Initial coin offering has been the main source of fundraising for Blockchain projects until 2019. They have been quite a successful model raising billions of dollars every year. In 2018 alone 1247 ICOs raised over $7.5 billion. Yet participating in ICOs can be a very risky decision, especially when you are bad at evaluating ICO projects and spotting the scams online.
The Rise of IEOs
After witnessing a global ICO boom in 2017 and 2018, the fundraising method witnessed its downfall. The dawn of ICO age leads to the emergence of a new type of blockchain-based fundraising called Initial Exchange Offering (IEO). Basically, Initial exchange offerings are pretty similar to old-school fundraising method of ICOs. The difference lies in how the tokens or coins are offered to the investors.
The advent of IEOs provided an alternative to help Blockchain projects gather funds and ensured that the investors are in control of what happens to their money.
The success of Initial Exchange Offerings has proved it to be a better fundraising perspective for investors to join the blockchain ecosystem while avoiding the risk of losing their investment.
IEOs: A better fundraising method
Binance introduced the world to the concept of Initial Exchange Offering in January 2019. The IEOs serve as a better alternative to the ICOs as a project’s tokens are initially sold directly on an exchange. For the investors, the exchange acts as a guarantor and conducts a due-diligence check of the project and its team. The exchange also performs the KYC (Know Your Customer), and AML (Anti Money Laundering) verification for each investor.
Why IEOs are better than ICOs?
- Reduced Risk and Secure Investment for Investors: As Crypto exchanges conduct due diligence on the projects before selling the tokens on their platforms, therefore, IEO adds the vote of “Credibility” to any blockchain project. To participate in an IEO, the investor needs to create an account on the exchange’s platform where the IEO is conducted. The investors then exchange the coins in their exchange wallet to buy the fundraising company’s tokens.
- Simple and less time-consuming: IEOs can be called the “back-door” entry to fundraising as the investors don’t have to undergo a different KYC process for every ICO project. The investors are free to buy the tokens of all the IEOs without any hassle by performing KYC only once at the time of registering with the exchange. This makes the investment in tokens extremely simple and less time-consuming.
- Easier Investors for Projects: The Blockchain project can benefit from the existing user-base offered by Exchange. While the projects have to pay the listing fee and a percentage of their tokens, the exchange helps in marketing which enables the projects to save huge marketing costs.
- Immediate Liquidity for projects after raising capital: When an investor participates in an IEO, the invested tokens are immediately transferred in their exchange wallet. This allows token holders to immediately trade their tokens after it launches, as opposed to waiting for it to list.
- Easy Listing of Tokens: As token listing is also the part of “the deal” made between cryptocurrency exchange platform and Token issuer startup. The blockchain projects can list their tokens on the exchange platform immediately after the crowd-sale is over.
- One platform, Many Investments: Holding fundraising on a Cryptocurrency Exchange Platform ensures that the investors can access a wide variety of blockchain projects just by browsing one platform. This helps them save time and make better and informed decisions by comparing all the blockchain projects on one platform.
- No more Gas War: While buying IEO tokens on an IEO platform, investors don’t need to pay for Gas. The tokens are available on a first come, first served basis, also, giving the opportunity to buy tokens in advance, depending on the IEO, and availability.