Today, the demand for cryptocurrencies is gaining pace as more and more people are getting involved in the crypto sphere. The growing awareness in inflicting interest in common people, investors, traders, project teams, and exchanges to learn about the crypto asset and invest in it. The growth in crypto-economy has given birth to many new fundraising mechanisms.
Many of these fundraising methods of the tokenized economy have been successful while many have faced criticism and failure. One successful fundraising method to have buoyed fundraisers and speculators alike has been Initial Exchange offering. Let us walk through the journey of IEOs, focusing on its evolution, and unique features.
The appearance of IEO in Tokenised Economy
Today, a majority of crypto trading platforms and exchanges are conducting their own IEO. Many of these projects have performed well after the listing of issued tokens on the exchanges. Initial Exchange Offerings came into existence after Crypto Winter wiped out many blockchain projects and startups including both good and bad. Binance was one of the first Crypto Exchanges to host an IEO on its platform after the initial coin offering (ICO) fad had started to cool off in December 2017.
IEOs, A mutation of ICOs?
The rising popularity of IEOs can be attributed to their capability to bring the much-needed legitimacy to the cryptocurrency industry. The basic framework of IEO is similar to that of ICO, the IEO is a safer way to speculate as the offering is done through local exchanges that bear the reputational risk if there is any fraud. Basically, IEOs are different from ICOs in the context that a local exchange acts as a middleman, and administers an IEO on behalf of the startup that is seeking to raise funds with its newly issued tokens. The fundraising is conducted by the crypto exchange and the smart contract governing the IEO is also managed by the exchange itself.
Therefore, in an IEO, both crypto exchange and the token issuer project engage in token marketing and benefit from the profit. The token issuers incentivize the exchange for marketing the product by sharing a percentage of profit garnered from the token sale.
The Evolution of IEOs and their Present State
The IEOs have witnessed steady growth since the advent of the first IEO project GIFTO in December 2017, on Binanace Launchpad. The GIFTO (GEO) project was described as The Universal Gifting Protocol. The project managed to reach its hard cap of $30 million on the very first day of launch. The GIFTO project now has a working project live in the market.
We are mid-way 2019 and the world has seen 32 IEOs launched of the 47 listed on ICObench with completed IEOs raising over $159 million. The year has witnessed many headline-grabbing IEO launches withreat potential.
Driving Force for the Success of IEOs
A successful IEO is the one which presents a win-win scenario for token issuers, trading platforms/ crypto exchanges, and the users. One of the driving force for successful fundraising is hosting the IEO on a reputed crypto exchange which brings an active audience that is already in a position to trade the token. The two most crucial features for the progress of IEOs are exchange volume (ExVol) and market cap (MCAP). The buying volume of the asset’s overall market cap is in direct relation to its reflexivity cycle.
In the age of fraud, IEOs provide an extra layer of trust and security. IEOs have garnered millions of dollars in investment from global investors, however, the IEOs are still in their infancy. To ensure success, the IEO exchanges need to be staffed by a multidisciplinary team of savvy engineers, technologists, computer scientists, and business strategists.