An Initial Exchange Offering (IEO) is a token sale overseen by a cryptocurrency exchange. IEOs are exclusively available to exchange users, although some IEOs may take place on multiple exchanges. Like ICOs, IEOs allow investors to obtain new cryptocurrencies (or tokens) while raising funds for promising crypto projects.
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Many people in the crypto space call Initial Exchange Offerings the next step in the evolution of ICOs. Since ICOs are not regulated, and most of them turned out to be scams, STOs were supposed to be a solution. However, most STOs remain constrained by slow and costly processes and stifling regulations. IEOs are the middle ground that addresses the issues on both sides.
Although exchange-assisted ICOs have been around for a while, IEOs started gaining traction after the launch of Finance Launchpad in late 2019. There have already been more than 50 IEOs in 2019, raising more than $159 million, according to Iconic.
Because they put the credibility of the exchange at stake. Therefore, the investigation process is deeper. Also, not all ideas manage to gain support from an exchange. Additionally, exchange offerings are more accessible than STOs, which allow almost anyone to be free to participate and invest (except in countries with regulatory restrictions, see below), and the token sale team is less likely to suffer. repercussions by regulators due to mandatory investor. KYC/AML checks performed by the exchange.
Essentially, IEOs are another way to crowdfund various cryptocurrency startups through a cryptocurrency exchange acting as a mediator. With the help of the crypto exchange, projects manage to gain significantly more exposure, interest, and credibility. After a successful IEO, token issuers pay a listing fee along with an agreed amount of tokens for the use of the IEO platform services. Soon, the tokens are listed on the exchange where investors can access instant liquidity.
Like ICOs, Initial Exchange Offerings have a limited number of coins offered at a fixed price, limits on the minimum and maximum tokens available for purchase per single user, soft limit and hard limit, and dedicated accepted cryptocurrencies.
However, unlike ICO tokens, IEO coins are already minted before the crowd sale. Also, they hit the exchanges several days or weeks after their IEO, which makes it more convenient for investors (instant liquidity). Furthermore, the IEO process naturally involves an intermediary (the IEO platform) who is trust to handle the funds. However, that also serves to increase investor confidence in the project, which most ICOs lack.
In a way, IEOs make it even easier for an average user to get involve. Unlike ICOs, you don’t need to send funds to a smart contract, verify transaction addresses, or make sure your transaction has enough gas or fees to process on time.
Of course, the process may not be as straightforward as described here, as each IEO platform has its methods to ensure a fair process for all users. For example, Finance Launchpad has introduced a lottery-based token distribution method for the Matic Network IEO.
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