Initial Coin Offering (ICO) was very popular in late 2017 and early 2018 but after a lot of regulation issues and China ban on ICOs new projects are unable to raise sufficient funds. A new trend is found in the market that is Initial Exchange Offering (IEO). In this post, we will explore the term IEO (Initial Exchange Offering) and What is IEO.
1 What is IEO (Initial Exchange Offering)
An Initial Exchange Offering (IEO), as the name explains is conducted by a cryptocurrency exchange. The cryptocurrency exchange offers the tokens on behalf of the startup that wants to raise funds.
The startup firm needs to pay the exchange fee and some percent of the tokens to the exchange (Only team and exchange know about that). in return, the exchange ensures that the tokens are listed on the exchange and available for trading for everyone, provides liquidity to the token investors.
IEO participants did not need to send any funds to the firm ERC20 contracts that happened in ICOs. Participants need to create an account on the cryptocurrency account and complete their KYC (compulsory to be eligible for the IEO).
2 Upcoming IEO (Initial Exchange Offering)
Many cryptocurrency exchanges have seen great interest in IEOs. The leading cryptocurrency exchanges have some rules and criteria to be eligible for the IEO sale.
Binance the leading cryptocurrency exchange by volume has started its own IEO(Initial Exchange Offering) platform named Binance LaunchPad. The first project on Binance Launchpad was BitTorrent Token (BTT) that has raised $7.2 million in just 15 minutes. The IEO was successful and BTT token has gained 1200% from the IEO price.
The second project on the Binance launchpad Fetch.AI has a better record, raised $6 million in just 22 seconds.
After the success of Binance launchpad, other cryptocurrency exchanges also announced their Initial Exchange Offering Platforms. Huobi global exchange announced Huobi Prime, Kucoin exchange announce Spotlight etc.
3 Different IEO Platforms
4 Recent IEO Returns on Investment (ROI)
5 ICO vs. IEO
6 Advantages and Disadvantages of Investing in IEOs
The main advantage of Initial Exchange Offering is Trust. The tokens are delivered by the exchange directly to users wallets and also the tokens will be listed on the exchange after completion.
That would eliminate the scam projects from raising funds from new crypto users. Only good and legit projects are selected by the exchanges to maintain the exchange reputation.
Initial Exchange Offering (IEOs) provides more security for both users and token issuers. All the KYC/AML process was conducted by the cryptocurrency exchange. Users funds are also secured as users not need to send any funds to the firm smart contracts. All the funds are stored on the exchanges.
Easier for the Projects
It is much easier for a startup to raise funds via IEO instead of an ICO. The exchange will help in marketing and reduce the marketing budget. The token issuer can take advantage of the exchange user base.
The tokens are listed after conducting the IEOs. Users get good liquidity on the exchange and not need to worry about the first listing.
However, IEOs are not always profitable. Bittrex IEO platform is a good example where the two previous IEOs was trading below the IEO price. Some exchange only sells the tokens in the exchange native token (Binance coin, Huobi Token) and the value of the coin will fall after the IEO.
7 How to Participate in IEO
IEOs are not as common as ICOs. Exchanges need to search and finds the legit projects.
The next step is to create an account on the exchange and completes the KYC/AML process. After that check the eligibility criteria and prepare yourself for the IEO.