The year 2017 and the early part of 2018 have seen the win-win situation of Initial Coin Offerings. However, in due course, we have witnessed the flow of funds to the cryptocurrency ventures. It resulted in the loss of faith in the cryptocurrency. People have also claimed that ICO is dead as one of the fundraising mechanisms. The crypto enthusiasts all over the world have started looking for a new alternative to ICO. Then, we find the introduction of Initial Exchange Offering as the best feature-packed option. We are going to give you a clear idea of IEO. Lots of speculators and fundraisers now prefer this IEO.
IEO- A brief idea on it
IEO is the token sale, backed with the cryptocurrency exchange. Just the registered users of the exchange are able to avail this IEO. The functioning of IEOs may be similar to ICOs in various ways. A particular amount of tokens is saleable at a specified price. For every user, there is a highest and lowest contribution limit. In short, we can say that cryptocurrency exchange administers the fundraising event, IEO in support of the token issuer. This issuer pays the listing fee to a cryptocurrency exchange.
The presence of additional regulations and standards is the major factor, differentiating ICO from IEO. A third party sustains the tokens of IEO. Thus, for ensuring better value, IEOs have newer regulations and interventions. Exchanges have two primary goals-
- To have a better profit
- To provide higher value to the investments
Investors have to work not with the token provider but directly with the exchange. Exchanges can now offer more assurance over IEO tokens.
Why does the token issuer or startup prefer IEOs?
An issuer or startup, raising funds through IEO never needs to make a separate investment of funds for KYC certification for the participating investors. Another benefit of a startup is the opportunity to list on the exchange instantly for a new token. The listing charge is, based on a launch fee, and thus, it is not much high. Listing can result in the increase of demand to develop token since trading can begin within a short time. After the beginning of trading, you may not find the price manipulation risk.
IEO help developers in taking full advantage from the present crypto exchange user base. By using the potential of exchanges, these IEOs have made it much easier for you to take part in the process of crowdfunding. With the hosting of IEOs on a platform, the exchanges affirm the project reliability.
Lots of startups, working as token issuers, have the interest to deal with a crypto exchange, as they trust it. Although this is a costlier option, their token project gains higher reliability.
At present, you can find different exchanges, having IEO dedicated platforms. For instance, Binance Launchpad is one of the popular IEO platforms of Binance. This platform started its journey in the year, 2017 and remained closed for 2 years. However, recently, we have found its revival with BitTorrent and Matic.
Cons of IEOs
Nothing is available at free of cost. Token issuers have to pay an amount for enjoying the benefits from token purchasers and cryptocurrency exchange. The cost of token marketing is another negative side. These are few demerits, found with the IEOs.
Now, we can conclude that fundraising has become the best approach to have several customers to your business to increase your profits. It would be helpful to make exchanges and cryptocurrencies highly more attractive to the international market. The IEO developers would assist you in having increased transparency, better security and a better system for all users.