintaining trustless and verifiable interactions on-chain.

The key challenge when designing a hybrid Web3 backend is ensuring that off-chain computations remain auditable and transparent. This can be achieved through cryptographic proofs, hash commitments and off-chain data attestations that anchor trust into the blockchain while improving efficiency.

For example, Optimistic Rollups and ZK-Rollups allow computations to happen off-chain while only submitting finalized data to Ethereum, reducing fees and increasing throughput. Similarly, state channels enable fast, low-cost transactions that only require occasional settlement on-chain.

A well-balanced Web3 backend architecture ensures that critical dApp functionalities remain decentralized while offloading resource-intensive tasks to off-chain systems. This makes applications cheaper, faster and more user-friendly while still adhering to blockchain's principles of transparency and security.

Example: NFT-based Game with Off-Chain Logic

Imagine a Web3 game where users buy, trade and battle NFT-based characters. While asset ownership should be on-chain, other elements like:

  • Game logic (e.g., matchmaking, leaderboard calculations)
  • User profiles & stats
  • Off-chain notifications

can be handled off-chain to improve speed and cost-effectiveness.

Architecture Diagram

Below is an example diagram showing how a hybrid Web3 application splits responsibilities between backend and blockchain components.

Hybrid Web3 Architecture

Comparing Web3 Backend APIs vs. Blockchain-Based Logic

FeatureWeb3 Backend (API)Blockchain (Smart Contracts)
Change ManagementCan be updated easilyEvery change requires a new contract deployment
CostTraditional hosting feesHigh gas fees + costly audits
Data StorageCan store large datasetsLimited and expensive storage
SecuritySecure but relies on centralized infrastructureFully decentralized & trustless
PerformanceFast response timesLimited by blockchain throughput

Reducing Web3 Costs with AI Smart Contract Audit

One of the biggest pain points in Web3 development is the cost of smart contract audits. Each change to the contract code requires a new audit, often costing tens of thousands of dollars.

To address this issue, Nextrope is developing an AI-powered smart contract auditing tool, which:

  • Reduces audit costs by automating code analysis.
  • Speeds up development cycles by catching vulnerabilities early.
  • Improves security by providing quick feedback.

This AI-powered solution will be a game-changer for the industry, making smart contract development more cost-effective and accessible.

Conclusion

Web3 backend development plays a crucial role in scalable and efficient dApps. While full decentralization is ideal in some cases, many projects benefit from a hybrid architecture, where off-chain components optimize performance, reduce costs and improve user experience.

In future posts in this Web3 backend series, we’ll explore specific implementation details, including:

  • How to design a Web3 API for dApps
  • Best practices for integrating backend services
  • Security challenges and solutions

Stay tuned for the next article in this series!