The digital age has bought many revolutions for the global economy hence, redefining the rules of trade. The advent of decentralization with the prominence of Blockchain technology has truly changed the internet. Web 3.0 as it is called, Blockchain offers transparency, immutability, provenance and an ocean of opportunities to transform the digital age. The rise of the crypto world in recent years has bought us face to face with numerous concepts like ICOs, IEOs, and STOs. Let us take a dig into ICO and IEO and explore which one is better?
What are ICOs?
ICOs boomed in 2017 and early 2018. During this time, the world witnessed the emergence of countless new coins. It was during this time that ICOs managed to raise billions of dollars, bringing the total crypto market cap to over $800 billion. By the end of 2018, the world witnessed the downfall of ICOs.
Despite the downfall, there were many successful ICOs financed by investors all across the globe. Basically, Initial Coin Offering (ICO) is a fundraising method, used to launch a new product or service related to the crypto world. Investors receive a number of tokens in return for their investment and make a profit if the value of the token increases from the base price.
So, What are IEOs?
An IEO is a new fundraising method which is conducted on the platform of a cryptocurrency exchange. The exchange acts as a middleman, as it administers an IEO on behalf of the startup that is seeking to raise funds with its newly issued tokens. Theoretically, an ICO allows the project team to raise more capital, as this model is open to everyone in public.
However, the model isn’t full-proof from frauds and scams, leading to their failure. The fraudsters exploited the opportunity to raise funds without delivering the promised technology. In the case of IEOs, the investors are protected by the exchange as the project team must comply with the rules and requirements of the exchange, in order to launch the token sale.
Talking about the race, ICO vs IEO
ICOs became a great investment for investors if it yielded results as per the promise of the white paper. Some of the ICOs like NEO, Ethereum, ARK, and NXT have actually made a great difference in the global market and crypto world. IEOs, on the other hand, offer credibility of a reputed crypto exchange, providing an extra layer of protection to contributors. The exchange also acts as an appropriate platform for investors to manage their funds as all assets are stored in the exchange account instead of different wallet addresses.
The token sale in an ICO is a safe but bit lengthy process. To invest in an ICO, investors need to pass KYC procedures, buy Ethereum, send crypto to a smart contract, wait for the token distribution and listing on the exchange. On the other hand, to participate in an IEO, the investor just needs to be an exchange verified user, and possess the exchange’s internal tokens. This eases the work of the operation team and decreases the hassles for the investors. The exchange provides liquidity with its user base, and also help in marketing promotions. Most IEO participants are crypto exchange users thus, reducing the marketing costs and technical expenses.
Though both ICO and IEO are a great method for fundraising, an IEO is undoubtedly a better fundraising model for the investors/customers. The IEO model is expected to bring more security to the fundraising application of blockchain technology. The IEO would also decrease the number of fraudulent projects due to the interest of main exchanges to conduct proper due diligence. The world has witnessed many successful IEOs like Binance, Huobi, OKEx, among others, and the trend seems to continue.