IEO, Explained

IEO is a relatively new concept in crypto crowdfunding sphere. Let's understand together will it become successful or not? And what advantages does it have compared to ICO and IPO?

Introduction to a new concept

If you are interested in cryptocurrencies and blockchain technologies you may have already heard about such a modern concept like ICO. ICOs have taken crowdfunding to another level. Nowadays companies are raising the money they need just in several minutes and this is just fascinating. But as all techniques, ICOs have their disadvantages too. And as long as technologies are improving and people are trying to make things easier and better, a comparatively new concept has appeared, which is called Initial Exchange Offering. This technique was designed to boost crowdfunding technologies for crypto coins and improve all the little flaws that ICOs have. In this section, we’ll descry this modern technology from A to Z.

Principals of IEO

IEO is a crowdfunding technique which, unlike ICOs, works straight on exchange platforms. When a developer creates some project’s token, he sends it straight to the exchange. Then the platform markets this token to an investor for Ether. One principal variation of this technology from ICO is that an investor doesn’t send Ether to the Smart Contract of this project. Every involved person has to sign up an account on the current exchange platform, the next step is simply to send Ether to this account’s balance. When an IEO begins, all engaged participants can get a current coin from the current exchange.

Exchange platforms and IEOs

With the rising popularity of IEOs, many platforms began to adopt this technology. The very first platform that started an IEO was the Binance Launchpad. BitTorrent launched an IEO on this launchpad in January 2019. It raised over $7.2 million in approximately 15 minutes.

The second launched IEO on this platform hit all records of fundraisings in the short time interval. Fetch.AI started an IEO and raised $6 million in only 22 seconds. This is obviously a fantastic indicator for a crypto startup.

Many platforms followed the Binance Launchpad after this amazing resolution and further they started adopting IEO technology. Now there are many platforms that support IEOs like Bittrex IEO, Huboi Prime, Bitmax Launchpad, KuCoin Spotlight, etc.

IEO and ICO: What is the difference?

The notable variation and the privilege of IEO is that all coins are rapidly tradeable. Every ICO investor mentions that the interval they need to wait before the coin distribution is annoying, sometimes it takes months.

In ICOs fundraisings are managed on certain coin creator’s website and IEOs’ are managed at the exchange platform.

The opponent of an ICO is a current project’s developers and the IEO’s counterparty is the exchange platform itself.

In ICOs smart contracts are maintained by a startup managing the coin sale and in an IEO they are controlled by the exchange platform.

In ICOs Anti-Money Laundering (AML) and Know Your Customer (KYC) need can vary from project to project, but usually, these processes are required. In the IEOs this is not necessary, because exchanges conduct AML/KYC on its users.

ICOs need high marketing resources in order to get some public attention and the IEOs may rely on the exchange, which is going to actively sell the startup tokens.

There’s no need to do a screening before starting an ICO, but if you want to launch an IEO the exchange will screen your company before it lets you launch an IEO.

Benefits of an IEO

The major privilege of an IEO is assurance. As the crowdsale operates on the exchange platform, it attentively inspects each project that wants an IEO launching. It’s done to keep the great prominence of the exchange platform.

Aforementioned point liquidates suspicious and deceitful projects from gathering money via exchange platform and IEOs. There’s one bright example of this case. Bittrex removed The RAID project’s IEO several hours before its beginning. The reason was that the RAID had a connection with the e-gaming data analytics corporation OP.GG.

Starting an IEO is accessible for each project. As the biggest part of the crowdfunding is connected with exchange platforms, they support the team with the marketing. Also when starting an IEO the project can be sure that investors are trustworthy as they have been previously checked by the exchange platform.

As the IEO’s smart contract is managed by the exchange platform, coin developers don’t need to concern about their safety.

After the crowdsale ends the exchange platform automatically conveys the token listing, so token creators don’t have to bother about this too.

How to take part in the IEO?

Everyone, except those who live in countries that forbid IEOs, can take part in IEOs. So, the very first necessary thing is confidence that your project really needs starting an IEO. Afterwards, there are four steps to do:

Search out the exchange platforms which are supporting IEOs. It may be one or numerous platforms.

Check up the list of the cryptocurrencies that are going to be admitted in process of your IEO and fund your account properly.

Wait until your IEO launches.

How to become in IEO investor?

It’s easy. The one required thing is to have a registered account on the exact exchange platform. The required thing for account creation is that you need to pass that platform’s KYC screening. Once this is done you can start investing in IEOs. You don’t even need to own an external digital wallet (it’s required for those who invest in ICOs), exchange platforms already have a built-in wallet. So you are able to purchase an IEO exactly on the website of the exchange.

Why do many exchange platforms start having IEOs?

IEOs are performing a completely new use case on top of the exchange platforms. For example, two IEOs that successfully ran on the Binance Launchpad gave the platform notable popularity.

Before IEOs creation, exchange platforms were intended only for cryptocurrencies sales. Now, IEOs are giving some new opportunity to add the importance of the platforms. Exchange platforms can use IEO as a method of user engagement or just money raising (they can do this by increasing fees for listing).

Also, IEOs can do free promotion for these platforms, this is done due to the IEO/ICO websites and their articles about expected or successfully launched IEOs.

What will happen with IEOs?

The Binance Launchpad experience is a good case of that IEOs can be very prosperous and may have very strong potential. BitTorrent and Fetch.AI have marketed their IEOs in minutes and became the most popular topics on every crypto website.

Various popular exchange platforms are starting to adopt IEOs and this indicates that the system crypto projects are gathering money has also evolved.

IEO is a new budding model of crowdfunding. As it learned on the ICO’s mistakes and improved the level of trust, privacy and safety, it can help many coin developers easily raise capital for their projects. Numerous experts forecast that IEOs are going to be the usual form of the crypto crowdfunding in the nearest prospect.