Are IEOs the new ICOs?
In crypto space, starting a new project requires funding. ICO, STO, and now IEO are ways that help a start-up to get funding from investors that they use to develop their project.
In the recent past, ICOs were considered the most common way to gain funding, but it had certain major issues that we will talk about later in the article. STOs came after ICOs and were supposed to be the solution, but they also had some flaws in the long term. Now very recently, a much secure and trustworthy offering IEO is introduced in crypto space.
What is an IEO?
Initial Exchange Offering (IEO) is a type of offering in which instead of directly asking the market for funds, the project owners contact the exchange to list their project, and in return, the exchange is responsible for getting funds and security.
IEO is conducted on the cryptocurrency exchanges such as on Binance Launchpad. To list token on the exchange, the project owners are needed to pay a fee to the exchange which in return, sell tokens using the exchange platform.
Pros of an IEO
Investors’ Confidence: When it comes to getting funding for a project, gaining the trust of investors is essential. As IEOs are conducted on reputable exchanges, investors feel confident and safe while investing in IEOs.
Security for Investors and Project: When exchange acts as the middle man, they make sure that before listing the project, it complies with all the policies to avoid future issues.
Smooth Process: IEOs are easy to understand as compared to ICO and STOs; this makes it easier for new users to join the platform.
Guaranteed exchange listing: IEOs are listed on the campaign soon after the launch of IEO.
Avoid Scams: The exchanges are there to stay so they cannot risk a scam as it happens in case of ICO where anyone could come up with their projects and ask for funding.
Win-Win for All Participants?
IEOs are a win-win situation for the investors and the project owners as well as for the exchange. Instead of making smart contracts like in ICO, an account is created on the exchange platform, and IEO is conducted using that.
Benefits for the projects: Getting the project listed on the exchange is helpful for the start-ups as it helps in the exposure and overall reputation.
Benefits for the exchanges: An exchange could enjoy the addition of new users who signed up to participate in the IEO that is listed by the exchange.
Benefits for the exchange token holders: IEOs help in adding more uses cases to the project that could result in increasing its value.
Cons of an IEO
Unclear regulations and restrictions: As the IEOs are mostly based on the core concept of ICO, so in certain regions, there are restrictions that are imposed on IEOs. This could affect the future of IEOs.
Comply with AML/KYC: When it comes to cryptocurrencies, usually new projects are launched by a small team of developers. So going through policies and procedures such as AML/KYC might be a problem for them.
Market manipulation and concentration of coins: Mostly before the launch of IEOs, they are minted, so it’s always best to take notice before participating in the IEOs. In case most of the tokens are largely kept by owners themselves, this could result in price manipulations in the future.
A limited number of investors. In the recent past, there have been complaints from investors that they were not able to participate or purchase tokens during IEOs.
Comparison between IEOs and ICOs
IEOs and ICOs might serve the same purpose, but some technical differences should be kept in view. ICO sell tokens directly to investors, whereas in IEOs, tokens are listed in exchanges.
Also, in an ICO campaign, everybody could participate as it is open to the public. In IEO, only the members of the exchange could participate in the token campaigns. This difference is not a hurdle as joining an exchange is not so much of a difficult task.
Another major difference is that it is easy and safer to buy IEOs then ICOs. This is because ICOs might have different conditions or requirements that might not be suitable for everyone. IEOs, on the other hand, is based on the regulations of the exchange that are more safe and regulated.
Will IEOs take over ICOs?
When ICOs were launched, it created a boom on the market. It had some major drawbacks, but it was the only option available back then.
When we observe IEOs, they seem promising in solving the issues of ICOs and STOs. It might be too early to say anything, but the way IEOs are going, they might prove to be major updates for the new entrants in the market. The crypto space is wide open to start-ups.
How can you benefit and make money from IEOs?
If you do proper market research and do your homework, you could end up buying tokens of a project that could do good in the future.
Evaluate the project based on your homework and research and act accordingly.
How to participate in an IEO?
To participate in an IEO, the simple process is as follows:
- Look for the IEO that you are interested in investing in.
- Register with the exchange that is offering the IEOs. This will include passing KYC/AML procedures.
- Look for the cryptos that you could use to deposit while participating in the IEO.
- Wait for the launch of the IEO and then buy the tokens as you like.
IEOs might seem to be the best solution for fundraising and safe for investors, but this doesn’t mean you should jump into it without any prior knowledge. It is important to do your research and keep your self-updated so that you could make the right decisions. Check all the details of the project, the whitepaper, the team, and look for any potential red flags.
So what do you think about IEOs, and are they the future of fundraising?