Initial Exchange Offering has emerged as a popular and crypto fundraising scheme for Blockchain startups. From less than a dozen to over a hundred Initial Exchange Offering projects going live in 2019, the total funds raised by IEO projects globally reached over $1.672 billion. A majority of this fund i.e. about $1.4 billion was raised in 2019 alone. Contrary to this, the funds raised by ICOs in 2019 is about $1.1 billion. How did the fundraising economy build-up to IEOs? Why IEOs are flourishing? Why investors are preferring IEOs over ICOs? Let us answer some of these questions.
What brings IEOs into focus when ICOs already exist?
Though IEOs are very similar to ICOs, the ICOs have become a thing of past and IEOs hold the potential to be larger than the ICOs of 2017. IEOs are the tokenized forms of crowdfunding similar to ICOs with one fundamental difference. IEOs are exchange specific, i.e. IEO offers tokens through a partnering exchange, rather than directly to investors. Basically, the security, authenticity, and reliability offered by IEO tokenized crowdfunding projects disrupted the venture funding space and carved out space for itself.
Why Grass is greener on the IEO side?
IEO holds the reputation of a Crypto Exchange, therefore the sense of risk is much lower in IEOs. The fact that the exchange list an IEO project after performing careful due diligence on the project increases the credibility of the project.
Why investors prefer IEOs over ICOs?
- Fierce competition assures commercial success, enhanced security and confidence: Given the fierce competition in the fundraising market, the cryptocurrency exchanges are most likely to only host the projects that they believe are going to be a large-scale commercial success. This motivates investors to invest in IEOs as it is known that the exchanges won’t list a project that has a high likelihood of failure. Exchanges hire domain experts that scrutinize the project and only select projects which prove quality and ability to succeed. The exchange act as an institution of trust that provides a stronger defense against scams. It boosts the confidence of investors about the security and quality of the smart contracts of an IEO project.
- One platform for multiple IEOs, Easier Participation for Investors: Crypto Exchanges provides a single platform to compare various IEOs to the investors. Also, participation in an IEO is easy and simple as it requires an interested participant to register and create an account on the hosting exchange platform. After registration, investors need to select the IEO of their choice, fund their exchange wallet and purchase the tokens when they go live. Contrary to ICOs, IEO doesn’t require the participant to send funds on a project’s smart contract or perform any other complicated technical processes. Thus, the IEO model ensures ludicrously easy investment in a project and the subsequent liquidity created by the launchpad guarantees investors have an exit on the exchange.
- Easier to find a legitimate IEO: Previously, as ICOs were held on the project’s website and there were several websites, the task of finding a legitimate ICO used to be tiresome and time-taking. Now Cryptocurrency exchange launchpads/ platforms provide all information about potential and upcoming IEO projects that they could invest in as soon as the IEO details are finalized. With the IEO launchpads, investors can cut down on the valuable time that may be wasted on researching a potential ICO opportunity.
- Lower Price manipulation and greater transparency: Tokenised fundraising through IEOs offers greater transparency which is much more likely to make an investment forthcoming. As the process of an IEO is much more regulated with rules like a specific token cap per investor, price manipulations are largely controlled. Therefore, the token price remains the same throughout that phase of funding. Thus, investors need not worry about getting a less favorable price than other investors during the same round of funding.
- Cryptocurrency Exchange guarantees the listing of tokens: Unlike ICOs, the regulatory processes of IEO ensures that investors and businesses are assured that their tokens will be listed on the Exchanges website immediately after the IEO is over.
COSS: One-Stop Investment Platform
COSS is a reputed Cryptocurrency Exchange which provides a one-stop solution to all your cryptocurrency needs. The Exchange platform brings all the potential benefits of participating in an IEO directly to investors. The platform performs effective due diligence by conducting its own research and verification process to make sure that the token is legit.