IDO (initial dex offering) is the first public offering of a token or cryptocurrency on a decentralized exchange. There is another definition — it is a model of launching an asset, which implies fundraising on DEX.
IDO History
The token’s IDO was first conducted in the summer of 2019. The Raven protocol team used Binance DEX by listing a token on the exchange, where investors and traders were able to purchase the asset. Within a day, more than 3% of the total number of Raven tokens listed on the exchange were sold.
IDO mechanism
The standard IDO launch mechanism consists of several steps.
In the first stage, White Paper and Yellow Paper are written, the website is launched, and sometimes users can see the alpha or demo version of the project.
In the second stage, the project is sent to the starting DEX, where the verification is carried out. It is carried out by external auditors, specially selected groups of users. The check is carried out in order to prevent scam projects from entering the market. For example, at the Polkastarte site, the platform administration and members of the supervisory board check applications from new projects. After the vetting is complete, the project moves to the Launchpad exchange, where the startup can already raise funds.
The third stage is pre-sale (presale) of the token. Liquidity is replenished using raised finance from investors and venture capital funds. They can buy a new token at a low rate. To participate in the presale, users sign up for Whitelist, subscribe to the project’s social network. In some cases, it is possible to get into Whitelist by taking part in a lottery.
An important nuance — the investor does not buy the token itself, but a promissory note for it. He will receive the asset itself when token generation (TGE) begins. It is conducted when the IDO is completed.
The fourth stage — the public sale. It is conducted on DEX. The public token sale can be done in two ways.
1. The token is sold in several batches, the price of the token increases sequentially. The very first buyers get the token at a significant discount.
2. They create a special auction, and during it the value of the asset determines supply and demand.
The fifth step is listing on a cryptocurrency exchange. When the IDO is completed, a TGE is conducted, the token is listed on the cryptocurrency exchange. The issuer creates a liquidity pool, using its tokens or proceeds from the IDO or other financial sources. This launches a secondary liquidity market for the asset.
This is what the standard IDO launch mechanism looks like.
What are the advantages of IDO
IDO is available to almost any startup. There is no strict vetting procedure like in IEO. It takes a short time to list on exchanges. And the token can be sold on several exchanges at once.
All investors can participate in IDO, not just qualified investors. Costs in IDO are low, you don’t have to pay significant amounts of money to have your token added to the exchange listing. Every user can check the IDO smart contract, the principle of transparency is fully implemented.
There are many platforms on the market where IDOs are implemented, you can specify some.
IDO platforms
Polkastarter Platform.
It regularly hosts IDOs of new projects. If a user wants to become a tokenseal member, he must be on the white list of the project. The account is chosen at random through a lottery. You can participate in the lottery in the following way: you have to keep the POLS platform token in your wallet for at least 7 days before the lottery starts. Or you can provide liquidity for the ETH-POLS pool on Uniswap. If the account is whitelisted after the lottery ends, the user passes KYC, and gets access to the tokenseal.
Coinlist platform.
IDO is held here several times a month. To participate in IDO you need to register on the platform, as well as KYC.
After that, a cryptocurrency wallet is topped up with one of the assets offered on the site. Then an application for participation in the sale is submitted. Twelve hours before the start of the token sale, an email is sent with a link to the project. Users follow the link and, when the token sale starts, they can see their number in the list. The list is generated randomly. If the user’s number is in the list, then a new token can be purchased.
There are other sites that offer IDO, the rules are indicated on their resources.
Results
If a user wants to get the most out of IDO, he should conduct a thorough analysis of the new token before investing, and work with a verified platform that offers IDO. This will minimize the risks of losing an investment in a new token, and close trades in profit.
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