After the huge explosion of ICOs and STOs, IEOs have been quite the trend lately as a popular fundraising module among cryptocurrency gurus.
An alternative fundraising method for cryptocurrency projects
An Initial Exchange Offering (IEO) is a token sale based upon an exchange which is assured by a crypto exchange platform. This platform plays the role of a middleman as the money is transferred to it rather than the project team and the token reward is also assured by this same intermediate.
But what kind of relationship is there between the project team and the crypto platform?
Well, before starting the fundraising process, the platform team and the project team agree on certain terms and conditions after the platform team reviews the project and checks its white paper, its team, its different goals and objectives, thus its authenticity and feasibility. The process has a certain amount of coins with a fixed price, and each user is limited with a maximum and minimum contribution amounts.
Binance is a pioneer in IEOs with its platform Binance Launchpad. BitTorrent has raised $7.2 million on it in about 15 minutes in January, hitting the crowd sale hardcap. A few months ago, Fetch.AI raised $6 million in 22 seconds on this same platform.
Others like Bittrex, KuCoin and Huobi announced launching their own IEO platforms too after the results that Binance Launchpad has made.
A new craze with different advantages
As an outcome to the revolution of ICOs in 2017 and the first half of 2018, there have been several frauds and security issues encountered with this crowdfunding method as about 80% of the ICOs turned out to be scams in 2017. IEOs have then come as a solution bringing both simplicity and security to a wider number of users.
Investors can monitor different projects‘ tokens (which are exposed) and can to a certain extent guarantee the credibility and the potential of the project they‘re investing in because the exchange will try as much as possible to keep a good reputation which can tremendously be affected by a scam or a failing project of which they host the fundraising.
Token issuers also do benefit from IEOs as the exchange is the one managing the smart contracts, the KYC/AML process and all of the security aspects so they won‘t have to worry about them. Moreover, the exchange helps them with marketing their project and attracting investors as it “legitimizes” them. They also can benefit from the exchange’s stable customer base.
So, IEOs make it easier for both investors and startups to either fund a promising project or grow and expand one, even if it‘s not that cheap especially for startups as the listing fees can reach 20 BTC.
How to trade with it?
Exchanges make it really easy to trade with IEOs. If an IEO is assured by an exchange you‘re already registered with, you‘ll just have to log in and buy your crypto.
You no longer have to register using obscure sites or check what payment methods a project accepts.
IEO is a concept that brought new features and possibilities to the cryptocurrency world and can be a really useful tool for both startups and investors to maximize the advantages of this kind of fundraising.