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When developers of a cryptocurrency project decide they want to organize an IEO, a complicated procedure must be followed before the first dollar can be raised. Perhaps the ICO craze, bull market, and subsequent crash was simply a necessary step in order to get to our current IEO stage, which will drive new investment and fuel promising projects in the industry. If this was an ICO, an external source could not stop or prevent an initial offering since all the decision making would be in the hands of the founding team. KuCoin Spotlight’s first offering was MultiVac, https://www.xcritical.com/ which is a blockchain scalability solution that emphasizes sharding technology. In general, if you believe that an exchange is trustworthy, there is a reason to believe that it will select projects that have some degree of trustworthiness or credibility. For example, the effect of Bitcoin Cash getting listed on Coinbase and Bitcoin SV getting delisted from major exchanges had a profound impact on their prices.
The IEO: An Evolution of the ICO
We were right to caution that it may just be another crypto fad without real substance as that is indeed how it has turned out. Will such a fad every come back again, i am sure it will as the crypto space has a short term memory when big money is to be made. Less than a month later, Binance Launchpad concluded its sale of the Fetch.AI initial exchange offering (FET) tokens.
Tips for a Successful IEO Fundraising Event
After all, if a new digital currency isn’t everything it was cracked up to be, the crypto exchange’s reputation could be at risk for launching the IEOs. An Initial Exchange Offering, or IEO, is a modern fundraising method where a cryptocurrency startup sells its tokens through a cryptocurrency exchange rather than directly to investors. This approach leverages the exchange’s platform to reach a wider audience and gain instant market credibility. Once you are registered, verified, and have the platform tokens, you are ready to purchase crypto assets through an Initial Exchange Offering. Binance allows users to purchase tokens on a “first-come, first-served” basis until the initial supply runs out.
- An Initial Exchange Offering, or IEO, is a modern fundraising method where a cryptocurrency startup sells its tokens through a cryptocurrency exchange rather than directly to investors.
- Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) are both forms of crowdfunding that use crypto assets.
- Investors send money through exchange wallets, rather than sending it to the project directly.
- The 2017 Initial Coin Offering frenzy underscored blockchain’s potential to empower both individual investors and businesses looking to raise capital.
An Introduction to Crowdfunding
Instead of exchanges, vocal community members vet projects and tokens, and then the tokens issued via IDO are listed on a DEX. Attempting to get funding from venture capitalists (VCs) can be time-consuming, with little or no results to show for it. Minting coins of a project before launch – known as a “pre-mine” – and keeping them in a treasury is also possible but often faces criticism from the community. Huobi Global is one of the longest-running crypto-asset exchanges in the world having started in 2013. The limits of what participants are allowed to purchase during the IEO are also directly tied to how many HT they are holding for a certain period of time. The most popular crowdfunding platforms such as Kickstarter, GoFundMe, and Indiegogo, mainly showcase projects from the U.S. and Europe and only accept payments via credit cards and traditional fiat currency.
The Outlook on the IEO And Further Cryptocurrency Investment Trends
Just look at BitTorrent, which managed to raise $7 million just 14 minutes after its listing on Binance Launchpad went live (it was later bought by Tron). That said, there are some marked differences from initial public offerings and IEOs you need to be aware of. All exchanges that are offering IEOs require you to register or create an account on their platform.
Create Your Free Token Metrics Account
With the IEO, the exchange performs many functions, including serving as the intermediary, facilitator, manager, marketer, and all these services are paid for by the organization that is launching the IEO. Established exchange platforms typically list projects that have made significant progress. Having a functional MVP or demonstrating ongoing development is important to gain credibility and increase your chances of being listed on a reputable exchange platform. A recent example of a successful IEO was Sui (SUI) via KuCoin Spotlight in April-May 2023. A much-anticipated project, its IEO garnered significant interest within the crypto community, with participation from nearly 250,000 users on the KuCoin Spotlight token sale platform. For a user, an IEO is easy to participate in as they don’t need to manage on-chain transactions with different wallets on different blockchains.
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Instead, a user only needs an account on the exchange and some funds in their account and can participate completely through the trusted website’s interface. Additionally, the exchange is staking its reputation behind the projects on its platform, offering a higher degree of trust behind the project. Investors send money through exchange wallets, rather than sending it to the project directly. Dishonest projects or teams with little business sense will not be able to conduct a successful IEO either, due to the very strict requirements.
IEOs vs. ICOs and IDOs: Comparison
Binance Launchpad offers full advisory services for startups using its platform for an IEO. Exchanges will commonly have a well-organized legal structure that protects them from regulatory consequences. For a young startup seeking initial funding, this is a protection that they normally would not have access to or resources for.
There are benefits to contributing funds to an IEO, but the risks cannot be overlooked either. Investors had to send bitcoin or ether to a smart contract or a website and hope they would receive tokens. Anyone with some basic smart contract knowledge and web development skills could put together a shiny website with a promising-looking roadmap and start raising money. It was a far cry from ideal and carried tremendous risk for anyone investing in ICOs.
We publish guides, reviews and news on tech, cryptocurrency, Bitcoin, blockchain & privacy. Our content is updated regularly to keep our privacy-minded readers safe, informed & up to date. We rarely run ads, but sometimes earn a small commission when you purchase a product or service via a link on our site. In order to participate in an IEO on Launchpad, users must complete verification so that they conform to a user’s jurisdiction as well as use specific coins such as BNB in order to participate. For example, Binance requires participates to use Binance Coin, Huobi requires participants to hold Huobi Token for a certain amount of time, and OKEX requires OKB tokens to be held. Scams, fraud, and legal issues were the worst part of the ICO boom of 2017 and the beginning of 2018.
This verification process is crucial to maintain the reputation of the exchange platform and protect investors from scams. ICOs were the first method used by cryptocurrency companies to raise money.[7] Ethereum followed suit in 2014, raising about $18.3 million. Its blockchain project was based on the so-called charitable foundation model, in which investors donate to support the project. Even as blockchain technology is rapidly developing in myriad fields, it has already radically transformed the way businesses and organizations can raise capital and fund projects. A fundraising method in which new projects will sell their cryptocurrency to investors. Although blockchain technology is relatively new, there are thousands of crypto startups and companies out there.
It is possible that the project raising funds will not be able to realize its vision. This can and often will impact the token price, regardless of its value during the IEO. An IEO is often conducted when a new crypto project wants to launch its cryptocurrency or blockchain product but requires significant investment capital to do so.
Exchanges are one of the only services or products in the crypto industry that have consistently generated revenue and do not rely solely on the appreciation of crypto assets. Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) are both forms of crowdfunding that use crypto assets. In more traditional fundraising such as venture capital, a small number of people would provide large amounts of money. IDOs are similar to ICOs and IEOs but are conducted on decentralized exchanges (DEXs).
Well-developed exchanges can offer legal advice and clarity as well as access to a full legal team to help nascent startups traverse through the minefield that is the blockchain industry. The goal of most tokens or coins after they launch a coin offering is to get listed on at least one major exchange. Getting listed on an exchange brings credibility to a project as well as liquidity and may potentially increase the token’s value. A well-written and informative white paper is essential for attracting investors and exchange platforms. Clearly articulate your project’s vision, technical aspects, tokenomics, and the benefits it offers to investors.
IEOs are ostensibly agreements between project developers and exchanges for initial placement of the token on the exchange. Rather than the more surreptitious nature of ICO listing on exchanges and the questionable dynamic between projects, rankings sites, and exchanges; IEOs are supposed to be the more reliable token offering. STOs involve the sale of security tokens, which are regulated financial securities. These tokens represent ownership in an underlying asset, such as shares in a company or real estate. STOs offer more regulatory compliance and investor protection compared to ICOs and IEOs. Firstly, the exchange platform verifies the project, which includes checks to ensure the project’s claims are valid.
Other popular IEO launchpads are Huobi Prime, OKEx Jumpstart, Probit Launchpad, Coinbene and more. Many investors tend to find IEO platforms more appealing because there’s a greater level of due diligence than what’s seen with an ICO. The IEO is managed by a central authority, the exchange, which can be seen as counter to the peer-to-peer and decentralized principles on which blockchain technologies were founded on. A look at the pros and cons of free, large-scale crypto distributions for both projects and consumers. Initial Exchange Offerings and Initial DEX Offerings are blockchain-enabled fundraising models with unique improvements as compared to ICOs and IPOs.
In traditional venture capital funding, the venture capitalists provide funding as well as advice and guidance. In IEOs, the exchanges offer a platform for raising capital and potentially valuable advice and guidance for the IEO team. Because of their experiences with a variety of different projects, exchanges may have a better idea of how much an IEO should raise or what their token limit and prices should be.
Essentially, both the exchange platform and the IEO project are promoting each other in a way that wouldn’t have happened during a normal ICO. Though not all projects are interested in being traded, many are and by doing an IEO, getting listed on a major exchange is an automatic process that happens after the IEO is completed. There were many outright frauds and scams that simply stole people’s money and had no intention of building a real product, but there were also legitimate projects that faced legal action because they were unregistered. For example, during the Brave ICO, $35 million worth of Basic Attention Tokens (BAT) sold out in less than 30 seconds. In that sale, one buyer paid more than $6,000 in gas fees, and five buyers were able to buy up half of the supply. The hotly anticipated Status ICO raised nearly $100 million in a day, and the enormous demand led to congestion on the Ethereum network, which increased wait times and fees for all other non-ICO related transactions.
